2 Common Misconceptions The Middle Class Has That Stop Them From Getting Rich

What’s stopping us from getting rich?

This article reveals that the answer is New Zealanders are hesitant to invest. Perhaps the same for all middle class workers around the globe in my humble opinion!

I can’t agree more with this article, not only because I’m a property investor; I’m also an employee. I know exactly what employees (middle class workers) want and think. The middle class tends to cling on job security, climb up the corporate ladder and hope for a raise, then they buy their dream house to live in. Other than their own home, many do not have other investments or assets. Am I correct?

Here I wanna point out 2 misconceptions:-

  1. Many think they are rich when the value of their own home goes up – does this sound familiar to you? When their home value goes up, many tend to treat their home as ATM and then spend on consumables such as holidays, cars or yachts. These are liabilities. In order to be rich the same “withdrawal” should be spent on investments or real assets, eg rental or commercial properties. Wait a minute, isn’t own home an asset? Simply put, an asset is something that generates income and put money into your pocket; a liability is complete opposite, it takes money away from you. You got my point now?
  2. Many think they are rich when they are on high-pay jobs – they may be right on this if their expenses do not increase as much as or over their incomes; and they have to ensure their jobs are secured. Say an employee got a promotion and a raise, from $100k pa to $150k pa; unless his/her living expenses (eg mortgage interest, car or grocery) largely remain unchanged; he/she hardly gets ahead financially. Why? because vanity, personal desires always take control; many would spend more when they earn more. Another downside risk of this is job loss. As globalisation and automation both become a norm today, very little jobs can guarantee their existence in the future. If these high-paid employees are entirely dependent on jobs and do not have secondary income source, do you think they can still survive when redundancies happen?

Final Words

The key to be financially independent or to be wealthy is own an asset. But more importantly it is one’s mindset – ability to distinguish assets from liabilities; and ability to “spend” on the real assets.

_______________________________The End____________________________

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