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|THE BARON INSIGHT (Broke Millionaires: Why even high-wage earners struggle financially)|
|Written by William R. Patterson|
|Tuesday, 17 June 2008|
There are now over one-million people facing foreclosure in the U.S. including millionaire celebrities such as Ed McMahon and Evander Holyfield.
Many people believe that not making enough money is the reason for their financial problems. Yet of even high-wage earners, those earning over $100,000 a year, nearly 20% live paycheck-to-paycheck and 30% save less $250 a month.
Many people think that their financial problems will be solved with money, but they don’t realize that money will only compound their financial problems particularly if coupled with poor management and planning skills.
As your income increases, there is the natural tendency to raise your standard of living and expenses in accordance. However, to build wealth, you must resist this urge.
As a general rule, regardless of your income:
As your income increases, strive to keep your living expenses the same and put the extra income toward debt service, savings, investment, and starting your own business.
As you receive bonuses and periodic windfalls of cash, elect first to pay down your debt, particularly those obligations that once satisfied will free up more monthly cash flow.
Next, choose to save and invest rather than squander the money on things that rapidly depreciate or have no value.
Remember, it is with every dollar that we choose to be rich or poor. Your financial independence depends not on how much you make, but what you do with the money you make and the wealth you can create through intelligent action.