Why “high income does not make you wealthy,” and what is the concept of attaining true wealth?


Many people “want to be wealthier ……,” and some list high income as their first requirement for a job, but “being wealthy” and “having a high income” are similar but not synonymous, according to the The, a provider of finance information for physicians. MDpreneur, a provider of financial information for physicians, states.

The MDpreneur explains who can have a high income but not be wealthy, and what choices one must make to truly be wealthy.

Purchase Cash Flow to Grow Wealth | Stop Buying StuffThe MDpreneur

The MDpreneur explained that in order to become wealthy, it is important to “increase future cash flow,” which is called cash flow.

Cash flow is essential for living, but the method of generating cash flow by selling off one’s time may generate cash, but it will not generate wealth. While there is such a thing as a “stable job,” cash flow comes to a halt when one is unable to work due to injury or layoff. Therefore, in times of economic uncertainty, it is important to first diversify your cash flow in the form of income, writes The MDpreneur.

When people earn cash by selling off their time, the cycle becomes one of “working to buy things. This way, people become slaves to their paychecks and employers, he said.

There is a difference between “cash” and “wealth,” and between “high income” and “wealth.” Cash is the movement of wealth, and the cash flow cycle is how cash comes in and out. Wealth does not create the cash flow cycle; wealth is created only by manipulating the cash flow cycle.

This “operation” is what we mean by “increasing future cash flow”. Buying things creates future payments, but when you buy cash flow, over time your entire income is replaced by the purchased cash flow.

The MDpreneur uses two people, A and B, as examples to illustrate the purchase of future cash flow.

A and B are both doctors with annual incomes of 20 million yen, and A leads a very normal life, enjoying drinking beer in the garden with friends and watching football games. B, on the other hand, is a luxury-seeker who routinely drinks cocktails at hotel bars and sometimes even goes to Monaco to gamble.

◆A Life

A took to heart what his father told him, “To create real wealth, you must have many sources of income. “A lived moderately, kept some money out of his salary, and purchased future cash flow rather than buying many things.

The following are some of the things A purchased during that year of high income.
1: Website construction / ¥300,000
On the website, A answers some questions from users and publishes articles he writes. By sending users to online courses through the articles, A earned $20,000 per month. The website also served as a training ground for A to build his career.

2: Used vending machine/500,000 yen
A hired a person to restock the vending machine with merchandise. Even without this labor cost, A earned 25,000 yen per month.

3: House on the beach / down payment of 2.5 million yen and mortgage
A used the house only twice a year and rented it out to others the rest of the time; A paid the rental service operator for management and reservations, but earned 55,000 yen per month after loan payments and other expenses.

4: Defined Contribution Pension Plan and Individual Retirement Accounts for Retirement
The U.S. has tax incentives for private pension plans, and there are some programs that provide tax-free retirement benefits; A has established a maximum amount available for a defined contribution pension plan and an individual retirement account.

To summarize the above, A has set aside ¥3.3 million as expenses and purchased a cash flow of ¥100,000 per month starting the following year. The rate of return is 100,000 yen x 12 months ÷ 3.3 million yen, or 36%. With the income generated, A will pay off the initial cash investment in 3 years. The vacation home then becomes an asset building and becomes cash when sold.

If the above continues for 10 years, the total income will be 12 million yen. It takes only a few hours a week to earn this money, and A enjoys a high income and an above-average lifestyle, but without excessive luxuries. In addition, he could quit his job and live off the income he earns from his investments.


◆B Life

On the other hand, the following items were purchased by B in the first year of his high income

1: BMW car / 50,000 yen per month

2: 50,000 yen per month including boat/maintenance
The boat is used only on weekends each summer. Friends are glad b have the boat, but friends do not pay for maintenance.

3: Approximately 460 square meter house / 5 million yen down payment and 300,000 yen monthly mortgage
B bought a large house because he likes to throw parties. Many people are happy to come to parties in this house.
4: Defined Contribution Pension Plan and Individual Retirement Accounts for Retirement
This is the same one used by A. Like A, it is set at the maximum amount available.

B’s purchase resulted in a monthly payment of ¥400,000 for the following year and thereafter. B, who is a luxury-seeker, has continued to enjoy similar luxuries since then, so his monthly payment is more than this; B continues to save for retirement and hopes to retire in 30 years, but he cannot “quit his job right now” even though he hates his job.

When comparing A and B, A is “wealthy” and B is not wealthy but merely “high income”. The difference comes from, as it did at the beginning, “are you buying future cash flow?” whereas A has purchased future cash flow, B has purchased future debt payments.

And many people follow the same path as B, even if they are not luxury oriented.

When one purchases future debt, one becomes poor; when one purchases future cash flow, one becomes wealthy. Stop buying lots of stuff and prevent “holes” in the cash flow that create outgoing flows. Then reverse the flow and make decisions that will increase cash flow in the future, The MDpreneur advised.

Hello, I’m Satoshi. I’ve been working as a staff member for an organization for over a decade. During that time, I’ve had various experiences, from launching new businesses to streamlining operations using information I’ve gathered from the internet and my own experiences. Of course, I’ve been successful with the help of colleagues and superiors, and I’m grateful to them. Nowadays, I find myself in a position where people from various backgrounds ask me for advice and share their knowledge. However, being constantly approached has made me realize that I need to protect my own time. So, I’ve decided to start a blog called ‘Satoshi Lab’ to share knowledge. I hope that by writing about my thoughts and experiences, people will enjoy reading and find it helpful in their own journeys.