It would be no good if I were diagnosed with a terminal illness and given three months to live or in a fatal car accident and given hours to live and I found out that I had saved 2 million in the bank. Then I would regret my frugal lifestyle a lot.
Investing is not the path to wealth
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It would be no good if I were diagnosed with a terminal illness and given three months to live or in a fatal car accident and given hours to live and I found out that I had saved 2 million in the bank. Then I would regret my frugal lifestyle a lot.
With an attitude like that, you probably don't see the need to save for the future or to provide for your dependants as you're probably just gonna die soon anyway so what's the point of anything really ... take a balanced view, enjoy life but don't blow all of your earnings, put some away for a rainy day, and park some of that in growth assets.
I am not so sure about 1, 2 and 3.
Wealth does not necessarily come from saving, thats the hard way to do it. A good investment of a modest amount can grow faster than saving ability. It's all about the magic of compounding.
So you can enjoy life and get your instant gratification trinkets while your modest investment keeps growing.
It's not the size of your investment but what you do with it, and for how long that matters.
If I tell you to "Float it up the flagpole and see if it sticks", you say "how high?" after all, if you can't stand the heat, you shouldn't throw rocks.
lol....That's one heck of a surgery !
I've found that a goood J.O.B. goes a long way toward supporting my investing habit.
I had a relative who did exactly this. He never spent any money, never married, never bought new clothes or travelled and just saved, quite a few million including two very humble properties be bought in the sixties and seventies.
however, he got ill and had several years in the best nursing home that money could buy.
i don't think he regretted it. as pully said, we don't know when we going to die.
I would look at your situation probably differently, although I really do not exactly know how I would feel if I truly had terminal illness.
Firstly, I would have hope as I wasn't dead yet and secondly, I would reminisce of all the wonderful moments from my past, my memories that even now I cherish. These would not necessary be monetary values but rather small things that had a great impact in my life.
I know from personal experience, when my younger sister was in coma for 36 hours after a car accident, no monetary things mattered to me at all at that time! I was then purchasing my first PPOR, and yet I preyed that all my material things be taken away from me yet she could live. She's with us all today living and the house wasn't taken away. I know that all situations don't end that well but I am a great believer in HOPE!
This is why balance is important.
JUst a comment in relation to China's post.
It was a serious illness that drove us to invest. In 1999 I was diagnosed with multiple angiomyolipoma (impressive name hey?) in my left kidney. This is one of those giant tumours that can grow hair and teeth (creepy , I know) but more importantly they grow their own blood vessels. Which means that if it ruptures -you bleed to death internally before anyone works out what the heck is wrong with you! Not malignant, but still life threatening.
Anyway, hubby had to quit his job and we went on sickness benefit with 3 kids and a mortgage. Total payments then were around 1000 per fortnight all up. Loan payment was half that.
I was out of commission for quite a while after surgery and then it took a while longer for hubby to get another job.
I decided that I never wanted to face a medical challenge again (and as I have 4 more tumours in the only kidney I have left, probability is high that I will have challenges) without having money. I found it soul destroying to be dependant on the government. I am grateful for it but the system that you go through sucks.
So, if I found that I had 3 months to live and had 2 million in the bank I would be pretty happy.
Just a side note: having the illness also changes my risk profile and even though the journey since has been rocky in places I don't regret a minute and am so glad that I chose to live, REALLY live.
It was a serious illness that drove us to invest. In 1999 I was diagnosed with multiple angiomyolipoma (impressive name hey?) in my left kidney. This is one of those giant tumours that can grow hair and teeth (creepy , I know
) but more importantly they grow their own blood vessels. Which means that if it ruptures -you bleed to death internally before anyone works out what the heck is wrong with you! Not malignant, but still life threatening. Anyway, hubby had to quit his job and we went on sickness benefit with 3 kids and a mortgage. Total payments then were around 1000 per fortnight all up. Loan payment was half that.
I was out of commission for quite a while after surgery and then it took a while longer for hubby to get another job.
I decided that I never wanted to face a medical challenge again (and as I have 4 more tumours in the only kidney I have left, probability is high that I will have challenges) without having money. I found it soul destroying to be dependant on the government. I am grateful for it but the system that you go through sucks.
So, if I found that I had 3 months to live and had 2 million in the bank I would be pretty happy.
Just a side note: having the illness also changes my risk profile and even though the journey since has been rocky in places I don't regret a minute and am so glad that I chose to live, REALLY live.
I think investing is the path to wealth.
It certainly is in my case because my income level alone was never good enough to get me there.
But before you get on that path, the mindset has to put you at the first row of cobblestones on that path.
So, points 1,2 and 3 are definitely part of the equation.
Until you have the mindset of allocating as much of the disposable income you can towards investing in income producing assets, leverage and capital growth, you will probably be like most folk who live a decent lifestyle until retirement age (if your income allows it) and then go on the pension until you die.
1. Work to increase your active income -- income you earn through your time and efforts, such as wages, salaries, commissions, etc.
- YES!
2. Put aside a portion of earnings for saving and investment FIRST. (Start with 10%, then increase over time)
- Yes but far too modest. If you have a high income from point one then aim higher - above 50% - 60% if possible.
3. Spend money wisely, get maximum value from every dollar.
- YES - this will be a natural result from point 2. Can't do point 2 without it!
4. Understand and manage your debt, don’t let debt manage you -- eventually eliminating debt altogether.
- Yes to understanding and managing debt but I see no reason to eliminate debt altogether. Especially if the investments purchased with that debt are paying you significantly more than the debt costs.
