Everyone aspires to being rich. Of course we do. But what is being rich?
What does it take to be rich?
In response to these questions, answers include ‘Having a secure, well-paid job’; ‘Owning your own home’; ‘Having no debts’; and of course ‘Winning the Lottery.’
And whilst all of these answers contain a large degree of truth, they don’t really tell us why, or how, they would make us rich.
So, what IS being rich?
If you have a secure, well-paid job, are you rich? Well, not if you don’t own a home. Not if you owe an arm and a leg to a finance company. Lots of people have highly-paid jobs, but with mortgages, credit-cards and car loans, are they rich?
If you own you own home – with no mortgage, and no debts – are you rich? Not if you can’t afford to buy decent food, pay your electricity bill, or run your car! Australia has a vast number of retired people who live in high-value, un-mortgaged homes, but who are trying to eke out a living on the Age Pension. Are they rich?
And if you’ve just won the Lottery? Well you’ve certainly got the money. But what will you need to do with it to live a great life-style, to enjoy absolute financial security?
Of course, you’ll spend some of it; maybe have a spending spree; cars, clothes, holidays. And you’ll buy a house (or pay off your mortgage), and get rid of all your debts. Fantastic! Then what will you do?
Yes, you’ll invest it – never mind how at this stage – even just to keep it ready for the next spending spree. But why else? Well, you wouldn’t want to lose it would you, or even find you’ve spent it all. Perish the thought!
Assume you were sensible. You would want your investment to earn income. To earn enough income to maintain your standard of living and life-style, and to continue doing so for the rest of your life, and without having to ask for your job back!
So. In a nutshell, you would be rich, because you own all your assets. And, more importantly, you have a secure, lifetime income-stream.
Conclusion:
Assets alone are not the key to being rich. Having an adequate and assured investment income is the key to having a lifetime of comfort, financial security and Peace of Mind.
And Financial planning is about attaining this goal.