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Do You Want Wealth?

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Forge Your Wealth is meant for education and entertainment and should not be used for financial advice.

Let’s Open Our Eyes

It is the third week into the new year. That means most people have forgotten their New Year’s resolutions already. But don’t worry that’s what 2020 is for, right?

According to a survey published by Inc., one of the most common resolutions for 2019 is to save more money, spend less money, or build wealth. 32% of people made this resolution this year, and that percentage has not changed much in previous years.

I am disappointed. According to a 2017 report on the financial well-being of Americans, 40% of Americans go into debt or sell something in order to cover a sudden $400 cost. So 32% of Americans want to ensure a better financial future the start of this year. At least 40% of Americans NEED to ensure a better financial future for themselves. Where is the missing 8%? I am optimistic about Americans’ desires to improve their finances, but I am a realist. Such a problem is unlikely to improve drastically in one year.

We All Want To Be Wealthy

We have a massive wealth problem in America. Almost half of Americans have little, no, or even negative wealth. What is negative wealth? Negative wealth is when your total debt is greater than the value of your assets. In other words, while people with positive wealth pass money on to their next of kin, people with negative wealth pass bills to their next of kin.

If the thought of footing the bill to people you love enrages you, then this blog is for you.

Making Progress To Your Dreams

Inheritance may sound strange, but that is mostly because inheritance, sadly, is not a common occurrence. Some people claim only spoiled brats inherit money they did not earn. But think of what your purpose in life is. One of them should be to provide a better livelihood for future generations. That is one of the literal definitions of progress according to

Thanks to my parents I have no personal student loans to worry about. On top of that I have some wealth in my name while I am merely in my twenties. Unfortunately, this is uncommon in my generation. I want to be like my parents and provide a livelihood to my future children. I think a good goal is to make sure my future kids do not worry about student loans. Another goal would be to make sure their potential wedding day, which should be the happiest day of their lives, is not clouded with worries about the bills.

Being Wealthy Is Good

And why provide people with these “luxuries?” So they feel that they will get whatever they want out of life without the effort? Do you hear how ridiculous that sounds?! No, of course not that’s not what I want! I want to provide for the people I care about so when they set out for their futures they are free to make it what they want. They can chase out careers they desire, start businesses they are passionate about, marry people they want to, and provide their families with comforts similar to my own or hopefully better than my own.

Granted, no one in the world is fully obliged to do anything except pursue a future they desire. However, debt and high expenses can hinder this potential.

Now, I understand many people are in very tough situations. As previously established, I am in no position to judge someone merely for being in these tough situations. I have a good life and good people surrounding me, which is more than enough to help set out a good path for myself. But that does not mean it is impossible to set out a good path for yourself, just harder. I hope the information provided in future posts will make it easier.

What Is Wealth?

Many people confuse money, particularly from your income, for wealth. The first and most important lesson in personal financing is this: money is not equal to wealth. Wealth is how much money you have to your own name. To illustrate this point I will use a very commonly used example where two people have different incomes and habits, but only one actually has built wealth. Who it is will surprise you.

The Example

Imagine a person who makes six figures at their job. They put down a minimal down payment on a house worth seven figures, so they can barely afford it. They also buy a fancy car that people envy (maybe for a few seconds, but to some being a source of envy is worth more than a house). This person looks rich and many people want to be this person.

Now, let’s imagine a more average person. This person pulls in a salary that is five figures, not as impressive as the previous person. They also purchased a more modest house, but they put down a moderate down payment on the house so they can easily make the mortgage payments. As for the car, they drive a modest car in which they paid for in cash. Instead of spending the remainder of their money, they put money aside. This person does not normally strike envy into the minds of people.

Who Is Better Off?

Many would answer the one with the higher income is better off because of the big house, and sporty car. I do not blame this mindset, one of the main reasons people try to earn more money is to peacock a bit more. But with that in mind, what happens when that person loses their income?

Many people would argue: “that is assuming they ever do.”

You Will Face Hardships

Money claims 96% of Americans face at least four income shocks in which they loose at least 10% of their income before they are 70. Oh wait, what about people who had a least one income shock in their lives, how large is that percentage?  

It does not matter how you look at this statistic, it is unwise, and even delusional, to assume that nothing can go wrong in your work life.

Not Everything You Buy Can Be Resold

Other people could argue that the higher income person could sell their house, rent it out, or sell their shiny car. However, equity is based on how much you owe on the mortgage. This number could be negative, especially if you only pay the minimum down payment. To make matters worse, the value of the house is far from guaranteed in the short run, equities could be terrible for a short amount of time. While renting out the house is possible, the mortgage company will have to analyze some information and there could easily be hurdles.

As for the car, the car’s value depreciated and is worth less than they purchased. In other words, while it is possible to pull something from the setback, this person has little, nothing, or even less to show for their hard work. This is a shame because they probably worked hard to make it to a place where they can make six figures on their own.

Not Everything You Buy Has Value

The second person has put money aside, even with a similar loss of income, this person can still pay their bills without having to jump over hurdles like the former. They are more likely to keep the house, and not have to sell anything.

The first person has a high income, but little wealth, no wealth, or even negative wealth. The second person has more modest income, has positive wealth, and can fall back on it when an active income is limited or no longer available.

How Do You Forge Wealth?

Income, while necessary to make money, has little to do with wealth. Habits, determination, and sacrifices involving money build wealth. I will bring up how to build wealth, both from my own personal experience, and from others around me in the future. 

Wealth is not obtained, it is not inherited (trust me history is full of people who wasted their inheritance), it is not even earned. Wealth is forged. Forging wealth requires constant work and attention in which will make you sweat at the best of times, and bleed at the worst. It is in no way easy, if it were, the previously mentioned statistics would be far less depressing.

There Is Hope

But before I conclude this post I want to mention one more statistic that may raise your hopes to a financial future. There are 4.8 to 9.4 million millionaires in America, that is anywhere from 1.5-3 percent of Americans. While that may seem like a small percentage, being a millionaire is far from unobtainable. 

I encourage everyone reading this to take a look at where they are in life, and whether they feel like their wealth will provide for themselves and the people they care about, now and in the future. You could feel comfortable with your wealth. I even hope you are. But the skills in personal finance are one of the most important and underrated skills to have. Life will throw many punches. If you build a stronger security and a more stable future, both will still be standing after these punches. Your life will be stable when you forge your wealth.

Author: Papa Foxtrot

Most of my life I was careful with money and learned where I should invest it. I was very lucky to have parents who taught me financial literacy when I was young. Unfortunately, I am very lucky because many people lack the financial literacy I know. The purpose of Forge Your Wealth is to teach people who are just starting out in life how to obtain their wealth or anyone who just realized they may need to learn more to handle their finances. I currently have a PhD in biochemistry, just started a job in industry (will not disclose where exactly for personal and professional reasons) and am currently married to the love of my life. I am one of the lucky few people in America who graduated with no student debts, my wife was not. Over the series of a little over 3 years we paid for our wedding with no debt and paid off her federal student loans.

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