Truth Yes You Do Need to Be an Investor Your Job Is Not Your Financial Wealth

It is almost epidemic how many people think they don't need to be an investor. Usually that happens because they believe consciously or unconsciously that the path to financial wealth is through one's job. If you're like me and believe that financial wealth is about having enough unearned income to finance your life mission without the need to work, chances are your current job income and savings plan will not be nearly enough to build true financial wealth. It is highly unlikely that your job creates enough income for you to set aside a manageable percentage of it and, at an average rate of interest, still achieve true financial wealth.

Many years ago this was a common and encouraged practice that I call the "myth of the modest saver." Thrifty individuals would stash small sums of money in coffee cans, under mattresses, and in personal savings accounts, believing they eventually would achieve financial freedom. In more modern times this "modest saver" has evolved into the "modest investor." This is the person who takes a small percentage of his or her annual income and invests it in his or her company pension plan, a 401(k), or a mutual fund. In this time when many people don't save or invest at all, these modest savers and investors are actually ahead of the game, but their investments almost never amount to true financial wealth. All the modest saver of old and the modest investor of today actually build is a small financial nest egg to provide for their most basic needs. When most people stop to do the math, they are shocked at how little income their current investment plan will provide when they quit working.

The truth is that only a tiny percentage of people, probably less than 1 percent, make enough income from their jobs to become financially wealthy. I'm talking about people such as highly paid athletes, actors, musicians, and executives. The extraordinary compensation these people receive is so large that they easily could live off a fraction of their income, invest the rest, and even with modest rates of return achieve financial wealth. The operative word here is could. I'm continually amazed at how many of these high income producers think they do not need to be investors.

Here's the problem: They cling to a far-fetched assumption that their jobs will continue to provide these extraordinary streams of income. In fact, the more money people make, the more overconfident they tend to be about their financial future. Prosperity can provide a false sense of security. They may overspend and underinvest to the point that one day they wake up and realize they are on the downslope of their primary income-earning years and their lifestyle is about to come to an end. Others understand they should be investing but then delegate all responsibility for their financial wealth building to other people.

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