I’ve seen many highly paid individuals struggle financially in the last 11 years of my career as a financial adviser. Why is that?
Your income is like water flowing through a hose. The higher your income, the larger the flow of water. However, wealth is like a bucket that you are trying to fill with water. If you have a high-flow hose but your bucket has large holes in it, you will never fill that bucket as quickly as you want.
What are those holes in your bucket?
Spending habits
When our income increases, our lifestyle usually does as well. Lifestyle inflation affects us all. When we make more money, we may spend that extra income on things such as expensive holidays and luxury items. In this society, we may be influenced to measure our worth by our possessions, so we shop for lifestyle items that enhance our self-image or social status to reflect our standards of success.
High debt level
When our income increases, our debt level can increase as well, as we take out larger loans for better cars and a larger family home. When most of the increased income is spent on the repayment of debts and lifestyle items, there is nothing left to contribute to building wealth.
In his book, ‘Rich Dad Poor Dad’, Robert Kawasaki said, “Your home is a liability”. From a cash flow perspective, he is right. Your family home doesn’t produce any income and it can be a liability if you stretch yourself to buy an expensive one that is beyond your affordability.
Lack of income-producing assets
When we look at struggling high-income earners, they normally have very few, or no, assets that produce passive income.
If you want to be financially successful, instead of spending all your income on living expenses and debt repayments, you must acquire income-producing assets such as managed funds, property, shares, and superannuation. I call this your money-making machine. When passive income from the money-making machine exceeds your expenses, you will no longer rely on your earnings from your job or business, and you will be financially free.
Poor money blueprint
Your money blueprint is your pre-set program – or the way you think about money. It typically operates outside of your conscious awareness, yet it drives your financial behaviours. The subconscious mind is comprised of ideas and beliefs that were formed primarily in your early childhood.
You are programmed in three primary ways around money – the things you heard, the things you saw and the events you experienced when you were young. You can access more information from this blog article – Your Money Blueprint | Compound Freedom.
Regardless of your income level, if your subconscious mind believes that money is hard to get, or there is some virtue in poverty, you will encounter problems when acquiring wealth. Your financial success will be limited because you have a poor mindset.
Are you currently using your money to enjoy your now, or are you saving it for your future? You can have anything you want in your life, but you can’t have everything at the same time. The wisdom of life is balance and discipline. Feel free to reach out if you need help to achieve a balanced and abundant life.
