The government defines wealth based on income. In fact, policymakers have a name for high earners, not yet rich. They are called HENRYs.
Although HENRYs have the trappings of perceived wealth, people with lower incomes can end up with higher net worth than people with high income.
Net worth — not income — is the best measure of wealth.
HENRYs work for money. They are typically doctors, lawyers, and other high earning professions often with student loans an other expenses. If they stop working, they stop earning. And if they’re like 78% of Americans, they live paycheck to paycheck. So people with high incomes can indeed be broke, if only on a bigger scale.
Meanwhile, people with high net worth may have started life working for money. But through diligent dollar-cost averaging, they have learned to put money work for them. So one day, they will reach what Dave Ramsey calls the “pinnacle point.” That’s the point when their investments begin to earn more for them than their jobs earns for them.
Delayed Gratification
Paychecks represent instant gratification. A paycheck comes every two weeks. However, growing wealth through long-term investing strategies like dollar-cost averaging requires delayed gratification. Think crock pots, not microwaves. This requires patiences.
Self-regulation is one of the executive function skills that separates the truly wealthy from the HENRYs. (It also tends to separate the “maze brights” from the “maze dull.”)
Self-regulation is all about resisting impulse behaviors such as buying stuff broke people think makes them “look” rich. (Read Power over Purchase.) This is often done on the “buy now/pay forever” plan. If their income allows them to make the monthly payments, broke people believe they can afford the doodad. Wealthy people think they can afford something when they can pay cash.
As Always…
Thanks for reading! I hope this information provides food for thought. Remember that I am not a certified financial planner, a certified public accountant, a licensed real estate agent, etc. My content is for educational purposes. I am a math educator who happens to have a finance degree. Like they say, never take financial advice from a math teacher! (Do they really say that?)
But you should spend less than you earn, invest the difference, and stay out of debt!
I would so appreciate your sharing my content with anyone you feel could benefit. And if you would like a free exploratory conversation or just want to shoot the breeze about personal finances, call me and leave a message or send a text to 570-731-0425.
References
https://www.investopedia.com/terms/h/high-earners-not-yet-rich-henrys.asp
https://www.daveramsey.com/blog/how-long-will-it-take-to-build-million-dollar-retirement