Are You a Wealth Producer or a Wealth Consumer?
You’ll never hear this from a central planner or a Socialist, but every individual is a fully-operational micro-economy, each making decisions they believe will best advance their own cause. It’s also true, based on the management (or mismanagement) of their own economy, that every person is either a wealth producer or a wealth consumer. Financial advisors understand this, and in their pursuit of wealth producing clients, commonly include the term, “wealth management” in their business name. Which of these two are you, and if the latter, what can you do about it?
Wealth production is superior to wealth consumption in both practicality and virtue. In practicality, wealth producers endure relatively low financial stress, the enjoyment of life’s adventures, and the blessing of helping those in need, while wealth consumers generally go from crisis to crisis. In virtue, wealth production offers gratification for good stewardship, and the privilege to demonstrate such for the next generation, but wealth consumption robs a person of both.
Financial success is almost never about how much money a person earns, and almost always about what a person does with the money they earn. I know people who have amassed great wealth on a modest income, and others who went broke after earning (or being given) huge sums of money. Discard every excuse to fail, and embrace the principles that will cause you to succeed.
The primary difference between these two “monetary types” of people is the simple fact that wealth producers consistently practice sound financial principles, and wealth consumers don’t. If you practice the following concepts it is highly likely you will soon begin to methodically accumulate wealth, at least throughout your working years:
Maximize ‘net positive monthly cash flow’ (net income exceeds gross expenses) with strict budgeting, careful debt management, and thoughtful tax planning (your thoughts, not just your CPA’s; you need to own this!).
Plug financial leaks by eradicating monetary waste. Understand the difference between your ‘fixed expenses’ and your ‘gross expenses’, and minimize that difference.
Allocate your investable resources wisely, beginning with a) adequate emergency savings (equivalent to 9 months of household expenses), b) the right amount, in the right duration, of the right type of life insurance, and c) a specific plan to become debt free.
I believe these powerful principles should be in place before a person begins investing, and the people who don’t do so generally withdraw invested funds sooner than expected, often with painful consequences, and for things other than what was intended.
Think about it, Shaun.
“He who trusts in his riches will fall, but the righteous will flourish like the green leaf.” ~Proverbs 11:28
“Owe no man anything, except to love one another” ~Romans 13:8
“God loves a cheerful giver.” ~2Corinthians 9:7
“A wise man leaves an inheritance to his children’s children.” ~Proverbs 13:22
The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.
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