The Truth About Wealth

We have so many thoughts and ideas around wealth and what wealth really means. We often think it’s all about making a lot of money and buying a lot of things.

But that’s not true. Learn the truth about wealth in this episode.

Lightly edited transcript appears after the show notes.

Topics we explore

• the relationship between income and wealth

• how lifestyle choices impact wealth

• what wealth is really all about

Resources mentioned

Lifestyle Freedom Starter Guide: https://www.rhothomas.com/start

Study – more millionaires were teachers than lawyers:  https://www.daveramsey.com/research/the-national-study-of-millionaires

Study – 78% of Americans live paycheck-to-paycheck: http://press.careerbuilder.com/2017-08-24-Living-Paycheck-to-Paycheck-is-a-Way-of-Life-for-Majority-of-U-S-Workers-According-to-New-CareerBuilder-Survey

Study – 25% of Americans making $150k or more live paycheck-to-paycheck: https://www.fa-mag.com/news/nielsen–even-many-high-earners-live-paycheck-to-paycheck-22704.html

Income/needs/savings graphic: https://www.theladders.com/wp-content/uploads/average-joe-1.png

The Millionaire Next Door by Thomas J. Stanley and William D. Danko: https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474/

Everyday Millionaires by Chris Hogan:  https://www.amazon.com/Everyday-Millionaires-Ordinary-Extraordinary-Wealth_and/dp/0977489523/

Harvard students would rather make $50k than $100k:  https://www.fastcompany.com/3006318/jonah-berger-explains-how-50k-salary-more-desirable-100k

Connect with me

The Wealthyesque Community: https://www.rhothomas.com/community

Social media: @iamrhothomas on Instagram, Facebook, and Twitter

Email: hello@rhothomas.com

Lightly Edited Transcript

Hey friend! Welcome back to another episode of Wealthyesque.

As always, I am so, so grateful that you’re here because I know how busy everyone is and so for you to take a little time out to spend with me means a lot.

I want to talk today about wealth. We have so many thoughts and ideas around wealth and what wealth really means, and a lot of them frankly are just not true and are holding us back, so I want to talk about it.

We’re going to get into

• The relationship between income and wealth,
• How lifestyle choices impact wealth, and
• What wealth is really all about.

The relationship between income and wealth

So let’s get into the relationship between income and wealth.

We have these thoughts about what wealth looks like. It’s the big houses and fancy cars and expensive clothes and trips to exotic places and all of that, and often when we’re looking to build wealth, we have things like that in mind.

We think about wealth as making a lot of money and being able to buy a bunch of stuff.

But some of the people who make the most and have the biggest houses, the fanciest clothes, the best cars have no money.

Income has little to do with wealth. There are people who make a lot of money and are broke. There are people who make less money and are wealthy.

More millionaires in America were teachers during their working years than lawyers or doctors.

It’s your savings rate, rather than your income, that impacts your ability to build wealth. If you’re living on a fraction of what you make, you’re able to put the rest of it toward building wealth. The key is spending less than you make and investing the difference.

Someone who saves half their income has a lot of freedom and flexibility, regardless how much they make, because they’re used to living on much less than what they make, and basically for every year they work, they’re buying a year off. That’s the power of your savings rate.

The more you save, the higher your savings rate is, the more freedom you have.

And if you’re not sure what your savings rate is, head to rhothomas.com/start and download your free Lifestyle Freedom Starter Guide. There’s an exercise in there that helps you calculate your savings rate and gives you a rough estimate of how long it would take you to reach financial independence at that rate.

If you need 100% of your income or more, or in other words, you’re saving nothing, you’re not free.

If you only need 80% of your income, that starts to change things a bit. You’ve got a bit more wiggle room.

If you only need 50% of your income, that gives you a lot of options. And if you need an even smaller percentage, it gives you more freedom and flexibility.

But 78% of Americans are living paycheck-to-paycheck, including 25% of those making $150,000 or more.

I heard someone say once that you can’t fix a money problem with money.

If you don’t know how to manage your money at the level you’re at, making more money is not going to fix that. Having more money will just magnify the problems you already have.

That’s why you see some people making six figures with all kinds of credit card debt, past due bills, and other money problems you wouldn’t expect at that level.

How lifestyle choices impact wealth

The biggest issue for most of us is we tend to adjust our lifestyle to our income, so let’s get into the lifestyle piece of our conversation.

What usually happens when we get a raise? We spend it right? We upgrade the car. Maybe do some home renovations.

We get a bonus and immediately put it toward buying that thing we’ve been wanting for a while.

It’s the nature of our consumerist culture.

We always need more, and we work the majority of our lives to buy the things we “deserve” because we work so hard. And then, of course, as we progress in our careers and family lives, we need to upgrade to bigger and better stuff.

