Realizing You Somehow Became Wealthy

I often talk with people who realize—almost by surprise—that they’ve become wealthy. 

They never really thought of themselves as wealthy, but after years of saving and investing effectively, it hits them: I’m actually wealthy. 

And let me tell you—being wealthy feels different.

In my latest YouTube video, podcast episode, and blog post I talk about:

• How do you become wealthy slowly?
• How do you know if you are financially independent?
• How do you know if you are “wealthy”?
• How does the mind shift feel?
• What mind shifts usually happen?
• What are typical mind shifts about how you spend your money?
• What are typical mind shifts about weekends & free time?
• What are typical mind shifts about vacations?
• What are typical mind shifts about friends & family?
• What negative feelings sometimes happen?
• Does the mind shift start when you realize you’ll be wealthy in retirement?
• Rethinking your values as a wealthy person.
• What is your legacy? How do you want to be remembered?

How do you become wealthy slowly?

Save & invest effectively. Nearly all wealthy people are self-made. It’s a simple formula:

• You need to have a decent income, which means you need a valuable skill.
• Save a significant amount, usually a minimum of 20% of your income.
• Invest effectively, usually in equities and often with leverage for the long term.

Long-term compounding is the 8^th wonder of the world. For example, investing from age 25-65 is 40 years. The last 40 years from 1985-2024, $10,000 grew to $900,000 = 90 times. After inflation, $10,000 grew to $300,000 = 30 times.

Most people never become wealthy because they either live paycheque to paycheque and don’t save money, or because they invest based on conventional wisdom of asset allocation with bonds & cash. Equity returns can make you wealthy, but balanced investing returns make even retiring comfortably very difficult.

How do you know if you are financially independent?

“Financially independent” means you have enough money to live the lifestyle you want for the rest of your life, no matter how long you live. You might choose to work, but you do not have to work for money.

To know if you are there, you need a Financial Plan, specifically a retirement plan that details the lifestyle you want to live and shows you exactly the optimal, tax-efficient way to get there. Without a Plan, you can’t be confident you have enough.

Ideally you should have a margin of safety of at least 10-20%. This means your retirement investments should be at least 10-20% more than what you need in your Financial Plan.

The amount depends entirely on the lifestyle you want to have and how far it is in the future. We have seen very low and very high numbers, but most Financial Plans say you need between $2-5 million in retirement investments to be financially independent.

How do you know if you are “wealthy”?

“Wealthy” means comfortably more than enough. Comfortably more than financially independent. You have all the money you expect to spend in your life, plus a comfortable amount more.

I define it arbitrarily as at least 50% more than what you need to be financially independent.

Again, this depends entirely on your lifestyle. However, if financial independence for you is between $2-5 million, then being wealthy would mean investments that support your lifestyle spending (e.g., not your house) of $3-8 million or more.

How does the mind shift feel?

Confidence. Independence gives you confidence in yourself. You are self-made and in control of your life. Being confident feels great!

Freedom. We ask every client what is important to them about money. The most common answer is freedom. More options in your life. You are not limited by money or a boss. You can pursue hobbies, travel to desired destinations, or invest in experiences without considering cost. Having freedom feels great!

Independent. What is fun or meaningful for you? You should only work if it is fun or meaningful for you.

What mind shifts usually happen?

Having money means you don’t have to think about money (ironically). No longer feeling stressed about money.

Empowered. You decide what to do with your money. You feel empowered to have fun or do something meaningful. What is important to you? More fun, such as travel & entertainment, more comfort such as a nicer home, supporting your family, keep building wealth to be even more confident, donate to causes important to you (possibly have your own charitable foundation). You have the power to decide.

What are typical mind shifts about how you spend your money?

Thinking of yourself as wealthy can be delightfully surprising. It’s not “I can’t afford it”. It’s “Do I want to afford it?”

Strategically non-frugal. Most wealthy people have been frugal and can’t stop being frugal. However, you can choose to spend more in areas important to you and enjoy yourself.

Are you more short of time or short on money? Time freedom is as important as money freedom. You can buy yourself time. Think about the activities in your life that take time and that you don’t really enjoy. For example, you can pay people for cleaning & maintaining your home, delivering groceries, delivering & pre-made dinners, hiring assistants & employees, etc. Find the services that free up your time.

You can buy quality instead of low price. If it is important to you, buy the item you really want. You don’t have to spend a lot of time shopping around for the lowest price. You probably can’t buy all expensive items, but you can buy things that are important to you.

I have seen the full finances of thousands of people. I can usually tell very quickly who has money and who doesn’t. The main difference is that people without money often try to look rich. Public displays of spending. Wealthy people tend to be understated and don’t want to broadcast their wealth. They don’t want people asking them for money. They don’t want to be around them because they are wealthy. They want people they connect with. They generally avoid public displays of spending. In short, people that talk about all the ways they spent money and that have expensive cars, clothes, jewelry & watches are usually those trying to look rich, not the ones that are actually wealthy.

What are typical mind shifts about weekends & free time?

When you don’t have money and you must work, you often feel stressed about money & life. On the weekend, you want something mindless to ease your stress.

