Tuesday, February 7, 2012

How To Get Rich - High Income is Not Enough

Individuals with a high income face many additional challenges when it comes to building real wealth.

                                                                       Taxes

The biggest challenge is the amount of income tax their governments charge on their earnings. In many countries, tax systems are designed to take a higher percentage of your earnings on the upper portions of your income.

In fact, I have seen the government take almost half of the upper income portions on high income earners.When this income is earned through employment or pensions, there is quite often very little that can be done without expert help.

                                                                        Lifestyle

Another challenge for high income earners is lifestyle. It is human nature to spend more as your income increases. Most people adjust their lifestyle to their current income level. Just look at the many celebrities and sports stars who were paid high incomes and are now broke.

True wealth is not measured by how much income you earn. True wealth is measured by how much of your income you actually keep and put towards your future.

                                                     High Income is a Good Goal


Don't get me wrong, I am not saying that you should not try to achieve a high income level.A higher income gives you much more opportunities for investment and to build your true wealth. I am just trying to point out the additional challenges you will face as your income grows.

As your income grows, it will also become more vital for you to do proper planning. High income individuals should almost always employ the services of a qualified financial adviser or planner. Any fees charged for their services should be deductible against their income when filing their tax returns. This is a good example of using other peoples time as discussed in my previous post.

                                                                 What To Do 


As your income grows, resist adjusting your lifestyle to follow. Instead, you should be increasing your savings amount and looking for good investments to earn you more income. It is good to reward yourself for a raise in income by going on a trip or out for a good meal. However, do not reward yourself with something that you continuously have to pay for.

As far as income tax goes, income from many investments will be treated much more favorably by our governments than income earned through employment or pension plans. Take advantage of the opportunities in your local area as much as possible. Again, use the services of a qualified adviser whenever you are unsure of which direction to take. However, be careful to not be too dependent on your advisers' help. You should be in control of your own direction and using your advisers' advise as a tool in your overall success.

Remember, it is not solely the amount of your income level that is going to make you rich. It will be how much of that income you are able to keep and invest for your future that will determine your true wealth.

As always, I welcome your comments and suggestions for future topics.






 

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