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If we’re interested in building wealth, we should all make a pledge to ourselves much like a doctor’s Hippocratic oath: above all, DO NO HARM. We’re living in an era of instant gratification. If we want to communicate with someone half a world away, we can do that immediately with a text message or a phone call. If we want to purchase something and have it delivered to our door, it’s possible to do that with a smartphone and a credit-card number – even if we don’t have the money to pay for it.

Just like that seemingly wealthy American family in Singapore, it’s easy to sabotage our future by blowing money we don’t even have. The story of living beyond one’s means can be heard around the world.

To stay out of harm’s way financially, we need to build assets, not debts. One of the surest ways to build wealth over a lifetime is to spend far less than you make and intelligently invest the difference. But too many people hurt their financial health by failing to differentiate between their “wants” and their “needs.”

Many of us know people who landed great jobs right out of college and started down a path of hyperconsumption. It usually began innocently. Perhaps, with their handy credit cards they bought a new dining room table. But then their plates and cutlery didn’t match so they felt the pull to upgrade.

Then there’s the couch, which now doesn’t jibe with the fine dining room table. Thank God for Visa – time for a sofa upgrade. It doesn’t take long, however, before our friends notice that the carpet doesn’t match the new couch, so they scour advertisements for a deal on a Persian beauty. Next, they’re dreaming about a new entertainment system, then a home renovation, followed by the well-deserved trip to Hawaii.

Rather than living the American Dream, they’re stuck in a mythological Greek nightmare. Zeus punished Sisyphus by forcing him to continually roll a boulder up a mountain. It then rolled back down every time it neared the summit. Many consumers face the same relentless treadmill with their consumption habits. When they get close to paying off their debts, they reward themselves by adding weight to their Sisyphean stone. It knocks them back to the base of their own daunting mountain.

Buying something after saving for it (instead of buying it with a credit card) is so 1950s – at least, that’s how many consumers see it. As a result, the twenty-first century has brought mountains of personal debt that often gets pushed under the rug.

Before we learn to invest to build wealth, we have to learn how to save. If we want to grow rich on a middle-class salary, we can’t be average. We have to sidestep the consumption habits to which so many others have fallen victim.

The US Federal Reserve compiles annual credit card debt levels. Cardhub.com publishes those results. In 2015, the average US household owed $7,879 in outstanding credit card debt.1 In 2015, MarketWatch news editor Quentin Fottrell reported that 15.4 percent of US homeowners have mortgage debt that is higher than their homes are actually worth.2 That’s surprising, considering that the United States may be the fourth cheapest place to buy a home in the world.

Numbeo.com compares global home costs relative to income. In 2016, it compared 102 countries. US homes were among the four cheapest. Only those in South Africa, Oman, and Saudi Arabia cost less, relative to income.3

Now here’s where things get interesting. You might assume it’s mostly low-salaried workers who overextend themselves. But that isn’t true.

The late US author and wealth researcher, Thomas Stanley, had been surveying America’s affluent since 1973. He found that most US homes valued at a million dollars or more (as of 2009) were not owned by millionaires. Instead, the majority of million-dollar homes were owned by nonmillionaires with large mortgages and very expensive tastes.4 In sharp contrast, 90 percent of millionaires lived in homes valued at less than a million dollars.5

If there were such a thing as a financial Hippocratic oath, self-induced malpractice would be rampant. It’s fine to spend extravagantly if you’re truly wealthy. But regardless of how high people’s salaries are, if they can’t live well without their job, then they aren’t truly rich.

How Would I Define Wealth?

It’s important to make the distinction between real wealth and a wealthy pretense so that you don’t get sucked into a lifestyle led by the wealthy pretenders of the world. Wealth itself is always relative. But for people to be considered wealthy, they should meet the following two criteria:

1. They should have enough money to never have to work again, if that’s their choice.

2. They should have investments, a pension, or a trust fund that can provide them with twice the level of their country’s median household income over a lifetime.

