The Only Way to Generate Wealth
There is only one way to generate wealth and I am going to share that secret with you. Make more money than you spend. There is nothing more to this. If more is coming in then is going out, you are becoming rich.
Wealth = Income - Spending
Control Spending
There are two ways to affect your wealth generating ability, increase income and decrease spending. It is most appealing to focus on just the earning. It seems that what we are after is simply more money, so it’s natural to concentrate on earning more. It’s easy to focus on income and give no thought to spending. Be warned though, our nature is to spend what we make. Without a system to govern your spending, you will quickly adapt your lifestyle to whatever wages you can make for yourself. There is no limit to the lifestyle we allow ourselves to enjoy.
Establish a baseline. That’s what a budget is. It’s just a simple number where we say “this is enough money for me.” Figure out how much money you need for planned expenses and how much you want for fun. Once you’ve reached a solid number, you’re set. This is your reasonable lifestyle. Generate more wealth potential by reducing that amount. Switch your auto-insurance, insulate your house, and use coupons. Do simple things you are comfortable with.
Generate More Income
You can generate a lot of wealth by earning a low income and saving a lot. There are lots of tricks to save money. However, if you focus on just this aspect you are greatly hindering your wealth generating potential. You could spend 10 hours scheming ways to spend less, or you could spend 2 hours updating your resume and landing a job that pays $5,000 more a year.
It’s a balance. Your budget is your first priority. You can’t move ahead if you can’t control where you are at. Get it under control, perform maintenance, and forget it. Look for ways to save money and look for ways to earn more.
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