The Quickest Way to Achieve Wealth

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Remember the last time you got some unexpected cash? It may have been a birthday present, graduation gift, working some overtime, a bonus, or receiving a raise in salary. What was your thought process when that happened?

If you’re like most Americans, your mind immediately started churning with numerous scenarios of what you could spend the money on.

This concept of increasing spending whenever your income increases is called lifestyle inflation, and is one of the biggest obstacles preventing people from achieving wealth.

Lifestyle inflation also occurs when you try to “keep up with the Joneses,” comparing yourselves to others and spending money to try and avoid the feeling that you’re missing out.

This phenomenon was detailed in a well known financial book, called The Millionaire Next Door, by Thomas J. Stanley. The book describes accounts of real-life millionaires, and found that many of the people who were most well-off financially actually lived much simpler lifestyles than their neighbors.

Living a more modest lifestyle is a GOOD thing, and allows you the opportunity to build much more wealth over your lifetime than your peers. In this way, possessions don’t tell the whole story. More often than not, the people who flaunt the most with their material possessions turn out to be the people who aren’t truly wealthy. Anyone can finance a fancy car, but being saddled with debt isn’t living wealthy. This is why so many athletes and celebrities end up going broke.

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There are a lot of scams and “get rich quick schemes” out there, but the reality is that achieving wealth isn’t magic. It just takes discipline and dedication over a long period of time. There are plenty of people who make hundreds of thousands of dollars per year, yet have nothing to show for it. On the other hand, there are people out there with modest salaries that end up being able to retire comfortably. How does this happen? They resisted the temptation to inflate their lifestyle.

One of the fastest ways to achieve wealth is to avoid lifestyle inflation. When your income increases, keep your lifestyle and spending level the same as it was before. Try and pretend that the income increase never happened. Then use the surplus money actively in ways to increase your net worth, such as paying off debt, building up an emergency fund, and investing into retirement accounts.

The common adage of “pay yourself first” is extremely important to grasp. If you tell yourself you’ll “save what’s left” at the end of the month, you’ll soon see that there won’t be anything left to save. Instead, set up automatic payments into an online savings account and retirement accounts so you no longer have to rely on your own discipline. This way you won’t be tempted to increase your spending when you see the extra money sitting in your checking account.

Increase Your Income

A common way to increase your income is to find a second stream of cash flow from a side-job. I put this into effect with my own finances, by putting my entire paychecks from the second job I work in the summer toward our student loan debt. As soon as a paycheck comes in, we submit the full amount toward our debt and pretend we never received it. We’ve been seeing massive progress the last few months because we’ve kept our budget and lifestyle the same despite the additional income.

Even if you aren’t expecting an increase in income anytime soon, make a plan for what you’ll do when it does end up happening and set clear-cut financial goals that you’re working towards. This way you’re prepared for the future and it helps avoid blowing it all on possessions that don’t bring you true happiness.

Every time you do this, you’re coming out further ahead. The better you get at practicing these principles, the better your financial state will be. Eventually, practicing these disciplines will lead to financial independence and the ability to retire comfortably. It’s such a simple concept, yet so few people actually do it. Even if you can’t fully avoid some lifestyle inflation, keeping it as minimal as possible will make a huge difference over time.

Have you been able to avoid lifestyle inflation?

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