Wealth is something that evades most people. The funny part is, tons of people spend most of their time chasing money. This includes me and Kris as well. I worked very hard to earn every promotion the Marine Corps threw my way. I got promoted until there were no further promotions. I did this for personal pride but also for the additional money as well. During my first full year in the Marine Corps, I earned $13,000. This year I will make $120,000. Kris started working in America for $6.90 an hour. Over the years she has held multiple job titles and management positions. She now earns $20 an hour. So we should consider ourselves wealthy, correct? I would say that we make a comfortable amount of money. Why do we not consider ourselves wealthy? This question has a different answer for every single person on earth. However, in order to become wealthy (by YOUR standards or definition), we need to understand the 3 stages of wealth. The 3 stages of wealth are comprehending, building, and enjoying.
Comprehending Stage– This is the hardest stage to grasp. Most people will never understand or progress past this stage. However, it is not always their fault. We grow up being told to do good in school, go to college, get a good job, buy a house, get married, and have children. And when most of us are on a path similar to this, we do not understand that there is a lot more we need to know. The fact of the matter is, most of us will not become wealthy working a standard job. Deep down we feel that we are not going to become wealthy from our jobs, so we adjust our definition of wealthy to be something that we can achieve. The average vision of wealth is probably owning a home outright, being able to send the kids to college, retiring at 65, and having a nice 401k to supplement social security. There is nothing wrong with this at all.
In fact, Kris and I were on that same path. We were getting promoted in the corporate world. We owned a house. Most of my kids’ college would be paid for by the military. Everything was going as planned. However, after I was promoted to my final rank, something happened. Kris and I wanted to go to Turkey together in the summer of 2019. It would have cost all of the money that I had just earned in the promotion. We decided to think outside the box. We decided to bring some roommates on board. Our extra income started at $500, then $1000, and now is $1600. I also took a second job teaching for $35 an hour. We went to Turkey and actually came back with extra money. While there, I learned about investing and passive income. With no trip on the horizon, we started to save and invest the additional rental income. We started to comprehend.
We had just broken the surface on the comprehending stage. We had to define what being wealthy meant to us. We slowly started to see what we wanted our future to look like. We wanted to be able to bring all of our family on board (parents, kids, grandkids). We wanted our children to have homes and investments already ready for them as they become adults. We wanted our children to have the option to stay home with our grandkids. We wanted to start businesses together and spend as much time together as possible. We also do not want to have money be the limiting factor of anything we choose to do, ever. If we all want to go to Spain, well, we will all go to Spain. Of course, this costs money. Lots of it. So as we journey through this comprehending stage we are brainstorming ways to start businesses and create multiple streams of income. We are keeping our day jobs as well. During this stage, we have realized that our day jobs are just a means to an end. It should have never been about growing inside these jobs at the expense of family. All we can take from these jobs is what we can extract from our paychecks and put into businesses and investments. Not everyone has a deep-seated core of family. We can appreciate that. But everyone should find what their real idea of wealth is and start working towards it.
Building Stage- Once we have established our TRUE vision of what wealth is, we will need to work towards it. More than likely, you will have to leave your comfort zone for this. If you are working a high paying corporate job, chances are you live in an expensive city. There are choices to be made. Can you remote work from a smaller, cheaper city? Can you start your own business in a smaller, cheaper city? Should you work for another job? What kind of business can you start? The goal is to generate more income. The more income we can generate, the more money that we can invest. The invested income then turns into passive income via interest payments, capital appreciation, and dividends. This way, our money continues to work for us.
Building multiple streams of income is where most people get stuck. Lots of people we meet have learned how to be frugal and budget their money very well. However, they are still tied to that one source of income. No matter how much they save, they are not generating more income. This will always leave a sense of fear and regret. For instance, let’s say that Jake is retired and earning $10,000 a month in pension payment. All his bills including his mortgage is $2000. This leaves Jake $8000 of free cash to invest, save, spend, vacation, etc. However, as random things arise, being on this fixed income starts to wear thin. Let’s say Jake’s daughter wants to travel to Europe on a 2-month tour. The trip will cost upwards of $25,000. No matter how he swings it, this will be a lot of money for Jake. Either he takes money out of his savings, or he will have to save up for 3-4 months in order to afford to go. He can make it happen. However, if Jake had started comprehending and building on what his true vision of wealth was, he could have been prepared for moments like these. What if 10 years earlier he had bought rental income (now producing $4000 a month), started a T-shirt business (now producing $2000 a month), and started investing (now producing $3000 a month)? That is an extra $9000 a month he could use towards the trip.
This is where Kris and I are currently. We are in the building phase. We have 5 different streams of income coming in. I am constantly on the lookout for even more streams of income. We do not ever want to be like Jake. We envision wealth as being able to support all of our family as well as being able to create experiences with family as well. Anything that we can do during the building phase to generate income, we are going to do. To our surprise, most of our friends think that we are crazy. They say we are crazy to have roommates. However, our roommates pay our entire mortgage. I think it is crazy to pay your own mortgage. To each their own. They say the path to wealth is lonely. In our case, not so much. I have a very close family and 3 friends, and that is all I need. On your journey, you will have to learn how to silence the naysayers. Continue on your own path.
Enjoyment Stage- This is where your hard work has finally paid off. You still have to be vigilant. You can never just throw in the towel and say “I’m done”. There is always more work to do. However, this is the beautiful dream that you have envisioned for 10-20 years. In January 2020, Kris and I have already experienced a little of the enjoyment stage. We had been paying down debt and saving money for about 7 months when a great opportunity arose. A great house on 3 acres of land opened up right across the street from our then-current home. We always loved the area. To be on 3 acres but still be 10 minutes from the base and 15 minutes from the beach is a dream. We looked at the house and made an offer that same day. 45 days later, we owned the home, our third. So it pays to be vigilant and forward-thinking. If we had been waiting for years to pay off debt or start saving, we would not have been in a position to purchase a third home. Having roommates paid off in spades.
I believe the best way to obtain wealth is to work backward from the enjoyment stage. Think about what you see in the future. What do you want to be there? Who do you want to be there? How are you going to get there? The question most people never ask themselves is, “What am I willing to sacrifice in order to achieve our goal?” To us, becoming wealthy is not our goal. However, it is the result of achieving our goal. Our goal is to have a happy, loving family that doesn’t have to worry about money.
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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