Almost everyone dreams of being wealthy. This status isn’t a bad goal by any means, but it is often a misunderstood status. Wealth is more than a high income. It’s best understood as the accumulation of assets or value. People mistake wealth for owning a lot of possessions or having the newest, latest gadgets, when in reality is it quite the opposite. Those who become wealthy spend significantly less than they earn, so that they can accumulate wealth.
Another way to look at it is to think of wealth like water pressure in a pipe. If you have the water valve completely open, you will not build up any water pressure. The same is true for wealth. Designating none of your earnings towards savings will get you no where towards your dream of wealth. The more you restrict water flow, the more water pressure you get. The same is true for building wealth. The more you save, the faster you accumulate assets.
If you are like me, once you realize this, you will start to wonder how fast you could accumulate wealth. In other words, how much can you reduce your spending so that you reach your goals faster. While it’s not necessarily a race against peers, the faster that you grow your net worth, the more freedom that you have in the future. My wife and I were able to save a significant portion of our income in the past year. We invested most of that and are excited to continue the trend as we both advance in our careers. Yet, part of me wonders if we might be going too far to the extreme.
Can You Accumulate Wealth Too Fast?
While many of you will laugh at this question, I can’t help but think of whether we are sacrificing too much just for the sake of growing my net worth. As much as I love the idea of early retirement and financial independence at an early age, there are more important things to life. After all, money isn’t everything. Here’s a list of things that I am not willing to lose for wealth:
- My marriage – Nothing is worth more to me than my best friend. I would be nowhere without her, so if it ever came down to choosing between her or money, the answer is easy.
- Family & Friends – Rarely are individuals faced with a life or death situation where they have to choose money or their relationships, but we make these decisions every day to a lesser degree. Do you go out partying with friends every night? If so, how much does that cost you? On the other end of the spectrum, do you avoid hanging out with friends because it is too expensive? I’m not willing to give up friendships altogether just because it is less expensive to do so, but I don’t hang out with people who fly to Europe for the weekend (yes, I know people who do this).
- My Sanity & Time – Last year I dedicated a lot of my time to growing my side business. Too much time. This year, I am approaching it much differently. Instead of killing myself and adding too much stress, I am now satisfied with a little less income so that I can enjoy life a little more. Anyone can work more hours for a little extra cash, but you have to ask yourself if it is worth it. The same is true with some forms of saving money. ‘Extreme couponers’ spend hours to save a few bucks. For me, my time is worth more than a few dollars.
How to Balance Building Wealth
Growing your net worth is an important focus in order to be financially successful. I am not advocating that you should ignore the goal of becoming wealthy, but I am saying that this much be accomplished within reason. Here are several steps that you can take to live a balanced life:
- Set realistic limits/goals – Determine how far you are willing to go in order to build wealth and then live within those boundaries.
- Be patient – If you are someone like me that wants to accomplish something within 1 year, remind yourself that these things take time.
- Live a little – By all means, save as much as you can, but don’t forget to live. The last thing you want to do is to sacrifice for two decades and then die an early death before you really lived.
Almost everything in life comes back to balance or moderation. Building your wealth as fast as possible is a noble goal, but don’t let it stop you from living the life that you want for yourself while accomplishing your goal.
This post was written by Corey, a staff writer from 20’s Finances.