All throughout my life, I have heard people tell me that your savings are the true measure of your wealth. For a long time, I believed this to be the gospel and I tried my best to save as much as I could with the hope that one day I would become wealthy also.
As I got older and became more knowledgeable on how wealth is obtained I had a new understanding of how the process of wealth building works. I also got lucky in that I had the fortunate opportunity to work in the financial service industry which helped me to grasp this very important data.
In doing so, I learned from the experts that knowledge is so essential in moving from being uninformed about wealth to going after wealth for yourselves. This is information that you have to get in order to move on to becoming financially set. Don’t let anyone tell you differently, knowledge is power and the more you have the better it is.
In working with people who handles cash professionally, I discovered that having cash in your savings is not the answer that I thought it was when I was young. In order to become financially comfortable, you have to learn to put your cash to work for you. Thus, having cash in the bank is not enough anymore, especially at a time when interest rates are as low as they are today. Once you know about all the options that are available to you and what you can do with cash to make more of it, you won’t settle for just holding cash.
However, when you don’t have this background on how wealth is built and created from the ground floor, which many people from where I grew up didn’t have this expertise, we only understood having cash. In our perspective at that time, if you had savings in the bank you had it made.
There are a lot of people today who still believes in this notion that wealth is when you are holding cash. They are not aware that real wealth is having a combination of growing assets plus cash working together. And if you have your assets diversified to lower your risk tolerance, you are on your way to becoming financially comfortable.
There is another important point that is worth noting and that is wealth building starts with you telling yourselves that you want more for yourselves and your family. You’re not going to stay on the sidelines and accept getting a nominal return on your money. This mindset is necessary because it will help you to stay on track in making the sacrifices that you would need to make to reach this goal. In other words, you must want to become wealthy for yourselves and not for others, as that burning desire is what will keep you hungry in going forward.
It helps also in a big way when you start early on this journey of becoming wealthy. This is important because time plays a pivotal role in this process, as well. The sooner you start the better your chances are as wealth building don’t occur overnight, it takes time. The people who have the mindset that this process is too complicated will also give up and I don’t want you to be like them. This process will take a serious commitment from yourselves, but it can be done as there are millions of wealthy people walking around who are wealthy, why can’t you be one of them.
I’m proposing that you convert some of your “idle cash” into equity building assets. The assets that have the best upside potential of growth are owning a house, contributing fully to retirement accounts 401K/ IRA accounts, developing a parcel of land you may have inherited, and you get the picture. In other words, you must accumulate tangible assets that have the potential to grow to a point where it surpasses the interest income that you would receive from holding it in the bank.
I’m passing along this valuable information to you with the intentions that you would think carefully about how you will choose to allocate your cash . Keeping cash in the bank where it’s not giving you enough of income to life comfortably, this is not the best alternative in my opinion. I do agree that you should keep a larger portion of your wealth in cash if you are older as you don’t want to take much risk at that age. But it’s better to have some of your cash invested into assets that can grow as you age. This way you will have money later on in life, where you will need it more than you realize. I know for myself because I’m living that life.
Your comfort level of how much you want to invest depend on your own feeling of financial security. There are experts who concur that if you are over 55 years old 80% of your wealth should be cash. I think that amount is too high, I’m suggesting that you have no more that 60% in cash as you need the other 40% to be in equity growing asset to account for inflation. As an older person myself, if you don’t have any money at this stage of your life, you are in deep trouble. So if you have growing assets to protect you for the future, it’s so much better than not to have it.
And for the last point, there is this strong opinion among the younger generation of today who thinks that equity growing investment takes too long for them to see the benefit. Putting money aside to grow for the future don’t seem to interest many of them and that is not good for their future. They would prefer to keep their cash in the bank for fear that they will lose their money.
When you are young, you have time on your side so you can take some risk and you should do so. However, as stated earlier, if you are older I understand playing it safe and you should. But the important part of this article is that equity growing assets have a better track record over time than holding cash in the bank. I believe that you should be aware of this fact when thinking about building wealth. I hope that this information helps you when deciding what you want to do with your money. Good Luck in getting to the next level.