Here’s the simplest equation describing what we talk about everyday.
wealth = income – spending
Basically, there are two ways to increase your wealth:
- increase your income
- decrease your spending
Everyone at this point will probably be thinking that this is pointless, but how many of you really look at everything in this way?
Every time you wonder why you aren’t rich, are you working with the right side of the equation? Do you try to find additional income? Do you try to cut back?
If not, just spend some time to think of what you can do today while concentrating on the two things that matter: income and spending. Here are a few quick suggestions:
Increasing your income:
- Passive Income
- Ask for a raise
- Investing in stocks, CDs to boost your income
- Enroll in your 401k
Decreasing Your Spending
- Cut your credit card
- Don’t look at advertisements as 40% off actually means you still need to pay 60%
- 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 ways right? Doesn’t increasing your wealth feel a little easier now? It’s amazing how simple something can get huh?
Happy Monday!
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{ 11 comments… read them below or add one }
I think this is a very good post. I would modify your simple wealth equation, though. Since building wealth means having more income than spending over time, I would add a summation symbol (or an integral) at the beginning of your equation.
My money saving tip is to watch tv on the internet. When I realized I only really enjoyed a couple of shows and could watch them for free on the internet I canceled my cable service and save $60 a month now.
I bring my lunch to work now, and stopped buying that morning cup of coffee at work. I bring really great tea bags – so I don’t fell deprived, and it’s still a lot cheaper! The money i save from the coffee, I eventually use to invest in shares on sharebuilder.
Carl: You are right. There’s a reason why I wasn’t the favorite in my math class
Greener Pastures: Investing the money you would’ve spent on something like coffee is a great idea! It’s another psychological way of helping yourself save and grow your wealth!
Good for you!
Another old saying: Wealth – It isn’t how much you make, it’s how much you don’t spend.
And my favorite tip for not spending money: Do it yourself, Do it yourself, Do it yourself! Or get by without it!
You couldn’t have made it any easier. Make more and spend less. People need to train themselves to get in the mindset to forget about sales and little purchases they don’t really need, or find more efficient ways to it. I am a movie buff and always found myself buying un-needed dvd’s. Now I have a Netflix account and never buy dvd’s saves money in the long run.
marci: Do it yourself (DIY) is always a great way to save, not to mention the satisfactory when it’s done right!
Craig: You should really check out Redbox as well (if they are available in your area). It’s really great and you can pay as you rent even though it’s only $1 each time.
@MoneyNingThere is a redbox in my area and have done it before. Thanks for the tip, and I would highly recommend it to most users. I love movies and feel that Netflix has a much larger variety of movies to offer than Redbox, also I like how it comes directly to my mail. I’m comparing Netflix to what I used to do and just go to Blockbuster. If I get 5-6 movies at $12 a month (I have blu-ray, another thing I’m not sure Redbox offers), it’s basically renting at $2 a movie opposed to $5 at Blockbuster.
Here is the link to Redbox for those users who are interested in learning more: http://www.redbox.com/Home.aspx
greeting…
I have to say that I totally disagree with the wealth formula. Wealth is not about income… it is about assets and passive income. I would say wealth is more accurately written like this:
WEALTH = (Assets – Liabilities) + Passive Income.
Let me give a few examples.
A doctor makes $150,000 per year. Sounds good
Sounds wealthy 
– NOPE! Doc lives in a BIG house that costs $4000/mon for mortgage, $1,000/mon for taxes. His kids go to expensive private schools. His wife stays at home and drive a Mercedes S500 @ $600/mon. Guess what… After all these expenses, doc has nothing left over… and if he starts loosing patients at his doctors office, his income can go down.
Now let’s take me… I make $40k-$50k per year as a web designer… and I live well within my means. I drive an Audi A8L (no payments)… I have a Harley Ultra Classic (no payments)… I have a nice condo on a lake in NH ($500/mon mortgage)… etc… etc… Here is where things get interesting… I have a net worth of over $2 million dollars! AND a passive income from my rental properties of over $7,000/mon! (by the way… net worth is assets minus liabilities). Am I wealthy? I think so… I have assets worth over $2m and if I stopped “working” tomorrow… I would still have income of over $7,000/mon for the rest of my life! And most important to me is I control my “time”. If I want to take a day or a week off anytime… I can… any month of the year. So to me true “wealth” is as follows:
WEALTH = (Assets – Liabilities) + Passive Income + control over your time!
Hope this helps stir some good conversation on what is “wealth”
Svend
Craig: Yup Redbox doesn’t have blu-ray offerings (but I’m sure they will eventually).
Changing from blockbuster to netflix is definitely a change for the better. Hopefully as time goes on there will be an even better deal!
svend: I welcome the discussion
Like Carl was saying, there should be a summation in front of the formula so maybe it should be sigma n=0 to infinity (income – spending). That’d work out to be what you were saying (asset – liabilities).
It’s nice to read success stories like yours because it really helps us work harder
Hopefully one day we can all say “i have assets of $2m and can control our own time”!
Wealth to me means the ability to control your time and money. Currently I am focusing on creating passive streams of income so that I can have control of my time. Once that is complete I will focus on how to gain control of my money, then I will be wealthy. Simple.
greeting again! I want to thank the creator of MoneyNing for his nice comments on my recent post. I have thought some more about what I wrote, and have made a few “improvements”… I hope you all agree!
WEALTH = (Assets – Liabilities) + Passive Income + control over your time + low tax liability + good health to enjoy your wealth!
svend
http://www.svend007.com
http://www.svend.com