It’s not about how much you make that makes you rich but rather how much you keep and grow. Being obsessed with making money will make you rich. Keeping and growing that money will make you wealthy. So, the difference between being rich and being wealthy is very crucial and elusive. One defining difference is that the rich look rich while the wealthy are intrinsically rich. The acting-rich majority are building their businesses to make money; the wealthy use money as a tool to build assets that will in turn bring more money. The majority are seduced by the marketing hype of the astute marketers who part the looking-rich from their money. The money earned then is being burned in the machinery of consumption. The 1% wealthy is aware of the trap of conditioned buying.
The looking-rich majority are consumer-oriented. Let’s look at the habitual lifestyle of a banker. He lives on a $500,000 year salary. His high occupational status dictates a high-consumption lifestyle. All of his income goes toward consumption categories that denote high occupational status and prestige: residence, cars, clothing, club membership and the like. When that banker loses his job in the early 2009 because of the economic crisis that hit the country, he went broke and was unable to keep up with the lifestyle he got used to.
Developing the healthy assets is the foundational principle of the minority 1%. These assets easily produce recurring and sustainable income. These healthy assets are the deep fundamentals upon which making, keeping and growing money is built. Without crafting these healthy assets, no wealth is attainable. These underground fundamentals are your physical health, mental health, emotional health, and spiritual health. You are spending money and time on these 4 pillars to make money later on. That’s the principle of investing: spending money to make money. Invest in Your physical health through eating properly and exercising. Invest in mental health through setting goals and planning. Invest in emotional health through hanging out with the right people and letting go of the toxic ones. Invest spiritually through being grateful and compassionate.
Mastering the principles is the one simple commonality that the 1% share. The American billionaire Charlie Munger attributes his success to focusing first on the unchanging knowledge that won’t shake over time. Principles won’t change, tactics will. That’s why he sticks to the principles and tends to be flexible when it comes to tactics. He advises investors to focus their time and energy on the bigger picture first. For him, tactics are constantly changing and therefore it is dangerous to separate them from the broader context.
Self-discipline is the path that helps you master these principles. It’s your willingness to lead a happy and wealthy life built on healthy habits. It needs to have guts to tackle the daily disruptions of modern life. It’s your ability to create good habits that stand against the conditioning of society. Charlie is an advocate of developing a habit of seeking to understand the fundamentals of wide variety of disciplines using the learnings of psychology, biology and other disciplines to help you become a learning machine and a better investor.
Understanding the difference between being rich and being wealthy will help you develop an accurate blueprint for your life. In order for this blueprint to be viable, it should be rested upon the foundational principles of developing healthy assets.