If you want to be wealthy

People who want to be wealthy have many attitudes. One very important one is that they are prepared to defer pleasures to build more wealth. In this article, I want to talk about this.

But first, I want to clarify what I mean by wealth. I'm not envisaging some Scrooge character sitting on a pile of gold,  or wealthy plutocrats lighting their cigars with wads of $100 notes. I am thinking about financial independence. The ability to make your own path, and make decisions about the course of your life that aren't controlled by financial considerations. If you are not a believer in wealth, do not write off this article. Hear me out.

Up front cost, long term benefit

If you want to become wealthy, all you need to do is maximise the difference between what you earn and what you spend (where income is greater than expenditure), and invest that difference. Do this for a long time, and you will be wealthy.
Where people struggle is that they want expensive pleasures now, not later. Because of this, their spending creeps up towards (or even exceeds) their income. Thus, they never save money and will never be wealthy. Wealthy people (those who built their wealth) do not do this. They control their spending, keeping it low, while they create capital with their savings -- capital that continues to generate more income for them.

Where to invest?

Investing wisely is critical, and I will not try and advise you. I will suggest, though, that you could consider investing in renewable energy and energy efficiency. These are not investments that yield a dividend in the normal sense, but they will reduce your expenses. In a way, this is better because a reduction in expenses is not taxable. As I've said previously, I estimate the investments I've made at my house to have a ROI of 17.5% -- a rate that may actually increase with time (as the cost of power increases) -- I challenge you to find a similarly-yielding investment with this level of security.

Societies

In the same way as a wealthy individual will invest for the future, so too do societies. I would argue that the preservation of environmental capital is prudent for a society that values its future. I hope it's obvious that an individual or society that is spending its capital cannot expect to be wealthy in the future. (I hope that Australians realise this and don't yoke ourselves to fossil fuels.)

Renewable energy

This idea of investing now to generate future wealth is a powerful reason to invest in renewable energy, which has higher upfront costs, but much cheaper lifecycle and whole-system costs. If we, as a society, can increase our investments in this sector, it will help ensure our continued wealth.

Your investment

If you want to be wealthy, I recommend you do not put your money into a flashy car or a new kitchen or bathroom. I recommend you invest in energy efficiency and solar PV. Unlike fancy renovations, energy efficiency and solar PV will give you more money in your pocket, every month, ever after.


This article was written by Angus Wallace, and first appeared at guesstimatedapproximations.blogspot.com.au