Here’s the simplest equation describing what we talk about everyday.
wealth = accumulated (income – spending)
There are essentially two ways to increase your wealth:
- increase your income
- decrease your spending
Do this and over time, you will accumulate wealth.
You are probably thinking that this is pointless, but sometimes we need a reminder because we over complicate personal finance.
Every time you wonder why you aren’t rich, you should ask yourself whether you are working hard enough on the right side of the equation. Have you exhausted all avenues of making more money? Do you live frugally?
If not, just spend some time brainstorming on ideas to improve the two things that matter: income and spending. Here are a few quick suggestions:
Increasing Your Income:
- Build passive income
- Ask for a raise
- Take full advantage of retirement accounts
Decreasing Your Spending:
- Cut up your credit cards
- Don’t look at advertisements as 40% off actually means you still need to spend 60% to get it
- Stop eating out already
- Call every company you are buying a service with and see if you get a better deal (TV, cell phone, car insurance etc)
- Search the web when something breaks to see if you can fix it before going out to buy a new one
I bet you can think of more to add to this list. Keep at it and increasing your wealth will become easier.