The strongest ability of rich people: knowing what money should not be spent

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The strongest ability of rich people: knowing what money should not be spent

A survey in the United States found that even among high-income earners, more than half of them rely on their monthly salary to cover their expenses and have no savings to deal with any unexpected situations.

Financial experts believe that true financial freedom is not about how much money you have in your pocket, but the ability to respond to environmental changes.

Don’t just use income as a criterion to measure wealth. Plan your expenditures, control unnecessary waste, and accumulate net worth to enjoy the freedom of wealth.

When ordinary people define wealth, most people think of driving luxury cars, carrying designer bags, flying first class, and experiencing luxurious travel. However, the other side of these social status symbols may be debt or pennilessness. Financial experts say that in a modern society with such extreme wealth distribution, true wealth freedom is no longer about how much money you have in your pocket, but the ability to respond to environmental changes.

Many experts criticize social media for changing the young generation's concept of wealth. When young people are constantly exposed to influencers who have become rich overnight and live a luxurious lifestyle, and view many posts about luxury consumption, they are bound to have questions about their own financial situation. Negative effects include unrealistic expectations of wealth and success. When young people strive to imitate this lifestyle, they may fall into unhealthy money habits such as impulsive spending.

High-income earners do not necessarily have freedom of wealth

A recent study in the United States shows that 64% of consumers live on salary, even for high-income earners. More than 50% of those with an income of more than 100,000 US dollars rely on monthly salary to cover all expenses, which means that most people have almost no emergency savings. .

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Many people with a bright appearance may have a high income but little savings. When interest rates rise or unemployment occurs, life becomes unsustainable. In the eyes of financial experts, these people are not truly wealthy.

Experts believe that a person who is truly wealthy should drive a Toyota car and go to hypermarkets to buy affordable goods. But they have the freedom to make major decisions, such as retiring early, resigning, and traveling where they want. When the general environment changes, such as the Federal Reserve (Fed) raising interest rates or temporary unemployment, it will not put any pressure on their financial burden. .

More important than income, net worth is the value of a person's or family's assets minus debts or financial liabilities. Wealth experts say that the label of being rich does not necessarily mean that a person can control his or her finances or achieve financial freedom. Because a person may be considered wealthy but still be in a financially unstable situation because they are highly leveraged and spend as much as they earn, often even spending more than they earn. These people sometimes appear to be doing well, but then become penniless after a while.

Controlling expenses is more important than super high income

Financial freedom represents the ability to say no to anything you want and the ability to do anything you want, independent of your employer or interest rate changes. Experts suggest that a super high income is not necessary, the focus is on controlling expenses. Even if you can afford it, you won't buy luxuries that will only depreciate in value, such as luxury cars, expensive clothes, and similar lavish spending.

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People who are truly financially free are usually very cautious about debt. They think further and will not squander their income on things that can only bring short-term happiness. They are only willing to take on good debt, things that will increase in value like real estate or growing businesses. Really wealthy people also typically have multiple sources of income, which may include salary, dividends, business ownership, property ownership, etc.

In this era of extreme inequality, some people advocate that instead of pursuing financial freedom, it is better to achieve spiritual freedom, but this kind of practice is unrealistic. Don’t only use income as a criterion to measure wealth. Plan your expenditures, control unnecessary waste, and accumulate net worth. You don’t need to be in the top 1% or 10% of income earners to enjoy the freedom of wealth.