Build Wealth In Your 30s? How? Click to know more ..

                                     Build Wealth In Your 30s? How?

If one knows the formula to build wealth, making money becomes more effective. Majority live a mediocre life. The reason for this mediocrity is, people do not know the wealth formula. In order to effectively build wealth, knowledge about wealth formula will give lot of clarity. Wealth formula is not a short-cut to build wealth. It just shows the right path to build wealth.

Building wealth should be on everyone's priority. But not everyone is seen following this priority. People generally get used to do their 9-5 job. At the end of month they get paycheck that makes them happy. Some people are paid more, and some are paid less. People get used to this mediocrity. It takes times for people to realize that they are only like a robot.

Same job they have to day after day, year after year. Even if they do not like it, they still have to do it for paycheck. Over time, people get extremely dependent on their paycheck. By the time they realize their evil dependency on paycheck, its already too late. It is essential for people to start developing a foundation for self early in life. In wealth terms, this foundation is called 'financial independence'. Complete financial independence can only be achieved gradually. It cannot happen in one day or one year. Developing a parallel source of income (alternative to paycheck) is essential. 

How to realize ones financial dependency on paycheck

Its not so difficult. Consciously take a decision not to use one months salary. That month, only savings will be used to pay for all expenses. Try this experiment for a month. The longer you can survive without using paycheck, the more financially independent one is. Majority cannot pass the first 10 days of the month. Its true that this experiment will make you very uncomfortable. But once you come out of it, you will be a changed person. You will start asking difficult questions to self. What happens if I loose my job? How will my child continue education? How will I pay my EMI? Realizing how dependent we are on salary is step one to build wealth. Everything after that will start happening automatically. 

Realize how asset and liabilities contribute to wealth building

When people do not have financial goals, they tend to get distracted. Instead of accumulating assets they start buying liabilities. To know difference between asset and liability we can use simple mathematics. We know that 1+1 = 2, & 1-1 = 0. Asset is +1 and Liability is -1. Our effort shall be to accumulate as much +1's and minimum of -1's. In the process of building wealth, important is to realize, which items are +1 (asset) and which is -1 (liability).

Do not confuse Liability with an Asset

There is difference between an asset and liability. Assets adds money to pocket. Liabilities takes money out of pocket. To build wealth wealth, accumulate more and more assets and minimize possession of liabilities. Asset accumulation does not mean buying a house, fast car etc. Assets are like cash reserves, equity, bonds, bank deposits, rental property etc. Our financial goals should be to accumulate income generating assets. Financial goal can be like "In next 10 years time I shall be earning at least Rs 50,000 in form of rental income from property". Here rental property is the ‘assets’. The rental income is the return on investment. If one wants to build wealth, then they must learn these keywords, 'asset' and 'return on investment (ROI)'. This is a litmus test for any asset. It helps us to differential asset from other items (liabilities). We may consider an item as asset, but if it is not generating ROI is cannot be an asset. A combination of asset and ROI has potential to build wealth over time. 

Magic Formula to Build Wealth

See that magic formula that can guide anybody on how to become wealthy. This formula is a result of excellent research work done by experts in the past which when applied will certainly lead to wealth creation. 
INA = Income from Assets
INJ = Income from Job
FI = Money required for Financial Independence
EX = Expenses

In order to understand this formula lets take an EXAMPLE 1:

INA (Income from Assets) = $0 / month
INJ (Income from Job) = $1,500 / month
FI (Money required for Financial Independence) = $2,000/ month**
EX (Expenses) = $ 1,000/ month

Applying this on Magic Formula: 

$0 + $1,500 < 2,000 + 1,000  

INA + INJ < FI + EX. 
Income from asset (INA) is zero. Income from job (INJ) is $1,500 against expense (Ex) of $1,000. But in order to become financially independent one requires $2,000 each month which is unavailable. Hence person is not on right way to become wealthy. Income from Asset (INA) must be increase to support income from job (INJ). A stage must come where INA > EX. This is a condition of financial independence. 

EXAMPLE 2:

INA (Income from Assets) = $2,000 / month [return on investment]
INJ (Income from Job) = $1,500 / month
FI (Money required for Financial Independence) = $2,000/ month (money invested will strengthen INA)
EX (Expenses) = $ 1,000/ month

Applying this on above formula of wealth: 

$2,000 + $1,500 > 2,000 + 1,000  Income from asset (INA) is $2,000 against expense (EX) of $1,000. It means the person is financially independent. He is already making $1,000 more from Asset income, above EX. Hence the additional $1,000 goes to fund FI. As he is already financially independent, money diverted to FI is only making the person more and more wealthy. 

INA + INJ > FI + EX 

Conclusion

In order to become wealthy one must have streams of income more than than expenses. From above formula we will notice that almost 90% of population will have INA equal to zero or amounting to negligible. To become wealthy increase the weigtage of INA. Also, most people in this world have never thought of applying Financial Independence to their expenses. In order to become wealthy channel your income to feed your “money requirement for financial independence”. There are several investment options that allows investors to feed money for their goal of Financial Independence.