5. Become a disciplined investor -- find a good strategy and stick with it.
- YES - to me that means that any debt needs to earn its keep and provide you with benefits in excess of its costs.
Or you could just start a business that becomes the next Facebook or Apple...
My point is real wealth, either in terms of early financial independence or high net worth, doesn't come from doing just one or two of these things. Do one or two of them well and your results will be "OK" over your lifetime. But they compound off each other - put all of them together in a package and the results are exponential - retire by 35 with a net worth over $5m kind of stuff is very achievable with the right plan IMO. The fact that so few are truly wealthy is a testament to how few do all of these steps really well.
- YES!
2. Put aside a portion of earnings for saving and investment FIRST. (Start with 10%, then increase over time)
- Yes but far too modest. If you have a high income from point one then aim higher - above 50% - 60% if possible.
3. Spend money wisely, get maximum value from every dollar.
- YES - this will be a natural result from point 2. Can't do point 2 without it!
4. Understand and manage your debt, don’t let debt manage you -- eventually eliminating debt altogether.
- Yes to understanding and managing debt but I see no reason to eliminate debt altogether. Especially if the investments purchased with that debt are paying you significantly more than the debt costs.
5. Become a disciplined investor -- find a good strategy and stick with it.
- YES - to me that means that any debt needs to earn its keep and provide you with benefits in excess of its costs.
Or you could just start a business that becomes the next Facebook or Apple...
My point is real wealth, either in terms of early financial independence or high net worth, doesn't come from doing just one or two of these things. Do one or two of them well and your results will be "OK" over your lifetime. But they compound off each other - put all of them together in a package and the results are exponential - retire by 35 with a net worth over $5m kind of stuff is very achievable with the right plan IMO. The fact that so few are truly wealthy is a testament to how few do all of these steps really well.
I wonder if this relative could have turned back time whether he would have lived the same way the second time.
Very true. Money cannot buy happiness or health, but no money guarantees unhappiness and ill health.
Yeah; I reckon he would have done a lot more.
In both cases not true.
Maybe a more likely factor in regards to health, but fortunately in Aus it is relatively easy and cheap to get public and virtually free health care.
Obviously elective stuff isn't free, and some more serious but non-life threatening probs go onto waiting lists (knees and shoulders to name two), but basically you get seen to when you need it for not much. Add pension and welfare cards to the mix and it's even better for those folk.
But as for unhappiness due to poverty...sorry; but this is totally wrong. Happiness is a subjective thing.
I grew up poor, and my childhood was pretty good, lots of fun for the most part, lots of friends in similar families.
Did I get to go to theme parks, and holidays in Barbados, and skiing in the winter? Not at all; never ever happened.
But, you don't miss what you never had.
The person who is more likely to be unhappy being poor is the one who had it all, then lost it. They know what it's like to have lived the good life and now have the comparison of the two.
I know lots of poor people who have always been poor. Many are quite resigned and relatively happy that they will never have money, and make do with what they've got; holidays are camping trips, or sight-seeing drives for a day etc.
Their houses are modest, but many are happy homes. We lived in a 101 year old house that was a fair amount of a do-er upper, but my parents bought it cheap, and many of my school friends came to hang out there because the house was a welcoming home and they felt happy to be at our place.
The poor folk are happy driving the 20 year old Conformadore etc; would they like a Merc or Beemer? Sure, but aren't unhappy because they don't.
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Not true.
Hubby and I were already as poor as church mice when our eldest son was born. We figured things could not possibly get any worse, we had our own business but we could always close it down and go on the dole and have far more income than we had working honestly in an industry that was becoming obsolete.
We had some of the best years of our lives in that tiny fibro house without air con, no insect screens, a 16 inch TV, a 20 year old car, no automatic washing machine, no microwave and a business that made nil profit in three years.
It took almost five years of banging my head against glass ceilings before our son was finally diagnosed. He was born with a disability. I was a stay at home Mum for this first fifteen years or so, teaching him to read and write and all the other life skills that our schools are not equiped to do as well as a loving family can. Hubby closed his business and has since worked in below-average earning positions. Our son graduated from Uni last semester, and passed his drivers license earlier this month on his first attempt.
No amount of money could have raised our son to be what he is now. Dont tell me, China, that lots of $$$ would getter better services, because services for people with Autism dont exist here in Australia to the degree that they do overseas. How do I know? Before being burned out and finally putting my own needs first, I was one of the early advocates for services here in Australia for people who have Autism.
We didn't get around to investing until our late 40s, we had more important things to do and no cash to do it with.
I actually agree with this to some extent.
All the poorest of the poor (and I don't mean the humble but relatively stable 'working families' [to quote the Labor Party]) I've known have been miserable and ridden with ill health.
Yeah well they would be healthier and so would their wallets, without the TVs that are the size of my dining table, the computer and playstation in every bedroom, the merchandised clothing falling out of their huge built-in wardrobes and the massive fuel-guzzling, tyre-wearing 4WD that she drives the kids to preschool in.
The working poor have just as much income as we do, and we arent miserable. We LOVE and appreciate our bloody huge TV and our six year old car.
I wasn't referring to the working poor with their huge built-in wardrobes and 4WDs
I was referring to the poorest of the poor. You know, people who don't have homes let alone cars.
My household is low-income (or 'working poor'). But after being raised in a no-income and often homeless household, I feel pretty wealthy. In my opinion, there's a world of difference between being low-income and living in soul-destroying abject poverty.
