Wealth and Guidance
Pfäffikon SZ, Switzerland – Spend less than you earn, is the simplest way to wealth. When your earnings over time increase even further and your expenses remain the same or even decrease slightly, the compounding factor comes quickly into view. Oddly, few people organize their finances in this way and can withstand the permanent desire for luxury.
Beggared
There are many examples in which soccer players, cyclists, boxers or basketball players are earning plenty and eventually get beggared. When their income increases, they suddenly spend more than is coming in, a curious psychological phenomenon. They believe that wealth is based on their spending habits. A bigger house, a thicker car, and other luxury toys are where wealth is all about according to many. The more you buy, the happier one is, is the thought.
Spending
Money is dirt cheap, causing that the phenomenon ‘spending’ is further enhanced. The average American, for example, has hardly savings and is carrying a mountain of debt (approximately USD 200,000). Curbing your spending pattern is often not an easy job in practice. It is logical that you want to earn more; However, at the same time boosting your spending and liabilities does not always contribute to prosperity.
Gambling
Smart purchasing of luxury items can save you a lot of money; opportunities abound. Additionally, gambling on the stock market often does not contribute to your peace of mind and wealth. Today, the phenomenon ‘gambling on the financial markets’ is easily facilitated and often confused with investing for the long term. Furthermore, you will soon get sucked into hypes one cannot fathom. A sophisticated checklist can save you for a lot of accidents.
Building up wealth is all about boosting your (net) income. The vacant savings can be used to work accelerated on your compounding factor; patience is here a necessary element. The world around you, however, is preaching a different language. Investments are volatile and panting. Additionally, the tax system in many countries is pushing you deliberating into debt. Building sustainable wealth requires too often external professional guidance. But usually, this guidance is invoked when it is already too late.
It remains for me to wish you a good weekend.
Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.
