Science of Wealth

How to Become Rich

As I write more and more articles from this blog, reading and researching around the subject of wealth creation one thing is becoming clear. Many people think that  building wealth is complicated. They believe that the rich have a secret formula or that others are only rich because they inherited money. The more I discover about the subject of building wealth the more I am convinced that those people are wrong. 

Wealth creation

There is no secret to becoming rich. Building wealth comes down to a single and simple formula that I shall reveal. The formula is as follows:

If A - B > 0 is true then you will build wealth. That is, if the difference between A and B is greater than zero then you will build wealth. But what are A and B? 

Some of you will think me stupid and wasting my time writing this post as A is simply your income and B is your outgoings (all expenditure). Many of you are thinking "why are you stating the obvious?" I'm stating the obvious to ensure that when you don't follow this formula and complain that you don't know how to build wealth then you have no excuse.

If you want to build wealth you have to have to have to make sure that the total of all your income is greater than the total of all of your expenditure. To know this you need to track your spending. You need to know exactly how much you are spending and on what. Then you need to compare this with how much you are making each month. If you are earning less than you are spending and want to build your wealth then DO SOMETHING about it! Cut your spending in the areas that are dispensable. If you desperately want to become rich then you need to control your spending. Do you need to go to the pub tonight? Do you need that extra pint? Is it cheaper to eat at home? Is is cheaper to make a packed lunch for work rather than to go out and buy your Pret a Manger sandwiches? Do you need that Starbucks coffee? Couldn't you have take a thermos flask from home? 

I think you get the picture.

Once you've begun to control your spending habits you've solved the 'B' part of the equation. Now onto part 'A'!

Growing your Income

Okay! So you've got your expenses in order (reader, be advised that controlling your spending can take months or recording your expenditure patterns and tons of self discipline. Those readers who are not able to complete this stage of the formula should give up the idea of ever becoming wealthy.) Now you need to boost your income.

I know what you're thinking. You're thinking that you have a job? There's only so much you can do to boost your income. Here are a few ideas. Have you tried going for a promotion? Have you tried asking for a pay rise? (Be advised that the first two suggestions are for those that deserve it.) Have you tried selling anything on eBay or Amazon? Have you thought about setting up a business, especially since starting up a side business is very cheap nowadays (this is something I am currently in the process of doing. More on this in the future)? Are you investing your savings wisely? Could you commit some of your funds to longer term bonds for a higher return? Could you take on more risk as you are not willing to touch your capital in the short term? Can you find blue chip shares with high dividend yields from which to earn an income (and become an ISA Millionaire)?

As you can see, there are many possibilities to consider when looking to make sure that the left side of the equation is greater than zero. 

I will remind you of the key lesson again, just in case you haven't quite understood yet (reader rolls their eyes), to build wealth your total expenses must be less than your total income.

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1 comment

Allan C. Dale said...
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