Why aren't You Wealthy?

The Millionaire Next Door A quote from page 38:

"Why aren't you wealthy, you ask? Well, Let's examine your lifestyle. Is it one of great offense (earning a lot)? Are you in the $70,000, $100,000, $200,000 income category? Congratulations, you play wonderful offense. But how is it that you keep losing the game called wealth accumulation?"

Be honest with yourself. Could it be that you play terrible defense? Most high-income earners are in the same situation, but not most millionaires. Millionaires play both quality offense and quality defense. And quite often their great defense helps them outscore/outaccumulate those who outearn/have superior offenses. The foundation stone of wealth accumulation is defense, and this defense should be anchored by budgeting and planning.

Wouldn't you like to know the secret of becoming wealthy? Well, thanks to Money Central, we now have some scientific information on this subject (see the bottom part of the article).

First, some key findings:

-There’s a huge variation in wealth at every income level. Many low-income families have almost nothing. But the same is true of many high-income families.

-Income alone doesn’t explain wealth disparities. Some of the lowest-earning households had managed to accumulate significant wealth.

-In fact, income differences explain just 5% of the wealth dispersion the researchers found.

-What the researchers called “chance events” -- inheritances, medical bills, marital status, number of children -- explained about 4% of the dispersion.

-Investment choices explained about 8% of the variations.

-In other words, the vast majority of the differences in wealth had nothing to do with income, chance events or investment choices.

-What did explain most of the differences in wealth? Venti and Wise concluded it was this: How much the families chose to save. Those who made it a priority to save built wealth, regardless of their income level, individual circumstances or choice of investments.

sources: MSN Money & Free Money Finance Also read: GETTING GOING