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Wed, 19 November 2008
The Formula To Building Wealth
Every one of us dreams of becoming rich. Who doesn’t want to? Having all the nice things in the world is all we wanted. Trips abroad, great clothes, nice car and nice house are just the things money can buy. You don’t have to worry about everyday expenses and you’ll be living a very comfortable life. Being wealthy also connotes power. That’s why, some people are so obsessed with money. Money is really the root of all evil- it can cause tragedy and ruin the lives of other people. But let’s not dwell on the negative side of wealth. More so, richness can still do well among men.

Helping the poor and needy people is just one classic example. Having wealth is a blessing to be shared to others. What’s the secret formula to richness? It’s very simple. If you know the basic equation in accounting, you’ll probably hit the right answer. If don’t even have a slightest idea, then I’ll tell you. In accounting, the basic formula is assets= liabilities + equity. This equation can be used in managing your finances. Of course, you have to analyze the equation. Let’s do it one by one. Your Net Worth will be solved by subtracting liabilities from assets. If you want to increase your equity or net worth, you have the option of either lowering your liabilities or increasing your assets.

You should work on your assets in order to increase your worth. It’s better to have more resources rather than liabilities. Assets can be in various forms. It is very advisable for you to invest on wealth-creating assets. Properties like land, house, savings account, funds and other investments are examples. These properties mentioned appreciate in value in the long-run. When you acquire land, benefits will surely come your way. You can either sell it in a higher price or better yet lease it. In lease, you’ll be receiving monthly revenues and you can acquire another property from the income. If you have an “eye” for stocks, then you better learn the ins and outs in the stock market.

On trading stocks, you’ll get richer instantly if you know how to play in the market. Investing in the right stocks is an advantage. The risk there is high but the returns are much higher too. If you can’t handle your stock securities, go to a stock broker and let them handle your stocks. You have to pay them their brokers’ fee though. Other assets can also be found in the vicinity of your home. Appliances and the latest gadgets that you possess are also assets. But in this case, these belongings are depreciable. Automobiles also belong in this category.

They easily depreciate in value especially if there are latest models in the market every now and then. For example, the value of the television that you acquired 1 year ago will not be the same today. It’s OK to purchase appliances and gadgets for they are now a necessity in every home. It can make your life easier to manage anyway. With regard to liabilities, as much as possible limit your credit. If you have a credit card, just use it for emergencies. You don’t need to buy unnecessary things just because you like them. In case you avail of a loan, choose a lending company that offers the lowest rate.

And always remember that you have an obligation to pay for the monthly dues. As much as possible, make a budget for you to follow. Don’t borrow money if you don’t need it anyway. Lower credit means no worry on your part. It will increase your net worth too. If your mission in life is to be affluent, just remember the basic equation. Accumulating wealthwill just revolve around the equation. Put it in your heart and you’ll never go wrong.

Source:Financezine.com

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