Why earning a lot of money doesn't make you rich


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Wealth isn't about how big your salary is.

A salary with a bunch of zeros tacked on the end doesn't necessarily equate to wealth. At the end of the day, it's just a number - and if the cash behind that number is not managed properly, it can disintegrate in the blink of an eye.

"Most people fail to realize that in life, it's not how much money you make. It's how much money you keep," writes Robert Kiyosaki in the personal finance classic, "Rich Dad Poor Dad."

At the end of the day, money does not solve financial problems - in fact, it often exacerbates them. Consider the lottery winners who lost it all within a few years; or the professional athletes who made millions in their 20s and wound up broke.Advertisement

When income increases, people have a tendency to boost their spending, which can quickly spiral into dangerous overspending habits.

"Money often makes obvious our tragic human flaws, putting a spotlight on what we don't know," explains Kiyosaki. "That is why, all too often, a person who comes into a sudden windfall of cash - let's say an inheritance, a pay raise, or lottery winnings - soon returns to the same financial mess, if not worse, than the mess they were in before."

What solves financial problems and produces money is intelligence. "Money without financial intelligence is money soon gone," writes Kiyosaki.

Unfortunately, while most of us are taught how to make money - how to get a job and work hard - we are not taught how to intelligently manage it, the crucial part.

The good news is that you don't need to be a certified financial planner or have an MBA to develop financial intelligence.Start by learning the difference between an asset and a liability, the single most important distinction to recognize if you want to get rich, Kiyosaki says. Next, focus on bettering your savings, and ensure that more money is coming in than going out.Advertisement

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