When you have money and only do work you enjoy, then you probably don’t have work stress. Your free time can often be about things you find meaningful, such as connecting with friends, learning new things (e.g., reading or educational videos), or fun hobbies. You can have the energy to enjoy your free time doing things that improve your life. Self-confidence is so important for being happy. Improving your life can add to your self-confidence.

What are typical mind shifts about vacations?

When your life and job are stressful, a vacation can be a needed break to do very little. For example, beach vacations can be relaxing.

When you have money and don’t have the stress, vacations can be about expanding your mind. Do something challenging. Travel the world and learn about it. For example, you may take educational tours.

What are typical mind shifts about friends & family?

When you are trying to be successful in a career, you are often competitive. You may look for approval from friends and family.

Having money can give you confidence. You may not need to prove yourself, because you are confident in yourself. Therefore, you can focus more on deeper connections with friends and family.

You may find the people you are closest to have changed. You may find some people asking you for money or expecting you to pay for everything. You may find your relationship feels different.

When you feel differently about yourself, you might connect more with different people than before. There may be fewer people that you can talk with about your life. Wealthy people tend to know many people from their work or entertainment, but you may find fewer people that you can be fully open with about your life.

What negative feelings sometimes happen?

Disbelief. “Am I really wealthy?” Is it real? You never thought you would be wealthy. Disbelief can lead to continuing to be excessively frugal and being scared to spend. It can limit the fun in your life. Disbelief does not go away on its own for many years. Your Financial Plan can prove to you that it is real.

Fear of losing it is a common fear. Unfortunately, it can lead to being excessively conservative in investments and letting inflation & spending slowly destroy your wealth. Ironically, staying wealthy usually involves continuing to invest the way you built your wealth. You have decades to live and want money & time freedom, so your money still needs to work. For example, in a retirement where you save from age 25 to 65 and then retire from age 65 to 100, typically 70-80% of the money you spend in your last 3-4 decades is from investment growth AFTER you retire.

Stress about how to manage all your money. You may find it getting increasingly complex. Investment opportunities can be complex. You may find a 30% or 40% investment decline feels different when you have a large portfolio. Working with a trusted fee-for-service financial planner can be the best way to feel in control without all the stress.

Social isolation. Feeling disconnected from friends or family who may not understand your new financial situation. It’s important to feel confident within yourself, so you don’t need the approval of others. You may want to think consciously about which people you connect most deeply with.

Experiencing anxiety or guilt about your wealth, potentially leading to impulsive spending or fear of losing it. You may feel guilty about having money when others don’t. The best way to deal with guilt is to donate to help others that are less fortunate. You can use your wealth for good purposes.

Does the mind shift start when you realize you will be wealthy in retirement?

Your Financial Plan may show that you will eventually be far ahead of your retirement goal in a few decades. You could be on track to being wealthy.

A client recently told me, “He finds it hard to perceive of being wealthy in retirement. He might have low expectations compared to his income.”

Few people go through the wealth mind shifts until they actually arrive. It’s just theoretical and you have a long way to go. Many things could go wrong in life.

Rethinking your values as a wealthy person.

What are your values & priorities, now that you are wealthy? You will likely ask this question as your lifestyle and social circles may change.

• Is your spending fun & meaningful or is it frivolous & wasteful?
• Instead of getting by and paying the bills, you have time & money to live the way you want.
• How do you want to spend your time? Live intentionally.
• Which people do you want to spend your time with?

The meaning of life is responsibility. Many people search for meaning. Meaning comes from being responsible for something. That’s what gives you self-worth. Now that you are wealthy, what do you want to be responsible for?

What is your legacy? How do you want to be remembered?

Do you want to have maximum fun and spend your money, leave it all to your kids or beneficiaries, or leave it to a cause important to you?

If you will never spend all your money on the lifestyle you are living, what do you want to do with the rest? It is important to think about it. I find many wealthy people just keep living their lives while their portfolio continues to grow & compound.

Your Financial Plan can help you think it through. Some people think that wealthy people don’t need a Financial Plan, but they do. Your Financial Plan is your life plan. If you will have more money than you will spend, your Financial Plan gives you confidence that it is real and tells you how much extra you will have. Then you can start to think about exactly what you want to do with it.

Your Financial Plan also shows you where they road you are on leads. We have told many clients that stayed frugal in retirement as their investments compounded where that road leads. “You live your frugal life and then die with a huge amount, often $10 million and sometimes $50 million that goes to your kids. Is that the ideal life for you?” Seeing the road can be a huge eye-opener.

Your main 3 options with your extra money are:

• Enjoy your life. Take luxury vacations, lots of dinners & entertainment, or spend money doing things with friends and family. Buy a nicer home.
• Give it all to your kids. Try to give it in a way that helps them learn about money. Don’t let it be an enabler for your kids to not make something valuable of their lives.
• Donate to causes important to you. Have a Giving Plan instead of mindlessly giving to telemarketers. You can create the ultimate legacy, a charitable foundation in your name that will be there 100 years after you are gone. I did a video about the 10 times strategy that lets you give $100,000 that only costs you $10,000. Make a difference in the world.

If you have become wealthy later in life, how have you experienced it? How is your life different? What mind shifts did you experience? Tell us in the comments below this blog or video.

Ed