You won’t get rich by saving money

You won’t hear many people say this, but there’s a little secret about building wealth. And I mean serious, life-changing wealth.

It has nothing to do with saving money. At least alone.

To build wealth, the equation is simple.

It looks like this: Income + Investments - Lifestyle = Wealth.

Notice that “saving money” is not a part of the equation. Yes, saving money has value. An emergency fund is a great example of the benefit of saving money.

And, notice that your lifestyle is a part of the equation.

In other words:

• income and investments build wealth (over time)
• lifestyle expenses drain wealth

Whatever is left is the wealth that you truly possess.

You will not get rich by saving money alone. Wealth — and I mean serious, goal-accomplishing wealth — is built through investments. Investments contain risk, but they are also what make wealthy people wealthy.

The other critical component that most people don’t consider is lifestyle.

Your lifestyle is the “accounts payable” portion of your life. It’s not profit. Your lifestyle (such as your home, your car, the things you buy, the vacations you take, etc) all need to be funded. Your lifestyle takes away from your wealth.

And, this means something brilliantly simple: the more that we control our lifestyle, the more of our income + investments become profit. The more money we keep.

How can we maximize our wealth-building potential, while we minimize our lifestyle expenses, at the same time?

Well, that’s at the crux of what makes building wealth so powerful.