Earning a high income and having a great education doesn’t make you automatically rich
I used to believe that if I earned a lot of money, at least $75,000 – $100,00 I’d be set for life financially.
It wasn’t until I was in $60,000 debt from my fancy degree, earning $65,000 a year (a very good salary in my opinion) that I realized it wouldn’t be as easy as I thought.
Don’t get me wrong, it’s a lot of money ($60,000 – $100,000), and people would kill for that kind of salary these days, but my point is more about a state of mind or an attitude change.
Becoming rich is all about delaying impulses and instant gratification, spending reasonably and most of all: saving what you don’t spend by living way below your means.
It is far easier to save money when you earn lots of it, but how many people really do that?
When you earn more, you tend to want to spend more.
You want to upgrade your lifestyle, treat yourself a bit more and enjoy life. (I know, I’ve been there!)
But having a high income and a great education doesn’t necessarily always translate into more wealth.
Wealth is only what you’ve saved from your net income after taxes & so on.
It isn’t what you earn as a salary.
Just because someone earns $45,000 a year versus another person who pulls in $100,000, doesn’t mean that the latter person will automatically be a millionaire in no time.
Don’t be handicapped by that way of thinking!
$45,000 income
Let’s imagine Betty earns $45,000 a year after a college degree, and starts saving 20% of her income at the age of 23 or $9000/year.
In 45 years, saving 20% each month ($750) at 5% interest rate, she would have $1,005,214 at the end of her retirement.
She deposited $378,000 but earned a whopping $764,895 in interest!
But FB, it’s unrealistic to save $750/month!
Is it? Let’s assume she works in a medium-sized city.
She earns $45,000 a year and is taxed 18% a year.
She pulls in net, $36,900 a year or $3075/month.
$750 taken away from that into savings, she has $2325 left to spent on rent, food, utilities and life.
It may not be enough depending on the city or whether she has a home, and so on… but I daresay it sounds doable if she shares an apartment or takes a very cheap one for herself to make that $750/month goal.
Very aggressive, but doable if she is inclined to do so.
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Related posts:
- Does holding or wearing designer anything, automatically mean you’re a high maintenance shopaholic?
- Frugality even at a high income
- Everything has its limitations: Maxmize the gap between your earning and spending!
- Acting rich is not the same as feeling rich
- Can you really get rich off playing the Lottery?
- What is your lifetime income?
