Myth: You need high income to become financially successful (2024)
What better time to start debunking myths than the Summertime! I love a good financial success myth but what I love even more is debunking it! It became a myth because enough people believed it to swear by it and use it, mainly as an excuse, as to why they would never become financially successful! Like every belief we have, be it financial or other, if we believe it, our brain is going to show us evidence that we are right. That in itself is a whole new blog post! So, for now, let’s tackle the first one:
“You need a high income to become financially successful.”
While having a higher income can certainly make it easier to build wealth, it’s not the only determinant of financial success. Many people with substantial incomes struggle with financial issues because of poor money management habits or excessive spending. By the way, I have a whole course on getting yourself in the right Mindset to completely crash your financial goals!!! (Just saying ,😉 ! On the other hand, individuals with moderate incomes can achieve financial success through smart financial planning and disciplined money practices. This article is to show you how you too can achieve this if you are not in the higher bracket of the payroll scale.
So, what can you actually do to start moving the needle the right way? Well, let’s see:
Create a budget: Budgeting is crucial regardless of your income level, budgeting is the foundation of financial success. Knowing where your money goes and creating a plan for saving and investing can lead to positive financial outcomes.
Control spending habits: It’s not about how much you make; it’s about how much you keep. People with high incomes who spend beyond their means will end up in financial trouble. Prioritizing needs over wants and practicing frugality can help you save and invest wisely.Which brings us to point number
Invest wisely: Making your money work for you through investments can significantly impact your financial situation. Even if you have a lower income, starting early and consistently investing in assets that align with your risk tolerance and goals can yield significant returns over time.
Focus on financial education: This is my personal pet peeve! In a world where everything is literally at our fingertips, where we can choose our pronouns, we still say “No one taught me about money… it’s not my fault! I didn’t know!” It is your fault, you can look it up no one needs to tell you! Take responsibility… but I digress! Increasing your financial literacy is crucial, regardless of your income. Learning about personal finance, investing, and money management empowers you to make informed decisions, optimize your finances, and identify opportunities to grow your wealth.
Multiple streams of income: While a high salary is advantageous, diversifying your income sources can really increase your financial stability and growth. Side hustles, passive income streams, or entrepreneurship can supplement your primary income and help you achieve your financial goals faster.
I just want to touch on this last point, yes, multiple streams of income are important and a great way to increase your income. However, there are a lot of people selling you on making thousands of dollars in your first week of writing a blog, that will not happen. Be mindful that you need to put in the work and you have to be patient. It’s not a get rich quick scheme, there’s no scheme. You do the work and you get compensation for it! Do your research and learn from those that are actually making money with these side hustles, not those that start thier videos or posts with “there are people making six figures…”.
I hope I was clear in this post that a high income is not the only factor, or the most important factor, for financial success. It’s how you manage and apply the money you earn that makes a significant difference. Building good financial habits, controlling spending, investing wisely, and continuously educating yourself about personal finance while leveraging your money making skills are essential steps towards financial security and prosperity.
You got this!
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It's a common misconception that wealth is only attainable for those with hefty six-figure salaries or flourishing businesses. But let me tell you a secret – building wealth isn't just about the size of your paycheck; it's about your mindset, habits, and financial literacy.
The short of it is that there is a relatively weak correlation between high income and high net worth. In plain English, people with a high income are a little more likely to be wealthy, but it's far from a definite thing.
Learning how to build wealth is essential for financial security and independence. If you have financial goals, such as buying a house, paying for your kids' college or securing a comfortable retirement, building wealth is the key to achieving those objectives.
However, if you focus on these four principles, you'll be in a much better financial situation by this time next year. If you want to build wealth, focus on creating a budget, paying off debt, living below your means and investing for the future.
Real estate investment has long been a cornerstone of financial success, with approximately 90% of millionaires attributing their wealth in part to real estate holdings.
Building wealth is not about having a high income. Many high earners spend more than they earn and have little or no wealth. Many low earners save and invest the difference and have a high net worth. The key is to have a positive cash flow, which means your income exceeds your expenses.
And one crucial detail to note: Millionaire status doesn't equal a sky-high salary. “Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”
Success necessitates a number of factors. There are also other factors to consider. Aside from that, one must put in a lot of effort, be driven, and have a very clear vision of what they want to achieve. Furthermore, gaining riches is not necessarily a necessary precondition for achieving one's goals, and vice versa.
There is a difference between being rich and being wealthy in terms of money and financial resources. Being rich typically means having a lot of possessions and material wealth, while being wealthy is more about having sustainable and lasting wealth.
While get-rich-quick schemes sometimes may be enticing, the tried-and-true way to build wealth is through regular saving and investing—and patiently allowing that money to grow over time. It's fine to start small. The important thing is to start and to start early. Earn money and then save and invest it smartly.
Yes, you can build wealth faster with a larger income, but income alone doesn't make you wealthy. You could make $1 million a year and spend $2 million—meaning you'd be in debt up to your eyeballs. No, it's what you do with your income that matters most.
According to IRS standards, a monthly income of approximately $45,000 qualifies someone as wealthy. However, if you're aiming for the top 1% as measured by the Economic Policy Institute (EPI), you'd need to earn about $68,277 monthly.
Continuously invest in your education and development to become better at what you do. The more valuable you are, the more money you will make. And the more money you make, the easier it will be to amass wealth.
Net worth is a better measure of someone's financial stability than income alone. A person's income could be disrupted by job loss or reduction in work hours. Income doesn't indicate how much debt someone has or how much savings or other assets they have.
According to IRS standards, a monthly income of approximately $45,000 qualifies someone as wealthy. However, if you're aiming for the top 1% as measured by the Economic Policy Institute (EPI), you'd need to earn about $68,277 monthly.
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
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