I get a lot of queries like this one:
"What are the assets of someone making $250,000?"
Many people assume (wrongly) that someone MAKING a lot of money HAS a lot of money - when this is usually not true.
And the same people assume (wrongly) that someone who HAS a lot of money MAKES a lot of money - and this is usually also untrue.
As noted in the Millionare Next Door book, most folks who have a lot of money don't actually make a lot - their income is often less than 7% of their assets.
They don't make a lot, but rather, they save a lot, invest a lot, and don't spend a lot of crap - the crap that most of us idiot consumers buy, because the television said so.
You may see old Joe driving his clapped-out Chrysler and think, "Poor old Joe, he is poor! He doesn't have a new leased Lexus like I do!"
But Joe has a million dollars in the bank, and you'd never guess it.
I met a guy like Joe the other day over on a neighboring island. There is a coin-op car wash there and it is cheap and clean and well-attended. I met a guy emptying the money changing machine and told him it was the nicest car wash around. He said, "Thanks. I own it."
And yet, here he was, wearing blue jeans and an old work shirt, driving a clapped-out pickup truck. His customers had nicer cars than he did. But he had more money than they did - and most would have assumed, as I did, that he was some low-level employee - some burnt-out alcoholic - who was hired to empty the money changer and re-stock the soap dispenser.
But most of us are convinced that having a huge income means we are wealthy, even if we are spending it faster than we are making it.
But wealth is not a W-2, but how much you have invested - your net worth. You can make a million dollars a year and be broke - if you spend a million-and-one dollars a year. And for most Americans, this is the case, living "paycheck-to-paycheck" on $100,000 a year, $174,000 a year, or even $250,000 a year.
Wealth is not money you make, but the money you KEEP. Think about owning money. Most folks think about money as something flowing through their hands - the cash flow mentality. You can't make money through cash-flow, however, you can only spend it.
Wealth is how much money you OWN, not OWE!