The Wealth Creation Formula

The key to solving a problem is to come up or use a formula that makes the process easier. Everything has a formula, and by following the logic of it, you’ll never be bothered by problems (in most cases) till the day you die. To get rich is something that only a select few know the answer to. And just like every answer, there exists a process or formula that’ll help you get there – want to know what it is? Then check this out: the formula to wealth creation is assets – liabilities; that may not seem much to you, and you may probably already know that, but the gravity of it means everything.

Now, the assets which I speak of isn’t just any asset, like the car you drive to work or the boat you ride out to sea, heck no. The assets that are used in the equation are known as “wealth building assets”, or the “medians” you own that increase in value over time. First and foremost, one would be your house, why? Coz statistically it’s most likely to increase in value, and when that happens, you have something to sell to make money off of (that is if you do intend to sell). Other “wealth building blocks” include the “instruments” you’ve invested in, that give back returns.

Such includes the stocks, bonds and mutual funds you’ve bought from the stock market (if any). Owning real estate is also included in the equation, as property can increase in market value drastically over time, meaning more promising returns. Now, what if you don’t have any of the mentioned above? No problem, coz savings accounts are also included in the formula, as well as the retirement accounts you have set up. Moving on to the second part of liabilities: these are things that’ll require you to spend more money for. This may include your car – now I know that a car is actually an asset, but in some sense, and given the “nature” of the formula presented here, it’d only be logical that we weighed it in as part of the liabilities side.

Having to pay for maintenance and gas causes cash to flow out, which is bad. Other commodities like cable subscription, the phone bill, etc., can also be included on this side. The number one monster liability for many people out there is their credit cards – they can be tempting to use, as they function fast and for your convenience. Here’s the blunt obvious secret to wealth creation: build your wealth creation assets. By getting more of them and making sound investments, you’ll be increasing the amount of returns; multiple streams of incomes if you will. That also means you’ll be upping the level of your buying power, which is what being a rich chap is all about.

At the same time, you want to minimize the number of liabilities in the list – don’t spend for something that’s going to suck more cash in for operation or maintenance if you don’t have a stream of income/s that’ll be more than capable of compensating it. Buy the goodies only when you’re investments alone can take care of it. In time, when you’ve collected and made enough investments (that work), you’ll never have to work for anybody again, and enjoy the financial freedom you deserve.