And let’s be clear, my husband and I have done some of that, as well. When our second child was born last year, we upgraded my husband’s coupe to an SUV. I would argue that a bigger car was necessary because we could only fit one of us and one child in the coupe.

However, we didn’t necessarily have to get an SUV, and we didn’t have to get the SUV we got. It’s an Infiniti, and it’s one of the higher packages in terms of the features and stuff included.

It was pre-owned, so we didn’t pay as much as we could have, but we also could have gotten something that served the same essential purpose for much less.

All that to say, many of us go through life buying new stuff or upgrading our stuff just because we can. Because we feel like we deserve it. Because everyone around us expects it. Because everyone around us is doing it, which is classic “keeping up with the Joneses.”

A lot of money goes toward buying these things that we don’t need or want to impress others. And for some of us it may be about trying to prove our worth or importance to others and maybe ourselves.

Because we finally made it. We’re lawyers, but we don’t feel worthy, so we feel like we need to look the part and show that we’ve made it. And that’s another episode for another day.

Another thing is we’re in a high-stress profession, and many people cope with stress through retail therapy.

But when you look at your life and you feel like you are just so busy, so overworked, so overwhelmed, have no control of your time, and feel stuck, a lot of times the root of that problem when it comes down to it is our stuff.

And we’re not making the connection between the things that we buy, our consumerism, and the quality of life we have. Many of us are working so hard to afford all the stuff we feel like we deserve.

Would you need to work as much if your mortgage wasn’t as large as it is? Would you need to work as much if you didn’t have that car payment or those credit card payments or the private school tuition or whatever the thing is for you?

As a society our priorities are way out of whack, and I feel that statement is even more true of lawyers than other segments of the population because of the way that we equate our time with our money.

We are literally trading our time away in 6-minute increments, right, trading our lives away in 6-minute increments, and doing it all to make more money to buy more stuff, bigger stuff, better stuff, to keep up with our colleagues and keep up this appearance of being well-off.

If I buy more stuff every time I get more money, and I keep increasing my expenses as my income goes up, then I’m not able to save for myself.

If I’m spending all of my income, I’m tied to the job that I have because I need that income, and if I’m dealing with an overbearing boss or a toxic work environment or the work is just not what I want to do anymore, it will be much harder for me to make a change.

If I’m dealing with those kinds of things at my job, the answer is not “Let me go make myself feel better by buying a bunch of stuff.”

That’s how we often operate, and that’s why we end up stuck. That’s what the concept of golden handcuffs is all about.

When people are in these high-paying, high-stress jobs and spend all of the money they’re making and then some, they become dependent on that income and then can’t leave the job if they want to.

There is a great graphic that I’ll link in the show notes that shows how people’s perceived needs change as their income changes. Basically, as the income increases, so do the needs. And the savings only increases marginally.

That’s what most of us do, and that’s why many of us stay stuck in positions that we don’t want to be in.

Your savings rate and how much your lifestyle costs play a much bigger role in your ability to build wealth than your income ever will. If you don’t get those under control, you will stay stuck. It will be very difficult for you to ever truly be free and to live life on your own terms.

It’s a really bad feeling to feel stuck and to feel like you can’t make a change that would make your life better.

Most people are living for the now and not thinking about later. It’s all about instant gratification and not long-term goals.

But if you’re doing the things everyone else is doing, you’re going to get the results everyone else is getting.

Many people feel like building wealth is not attainable for them. They think wealthy people were born wealthy or that you have to invent something or win the lottery or whatever limiting belief you have about wealth.

But regular people become wealthy all the time. Becoming a millionaire in America is very attainable. People do it every day.

I highly recommend the book The Millionaire Next Door because it talks about these everyday millionaires. And actually there’s another book, a more recent book, called Everyday Millionaires that’s really good, too.

Both of those books focus on the everyday millionaire. It’s not the celebrity. It’s not the tech inventor guy in Silicon Valley.

It’s your neighbor. Regular people living in regular neighborhoods driving regular cars doing regular things but quietly building wealth.

You’d never know it because they don’t look like the stereotype of what we’ve conceptualized a wealthy person to look like, but that’s part of why they’re able to build wealth.

You can build wealth if you want to, but that’s the key—if you want to. Because a lot of us say that we want certain things, but we’re not willing to put in the work or make the sacrifices to get there.

So if you want to build wealth, great. Put in the work, and do it. But recognize that the money is just one piece of the puzzle.

Which brings me to what wealth is really all about.

What wealth is really all about

In reality, wealth is not about money or material things.

At the end of the day, wealth is truly about having control of your time. I say that every episode in the intro, and I don’t know if you’ve picked up on it or really paid attention to it, but I really believe that the people who have control of their time are truly wealthy.

I don’t want to just have a bunch of stuff and look wealthy.

