Your salary will NEVER make you rich!
I'll tell you why
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Yes. You read it right. No matter how much you slog your a** off at work, no matter how highly paid you are, you will not be rich, as long as you’re dependent mainly on your salary.
And no, this isn’t a post where I talk about inflation or equity investments! You already know all that by now 😁
This post is about establishing a mindset with regards to time and money.
You see, in order to be rich, you and your money need to grow exponentially.
But when your main source of income is your salary, it’s only going to grow linearly. And linear growth rarely generates wealth.
Why, you ask?
Because your income from salary is dependent on YOU working for it. And YOU only have a finite number of hours in a month, and therefore a finite salary.
The best companies in India give a 15-20% hike to junior and mid-level employees. Senior employees get lesser. And hardly anyone on the Forbes or Huran rich list has got there by getting 15-20% salary increments.
So does this mean you should quit your job and pursue entrepreneurship?
No. Not at all!
Well then..what should you do?
You just need to use the same principle that entrepreneurs use. You need to own things that rapidly increase in value.
Entrepreneurs mostly own equity in their company, which increases exponentially, leading to an increase in their net worth and wealth. You could own equity, a piece of land, an intellectual property like a patent, or anything else, which has the potential to grow rapidly on its own. Even while you’re sleeping.
The idea is that your wealth shouldn’t depend on your time. It should depend on an asset that actually works for you to make you money.
So while your salary forms the base for your “income”, this income should be used to purchase assets that will generate wealth FOR you.
Second, to get wealthy, you need to be able to take certain risks. Buy assets that have a 1-2X downside if they fail, but a 10X upside if they work. And invest a small amount, not your entire corpus.
Some of these assets could be:
Small cap stocks
Real Estate in areas where development is expected
Natural resources that are reducing year-on-year
(Of course, it goes without saying that you need to understand these assets and not buy them blindly)
You can also create something that runs on auto-pilot. Could be something as complex as a patent that gives you royalty lifelong, or something as simple as a self-paced, pre-recorded learning course for a niche segment of the population. That’s for you to decide!
The idea is to create an ecosystem where you don’t need to trade your TIME for MONEY. The idea is to create something that runs on auto-pilot, and is exponential in nature.
You can very well be an upper middle class individual by earning a high salary, and have a comfortable life. But true wealth can rarely be generated that way. It’s generated by making your assets, investments and creations work for you. So if you want to move from a Honda City to a BMW, start looking for such opportunities.
Like I said, today’s newsletter is not about core money management gyaan, but a mindset shift. Let me know if you’d like such articles occasionally, which are geared towards developing a rich mindset rather than explanations on finance. You can reply to this email, comment on the post or just like it, and I’ll know! 🙂
By the way, before you go..
A friend of mine has a YouTube channel on Psychology, and just last week, we both made a video together on “Cognitive Biases in Personal Finance”, where we discuss how our own pre-conceived notions and beliefs affect the way we invest. Do check out the video HERE to see if you’re sub-consciously facing any of these biases. It’s pretty interesting!
Have a great weekend!