Large income does not equal wealth

“If you are not as wealthy as you like, there is something you don’t know.” – David Wood

“Wealth is largely a result of habit.” – John Jacob Astor

Many of us make a lot of money as we progress in our careers. Many people earns a monthly income of thousands of dollars and some even much much higher. Despite the big money, they are not much the difference between a minimum wage person who earns a few hundred dollars a month. At the end of the month, these people who earns thousands of dollars are just as broke as everybody else. This is because, the higher they earn, the larger the debt that they can accumulate. For example, bigger house, bigger car, fancier gadgets would led them to bigger debt than before.

Wealth is your net worth. Inflow is larger than outflow equals wealth. Outflow is larger than inflow equals headache. Develop wealthy habit and not a spender habit and you are on your way to financial freedom sooner than you think.

Sunken Ship

How to know that you are already in heavy debt? These are some indicators stated on the book by Azizi Ali, Millionaires are from a different planet!

1) Missing payments
2) Paying less than the agreed amount
3) Paying the minimum due
4) Busting your credit limit on the credit card
5) Having to borrow more money to settle old debt commitments
6) Not able to handle minor financial emergencies
7) Avoiding calls of creditors
8) Wondering how on earth are you going to get out of this mess

So, if you are having some or all of the symptoms as stated above, you are in big trouble. Having debt is like cruising the sea in a sunken ship. The more holes the ship have, the more deeper the ship will sank. Therefore, the first immediate step you should do is to try to find the biggest hole in the ship and plug it quickly. In the financial world, it means try to identify which debt carries the highest interest and eliminate it quickly.

What to do with $1,000?

Once you start earning a living,you quickly learn that you always seem to need more money, no matter how much you make. You can easily spend $1,000 in a day, perhaps to update your wardrobe, book a holiday or buy the latest iPod.

However, the money can be wisely invested in your future. As a young adult, you know it is time to get serious about money, especially if you have been living from pay cheque to pay cheque. You may be keen to start investing but do you have a rainy day fund to see you through the unexpected? Here are a few things to consider

1. Start paying off your debts
2. Cultivate a saving habit
3. Invest in a growth fund
4. Build a cash cushion
5. Buy peace of mind
6. Get financially savvy
7. Enhance your earning power
8. Invest in a hobby

Article excerpted from Personal Money, November 2006 issue