I want to build wealth. And that’s not just a monetary thing. It’s ultimately not about the money. It’s about the freedom, the choice, the options that the money provides.

I heard a great quote by Chris Rock, and he said, “Wealth is not about having a lot of money. It’s about having a lot of options.”

I couldn’t agree more. A lot of times we overlook the power that money has to provide those options.

People tend to view money as just a tool to buy things, but money is a tool that we can use to literally buy back our time.

But if we don’t pay attention to what we’re doing with that money, if we’re not intentional with that money, if we’re mindlessly spending it trying to keep up appearances, then we’re wasting this tool and the opportunity to achieve the control we really want in life.

Wealth is tied to money, but it’s not the same as money. Having money helps you to achieve true wealth, that control, that freedom to live your life the way that you want to.

All of the money that we spend on stuff is money that we can’t use to make further progress on what we ultimately want for our lives.

We don’t need a lot of money and stuff to have a good quality of life. We need control of our time.

We worry so much about money, but money is an unlimited resource. We can always make more money. But time is limited. We can never make more time.

Time is our most valuable resource, and we trade so much of it for stuff.

We basically trade hours of our lives for stuff.

A lot of us are really caught up in what society says that we should be doing. When you’re in a field like law, you’re perceived to be doing really well. So for some of us it’s tempting to try to keep up those appearances.

We have to have the type of house that’s fitting for a lawyer, the type of car that’s fitting for a lawyer, shop at the type of stores that are fitting for a lawyer, go to the type of places that are fitting for a lawyer.

Some of us also buy things to fill a void. We’re unhappy and want to feel better.

But money and material things won’t make you happier. Sure, when you get a raise or a bonus or buy something new, you might temporarily feel happier, but then you settle into that new income or that new thing, and it just is what it is.

I think a lot of times the unhappiness comes in when we’re comparing ourselves to others. We want to do better than those around us.

I read once that Harvard students were asked if they’d rather make $50,000 when everyone else made $25,000 or $100,000 when everyone else made $200,000. The majority of students chose to make $50,000. They chose to make less for themselves if it meant they could make more than others.

When we perceive ourselves as behind our peers, it can drive unhappiness and make us feel less valuable or like our lives aren’t as good as theirs. This tends to drive things like keeping up with the Joneses and buying things just because our colleagues have them.

But remember that we see what people want us to see. You can’t compare your behind-the-scenes to everyone else’s highlight reel. You have no idea what’s going on with them behind closed doors.

And none of that to say there’s anything inherently wrong with spending money on material things. But I want you to think about whether the things you’re buying are things that you actually value and want.

I want to remind you to be intentional about the things you buy because the more that you spend on those things, the less money you have available to buy back your time and the more money you need to get to that freedom point.

I’m not one of those “sacrifice everything so you can hurry up and save a bunch of money and quit your job” type of people. But if that’s you, cool.

I just want you to be able to do what you want to do and not be stuck in a position that you don’t want to be in. That’s no way to live, and life is way too short for that.

The point of all of this is that wealth is about so much more than the money. Yes, money helps, but wealth is about having control of your time, having options, being able to do the things that you want to do when you want to do them without constraint.

The truth about wealth is that it has very little to do with money and everything to do with control and freedom in your life.

For me, wealth is not measured in dollars and cents. It’s measured in time. It’s not about money for the sake of having money. The money is just a means to an end.

I want to maximize the options in my life. I want to live life on my own terms, and I want to have the freedom to do the things that I want to do. The major way to do that is to have money.

Although money won’t make you happy, it gives you options, and those options contribute to your happiness.

Let’s recap.

1. Income has little to do with wealth. Your savings rate will determine whether you’re able to build wealth.
2. The more you save, the more freedom you have.
3. Many of us are working so hard to afford all the things we feel like we deserve.
4. We allow our perceived needs to creep up as our incomes increase, which keeps us stuck in the same position.
5. The average millionaire looks like your neighbor, not the stereotype of wealthy people we typically think of.
6. People tend to view money as a tool to buy things, but it’s a tool to buy time.
7. Wealth is not measured in dollars and cents. It’s measured in time.

That’s it for today’s episode. Join me over in our private Facebook community, The Wealthyesque Community, and let’s talk about the truth about wealth and how you define it. Head to rhothomas.com/community.

If you got value from this message, please share it with a friend or two you think would also benefit. And if you share on social media, I’m @iamrhothomas on Instagram, Facebook, and Twitter.

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As we close out, friend, I pray that you will challenge the beliefs you have about wealth and money that are no longer serving you.

I pray that you will evaluate your money habits and honestly consider whether the way you manage your money is hindering your progress toward the goals you say you have for your life.

And as always, I pray that you continue to take steps to regain control of your time, build wealth, and live the life of freedom and choice you deserve.

Talk to you later.