Huge snare people ride into. As they increase their annual income, they also increase their lifestyle costs. They go from whatever the amount is. They get a big raise or they make more money. As owners of the business, they move into a better neighborhood. Please hear me on this. I say this with great respect and love, but when you move into a better neighborhood and you buy a bigger house, you also buy the lifestyle of the people in that neighborhood. Maybe it’s the private schools, maybe it’s third car, maybe it’s vacationing in St. Barts, maybe it’s buying a third or fourth home because you want to keep up with the neighbors. It is such a flaw people make. They start making more money, they buy more cars, they start flying private, they start doing this, they start doing that, they have an entourage, they start eating out five times a week because they have all this money. Here is the key point. If your income increases and your lifestyle cost increases, at the end of the year, you have nothing left over. There are teachers and there are engineers who have more wealth than hedge fund managers because the hedge fund managers have the Hamptons and they’re home in Tuscany and they’re flying private everywhere and they have divorce payments. I have seen this firsthand with people I’ve worked with. They make a fortune and it all goes out the window through all their expenses. Then you have engineers and people who are much more careful with their money and they live below their means, so they save money every month. They live below their means, they don’t live off of credit cards, they don’t fall into this comparison trap where they need to buy and buy and buy so they can show what they buy on the social media to validate their holes and emotional wounds. Instead, they make a certain amount of money as teachers or as engineers, they live below their means, they save money every month, they invest what they make through the power of compounding. At the end of the year, their wealth is growing. They do that 10 years, 20 years, 30 years, 40 years, and guess what, they end up rich. Here we have someone making millions every year who ends up without any real wealth. There is a difference between your income, how much you make every year, and your wealth, your personal net worth, which is your assets minus liabilities.
