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The person who earns well looks richer than the person who earns less. You can enjoy your life much better if you earn a good income. There are a lot of dreams which can be fulfilled only by money. Luxury car, house, and foreign trip is not possible if your income is low.
Is it true that if your earning is high then you are rich and if your earning is low then you are poor?
People always get confused income with wealth. Income and wealth are two different terms. We think that the person who earns more money is richer than the person who earns less. If we look at the present situation then it seems true. Higher earning makes us enjoy all those luxuries which a lower-income person can’t afford.
But this is not true. Wealth is different from Income. Wealth is about saving for the long term.
Suppose you are earning a high income but your monthly expenses are so huge that you are not able to save enough money for the future, then how can you consider yourself wealthy. Instead of focusing only on higher-income you also need to focus on creating wealth for yourself.
High earning does not guarantee wealth?
Earning a higher income does not ensure a person to become wealthy. High-income earners usually have high standards of living which makes them spend more while many earn less income but may save more and acquire wealth. It all depends on how a person manages his income.
Difference between Income and Wealth?
Income is earned immediately, but wealth takes time. Wealth can be acquired by purchasing assets that can generate additional income. You can invest your money in a fixed deposit which will generate interest income for you. There are many investment options available which I had already discussed. You can check here. Don’t work for money let your money work for you
Who can create wealth?
Creating wealth is not a difficult task. Fortunately, a person with a lower earning can also create wealth. You need to focus on your savings and invest that saving in income-generating assets. Of course, it is easy to create wealth with higher income. With the higher income, you can save more by cutting you unnecessary expenses and invest your money in income-generating assets.
How can you create wealth?
If you think that you cannot create wealth with a lower earning than you are wrong. All of us can create wealth, no matter how much we earn. There are a lot of investment options available to us which are not only helping us to create wealth in the long term but also help us to develop new streams of income.
Start investing early
Compounding works better if you invest for a longer duration. If you want to create wealth then you need to start your investment as early as possible. It is easy to save money and invest in a younger age. At this age, you can invest your money in equities which is a risky investment but give a huge return in the long run. But if you crossed your forties than you can invest in fixed deposit or other safe investment options.
Reduce your expenses
There are a lot of unnecessary expenses that you can eliminate without any change in your lifestyle. I am not saying that you start cutting your expenses on food or clothes. There are a lot of expenses which are unnecessary for us but you incur them just to impress others. There is no need to go out to change your mobile frequently.
Another place to cut your monthly expenses is to avoid dining out or at least cutting down alcohol spending.
Paying off your debt
You cannot become rich with a lot of financial debt burden. These burdens eat your savings every month. The cost of debt is much higher than the return from any investment. If you started saving money then firstly try to repay this loan and then think of any investment.
Try to repay your loan by increasing your EMI amount. A small increase in the EMI amount can save a lot of interest outflow. Repay your credit card loan promptly. There are a lot of methods to repay the loan, you have to think which method is best suitable for you.