Are you paycheck rich or balance sheet rich?
It is common for people to live paycheck-to-paycheck. It is also common for those same people to think that if they get millions, they will never be broke again. Living paycheck-to-paycheck most often brings to mind people in lower to middle income brackets. However, that is just not the reality.
Did you know that you can have millions of dollars and still live paycheck-to-paycheck? A person can be paycheck rich but still broke. Look at some millionaires can have five million or twenty-five million dollars in revenue coming in, but as soon as the money stopped, they lost houses, cars and so much more. Paycheck-to-paycheck is a scenario in which a person would be unable to continue their lifestyle when their paycheck stops, because most of their income goes to expenses instead of savings and investments. As you can see, it has nothing to do with the amount of the paycheck and everything to do with the mindset of the person receiving the paycheck.
Instead, the mindset should be a goal of being balance sheet rich. To achieve that, you should have assets and passive income in excess of your active income (paycheck). The purpose is so that if you lost your paycheck today, your assets and passive income can sustain your lifestyle until you regain active income.
Are you doing what it takes now to be balance sheet rich or are you forever going to be paycheck rich? Will you continue to frivolously spend money, not invest in assets, or create passive income? Most see windfalls of money or get lump sums, only to spend the money without investing and saving any. Before they know it, they are back to living paycheck-to-paycheck. A better decision is to continue to spend money as usual and invest the lump sum. The investment options are limitless: stock, real estate, other businesses and so forth.
Let’s shift our mindset from believing that just because we temporarily have a lot of money on hand, that we are rich. Let’s create expenses lower than our paycheck and make the excess work for us in a savings account and with passive income opportunities. Remember, the goal is for your assets and passive income to surpass what you are making in active so that you can live comfortably and be balance sheet rich.
A person that makes $100 million but has about the same amount tied up in a million dollar house, luxury cars, and a luxury lifestyle that takes up most of that income, is in the same financial situation as a person making $40k with a lot of debt and no assets. It just sounds better to be the millionaire. The object of the money game is to increase income and decrease debt while building assets!
Go ahead and start preparing yourself to transition from paycheck rich to balance sheet rich.
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