In modern financial markets, wealth alone is no longer a guarantee of economic security. And it is a paradox we hear about more and more — even among multimillionaire 40-something couples.
We will take a look at why even with a $1 million net worth, a couple could still be feeling like they are living paycheck to paycheck, by looking into some tips & tricks from well-known personal finance experts such as Ramit Sethi, Dave Ramsey, and Robert Kiyosaki.
1. The Illusion of Paper Wealth
Paper wealth is dangerous A couple that might have a $1,000,000 net worth (including home equity, retirement accounts and other investments) on paper could be cash poor if they find themselves watching their credit card bill grow out of control each month. While these things lead to financial stability over time, they also can often fall short of providing daily financial solace.
A couple with a $600,000 home, $350,000 in retirement accounts and $50,000 in savings. In the books, their millionaires. But someone that only breaks even on their expenses might have difficulty with surprises expenses or even regular bills. This speaks to how net worth is not conforming of the full scale of financial health out there.
2. Cash Flow Problems: May or may not have wealth, but May not real Cash???
For high-net-worth individuals, being “cash poor” is a common problem. It is how a person or couple would have good assets but not much liquid cash for daily expenses or emergencies. Despite all of this, the end result could be that you have a delicate financial situation, though one on paper which seems wealthy.
Ramit Sethi and other experts will tell you to keep that cash flowing. Saving for the future is extremely important, but so is having money that you can access right away. This typically includes maintaining an emergency fund equal to 3-6 months of living expenses, and investing for long-term growth.
3. High Fixed Costs – The Silent Killer
Even a healthy profit can disappear in a heartbeat with high fixed costs. If I may use a personal finance analogy, this is like death by a thousand cuts: Many little ongoing obligations that slowly bleed you dry. This could be a large mortgage payment, car loans, private school tuition for kids, or top-of-the line insurance policies for our imaginary couple.
They add up — because a bourgeois lifestyle can get surprisingly expensive — without necessarily presenting the picture of debt overload from the outside.
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