Think
January 21st, 2008 — Building Wealth
First Rule of Building Wealth
January 5th, 2008 — Credit Card
What is first Rule of Building Wealth? Spend less than you earn! It sounds so simple but most people don’t do it. That’s why most are not wealthy. If you spend more than what you earn, then you’ll never be able to build wealth. Period. Doesn’t matter how much you make or who you are. Just won’t happen.
Imagine your wealth is water in a container and imagine that your income (including income from employment, investment income, passive income and business income) is poured into this container. At the bottom this container is a faucet. Your money flows out of this container through this faucet. How much water that flows out is up to you.
If you spend carefully, then the water in this container will increase faster. If you spend lavishly, the level will go down. There is no two ways about this rule. Even if you are a multi millionaire, as long as your expenses is less than your income, your money and henceforth your wealth will increase. If your expenses is more than your income, you are eating into your wealth/assets. Your assets could be your savings, capital gain from sale of an asset, like property or a business.