Part 4: Not all that glitters is gold
There is one who makes himself rich, yet has nothing; And one who makes himself poor, yet has great riches. (Proverbs 13:7 NKJV)
Not all that glitters is gold. This is a famous saying, which means that not everything that looks precious is actually so. The scripture above shows that seeing is not believing. A person can appear to be rich, while the opposite is true. Conversely, a person can appear to be poor, while is indeed rich. In this case, looks can really be deceiving. (The advent of Photoshop has worsened things, what you see is not what you get, due diligence is a necessity.) On a serious note, the desire to appear rich is detrimental to wealth building.
It is easy to acquire the appearance of riches. You drive German, wear Italian, phone American, drink Scottish, etc. This is the easy part. Furthermore, the banks will line up to fund you with unsecured debt. Taking this route is embarking on a journey of financial suicide. You would have chosen a journey that goes no where financially. You might have the look, but you bank account will be screaming empty and no sufficient funds.
This is the great deception of our time. Firstly, Having bank approvals to purchase these things give people an appearance of riches, which is indeed a false sense of wealth. As stated before, acquiring these things with debt is a recipe for disaster. Secondly, people confuses affordability and buying power with riches. Here is the difference, affordability is based on what you earn. Riches are based on the asserts you have acquired. If you acquire liabilities, the best you will get is an appearance of riches. If you acquire asserts, you will have life long streams of income.
The main danger to acquiring the appearance of riches is the opportunity cost. Opportunity cost is defined as the loss of potential gain from other alternatives when one option is chosen. In this case, a person would have chosen to put his hard earned cash on an expensive sedan, instead of putting money on a less expensive locomotive and investing the balance. Therefore an opportunity to invest or acquire any asserts is been lost by trying to appear rich.
What drives the desire to want to appear rich?
1. Catching up with the Joneses'
We buy things we don't need, with money we don't have, to please people we don't know. We want to appear rich to our neighbors. This phenomenon is very dangerous to your bank balance. Why do we compete with people who are not in competition with us? Why do you compete when you do not know the source of income of your competitors? What if people won lotto, inherited some cash, or worse they don't make an honest income? Stop catching up with the Joneses, and start living within your means.
2. Immediate gratification
There is a song by a music band Queen Which says, 'I want it all, I want it all, and I want it now.' The problem is not that you want it all, the problem is that you want it now. You can not wait, you can not even plan. You want it now, but because you don't have the money, you will spend your future earnings to satisfy today's cravings. You have to borrow to get it all now. You want immediate gratification. You want to enjoy now, and pay later. The challenge with immediate gratification is that you might have to pay double in the future for what you consumed now.
3. Low self esteem
We tend to acquire material things to hide our low self esteem. We need affirmation from a clothing label or a badge of a car. When you drive something that turns heads, you think you are gaining social mileage and capital. You depend on material things to acquire a particular social standing in the community. But the void is still there, after a few thousands and millions in the red, the hunger and emptiness is still there and is growing bigger. This is what the Ecclesiastes writer meant when he said, ' vanity of vanities, a mere chasing after the wind.'
Great riches
I define great riches as having multiple streams of income, from various assert classes, across many geographical locations and currencies. In simple terms, owing cash, property, gold, oil, shares and deriving income from them, across the globe, and in different currencies. This my dear friends, is great riches. Do not let the trappings of material things hinder you from achieving great riches.
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