Human behaviourist Dr John Demartini discusses the one thing we all aspire to have in life wealth and what this means to different people
What some people call being rich others call being wealthy, which can translate to well-being, or whole being. So being rich is not just about being economically well off; it’s also being wealthy in all areas in your life. Because economic value is one of the most universal of all values for people, being rich or wealthy usually boils down to having more money at the end of your life than life at the end of your money. Richness can therefore mean that your passive investment income exceeds your active working income so that you don’t have to work, but you work because you love what you’re doing.
Not many people find wealth
About only 1% of people ever reach complete financial independence. The majority put a higher value on buying consumables, liabilities and depreciable items and spending their money instead of saving and investing. Not many people know the distinction between liabilities and assets. A liability is something that you pay for and an asset is something that pays you. If you don’t fill your financial nest egg with assets, you won’t have financial independence.
You may become rich through inheritance, but if you don’t eventually know the difference between assets and liabilities, you have a high chance of spending your assets on depreciable items or liabilities.
I’ve asked millions of people in my audiences “How many of you want to be financially independent?” and nearly every hand goes up. I have asked them, “If I gave you $10 million and you never had to work another day in your life, what would you do with your life and the money? Quickly write this down.”
Most people answer that they would spend money on things that decrease in value. They say they would buy clothes, a house, cars, a trip… Only 1% answered that they would take the money and invest it and double it. The majority of people are living with the fantasy of having a lifestyle that they want, instead of learning the art of building wealth. Poor people work for money all their lives, whereas the rich learn how to have money start to work for them.
How do you get rich?
To be rich you will first require a healthy work ethic and a desire to serve people. If you are not dedicated to serving people, you will have little or no source of income. There are two ways to build wealth: a non-zero sum game where you go out and offer and sell a product, a service or idea and you get paid for it. That’s called a productive fair exchange transaction that builds wealth because both of you win.
The other option is to buy stock and share options, and futures which is a zero sum game. It’s gambling and you’re not necessarily adding productivity to the economy, and you are living off deals where other people are losing money. But the overall economy would not continue to work if everyone did that. We need an adequate percentage of people producing for other people for the economy to work. A robust economy works through people having a work ethic and helping people.
To be wealthy, you will also have to build a business that is efficient and that makes a profit. In business if you don’t make a profit, there is no source of money for building wealth and so it has to be managed efficiently.
Thirdly, to be wealthy, you will have to save an ever greater portion of those profits rather than spending it on consumables, so that the money works for you instead. If you keep buying things that go down in value, you will never get ahead.
Make sure you take those savings and invest a portion of them into true assets that build wealth. Buy companies, shares of companies, commodities (energy or food) or real estate properties or developments to build wealth. You can use leverage to make greater income generating assets out of them. These are real investments and the others are just expenditures. And you are wise to learn how to use such investments to work for you, otherwise you are living in a fantasy and will work your whole life for money.
Dr. John Demartini is a human behaviour specialist, educator, author and the founder of the Demartini Institute.