Set your goals!

Many people have these thoughts.

It would be nice to be rich.
I don't mind being rich.

Be specific.
You will not get rich just hoping for it.

Set little milestones.
Always check yourself to make sure you are going in the right direction. When in doubt, ask yourself why do you truly wan to be rich.

Keep motivated.
Do not be afraid to give yourself a little reward if you stick to your financial goals. Rewards are good as long as they keep you motivated. But don't over do it or all your efforts will go to waste.

Define rich.
If you do not know what being rich is about, how would you know if you have reached it? Note down the things you want to have and want to do when you are rich.

The Niagara Syndrome

Why is it important to have a direction in life?

The journey through life can be described as going downstream on a boat.

Often in life, people were thrown out into life without ever deciding where they want to end up. Instead of keeping focus on their destination, they are quickly caught up in the currents of life; current events, current challenges, current fears, current wants.

And when they come to the forks in the rivers, they are unable to make a decision on which way to take. Instead they went with the flow of the river (flow of the majority, instead of their own goals and values). That is why they are always feeling frustrated with life and felt like they have no control over anything.

And one day, it will be the sound of the raging water that wakes them up. By then, they will realize that they are approaching a waterfall. It will then be too late to turn back to safety.

They are going to take a fall, it may be a financial set back or the break up of a relationship or maybe even a health problem, in almost all of the cases the fall could have been prevented by making better decisions up stream.

So plan your path and set your goals.

1. The Law of Abundance: We live in an abundant universe in which there is sufficient money for all who really want it and are willing to obey the laws governing its acquisition.

2. The Law of Exchange: Money is the medium through which people exchange their labor in the production of goods and services for the goods and services of others.

3. The Law of Capital: Your most valuable asset, in terms of cash flow, is your physical and mental capital, your earning ability.

4. The Law of Time Perspective: The most successful people in any society are those who take the longest time period into consideration when making their day-to-day decisions.

5. The Law of Saving: Financial freedom comes to the person who saves ten percent of more of his income throughout his lifetime.

6. The Law of Conservation: It’s not how much you make, but how much you keep, that determines your financial future.

7. Parkinson’s Law: Expenses always rise to meet income.

8. The Law of Three: There are three legs to the stool of financial freedom: savings, insurance and investment.

9. The Law of Investing: Investigate before you invest.

10. The Law of Compound Interest: You become financially independent by investing your money carefully and allowing it to grow at compound interest.

11. The Law of Accumulation: Every great financial achievement is an accumulation of hundreds of small efforts and sacrifices that no one ever sees or appreciates.

12. The Law of Attraction: The more money you save and accumulate, the more money you attract into your life.

13. The Law of Acceleration: The faster you move toward financial freedom, the faster it moves toward you.

Net Worth

To put it simply, if you subtract your liabilities from your assets, the difference in your net worth.

Net worth = Assets - Liabilities
Total net worth = Total wealth
Assets are things that you own. Property, car, furnitures, stocks, bonds, cash, bank deposits, etc... All these are examples of assets. And assets include stuff that are still being financed. It means that your house is counted as your asset even though you have not fully paid for it.

Liabilities are debts. These include housing loans, car loans, student loans, bills, etc...

As you can see, although your house is counted as your asset, you must factor in the housing loan too. It is a common mistake when people equate wealth with assets. Having a big car and a big house does not necessary mean that you are wealthy because you may have taken huge loans from the bank to be able to afford the house and the car.

Equating assets to wealth will overstate your true wealth. Since net worth is the correct measure of wealth, to be able to be truly wealthy, your assets must grow faster than your liabilities.

Admit it, there is a fair chance that you are here because you are looking for a quick and easy way to make money. There are advertisements everywhere claiming that they have the ability to turn you into millionaires; that is if you buy their product. Well, I am not sure if you will become a millionaire but I am sure they will.

Most people do not become rich because they are lazy. They are always looking for a quick and easy way to make money. That is the reason no matter how unbelievable Nigerian scam sounds, many are still falling for it.

And one of the things about wealth creation and especially about learning about business fundamentals or investing is that you need to be able to invest time and effort to read and understand the principles and concepts behind those models.

Another reason why a lot of people do not become rich is because they do not understand the concept of being wealthy. Read more about it here.

Making real, good money is never fast, quick and easy. Even if you have managed to make quick money, I am sure you had taken quite a fair amount of risk and such luck is hardly sustainable.

Read well, invest well.

What is Wealth?

It is easy to confuse wealth with income; and most people do. They believe that doctors, lawyers, movie actors are rich because they earn extraordinary high incomes. We judge the ecomonic success of our friends, relatives and colleagues at work by how much they earn. Although there is a relationship between the income and wealth, they are very separate and distinct economic measurements.

Income is the amount of money you earn in a given amount of time. Let's say you earn $10, 000 a month but you spend all of that every month. Can that be counted as being wealthy? Compared to a person who earn just $2, 000 a month but saves $500. The person who has a lower income is actually wealthier than the person who has a higher income.

Those who focus only on net income as a measurement of economical success are ignoring the most important measuring of financial independence: It's not how much you make. But how much you keep.

A dollar saved is a dollar earned.
The correct measurement of wealth is net worth. Net worth is the total dollar amount of the assets you own minus the sum of your debts.

We'll talk more about calculating net work in my next post.

Older Posts

Blogger Template by Blogcrowds