According to the US Census Bureau, the median US household income in 2014 was $53,657.6 Based on my definition of wealth, if an American’s investments can annually generate twice that amount ($107,314 or more), then that person is rich.

Earning double the median household in your home country – without having to work – is a dream worth attaining.

How Do Investments Generate Enough Cash?

Because this book will focus on building investments using the stock and bond markets, let’s use a relative example. If John builds an investment portfolio of $2.5 million, then he could feasibly sell 4 percent of that portfolio each year, equating to roughly $100,000 annually, and never run out of money. (See, “Retiring Early Using The 4 Percent Rule.”) If his investments are able to continue growing by 6 to 7 percent a year, he could likely afford, over time, to sell slightly more of his investment portfolio each year to cover the rising costs of living.

Retiring Early Using The 4 Percent Rule

Billy and Akaisha Kaderli retired when they were just 38 years old. They have been retired for more than 25 years. They live off their investments. In fact, they have pulled more money out of their investment portfolio than their portfolio was worth when they first retired.

Does that mean they’re almost broke? Not even close. Compound interest worked its magic. When they retired in 1991, they had $500,000. Today, they have a lot more money. How did they do it? They live frugally, in low-cost locations. They also followed the 4 percent rule.

In 2010, Philip L. Cooley, Carl M. Hubbard and Daniel T. Walz published a research paper in the Journal of Financial Planning.7 They back-tested a variety of portfolio allocations between January 1926 and December 2009. They found that if investors withdrew an inflation-adjusted 4 percent per year, their money stood an excellent chance of lasting more than 30 years.

I wanted to see how it would have worked for Billy and Akaisha. They own an S&P 500 index. That means they invest the way that I describe in this book. They withdraw less than 4 percent from their investments in a year. But let’s see what would have happened if they had taken out exactly 4 percent annually.

Over the past 25 years, their money would have kept growing. So if they took out 4 percent of their portfolio every year, they would have taken a total of $1,325,394 from their initial $500,000 portfolio. Yes, you read that right. They would also have plenty left. By April 30, 2016, despite those annual withdrawals, their portfolio would be valued at $1,855,686.

Frugal living, compound interest, and the 4 percent rule are powerful combinations.8

If John were in this position, I would consider him wealthy. If he also owned a Ferrari and a million-dollar home, then I’d consider him extremely wealthy.

But if John had an investment portfolio of $400,000, owned a million-dollar home with the help of a large mortgage, and leased a Ferrari, then John wouldn’t be rich – even if his take-home pay exceeded $600,000 a year.

I’m not suggesting that we live like misers and save every penny we earn. I’ve tried that already (as I’ll share with you) and it’s not much fun. But if we want to grow rich we need a purposeful plan. Watching what we spend, so we can invest our money, is an important first step. If wealth building were a course that everyone took and if we were graded on it every year (even after high school), do you know who would fail? Professional basketball players.

Most National Basketball Association (NBA) players make millions of dollars a year. But are they rich? Most seem to be. But it’s not how much money you make that counts: it’s what you do with what you make. According to a 2008 Toronto Star article, a NBA Players’ Association representative visiting the Toronto Raptors team once warned the players to temper their spending. He reminded them that 60 percent of retired NBA players go broke five years after they stop collecting their enormous NBA paychecks.9 How can that happen? Sadly, the average NBA basketball player has very little (if any) financial common sense. Why would he? High schools don’t prepare us for the financial world.

By following the concepts of wealth in this book, you can work your way toward financial independence. With a strong commitment to the rules, you could even grow wealthy – truly wealthy. This starts by following the first of my nine wealth rules: spend like you want to be rich. By minimizing the purchases that you don’t really need, you can maximize your money for investment purposes.

Of course, that’s easier said than done when you see so many others purchasing things that you would like to have as well. Instead of looking where you think the grass is greener, admire your own yard, and compare it, if you must, to my father’s old car. Doing so can build a foundation of wealth. Let me explain how it worked for me.