You can create personal wealth. It’s possible to meet your financial goals. By choosing to budget, save and invest, you can pay off debt, send your child to college, buy a comfortable home, start a business, save for retirement and put money away for a rainy day. Through budgeting, saving and investing, and by limiting the amount of debt you incur, all these goals are within your reach.
So this is part 1, the very basic of WEALTH CREATION. Let’s start from what we are today. Our Networth. Believe me, if you keep this figure positive and increasing, you will reach all your goals.
This is just like your personal balance sheet.
Create one today and keep reviewing it every year. Below are the explanation and Template for you to start today.
Some people consider themselves wealthy because they live in a very expensive house and travel around the globe. Others believe they are wealthy simply because they’re able to pay their bills on time. What we are talking about here is financial wealth and what it means to you.
Building wealth requires having the right information, planning and making good choices. This article provides basic information and a systematic approach to building wealth. It is based on time-honored principles you probably have heard many times before—budget to save; save and invest; control debt; and protect the wealth you accumulate.
“Accumulating wealth—as distinct from just making a big income—is the key
to your financial independence. It gives you control over assets, power to help
shape the corporate and political Landscape, and the ability to ensure a prosperous
future for your children and their heirs….”
Rev. Jesse L. Jackson, Sr. and Jesse L. Jackson, Jr.,In their book It’s About the Money!
The first Step to Wealth Creation: Know your Networth
You want to create personal wealth, right? So does Aman.
Aman is 35 and works for a software company. He looked at his finances and realized that at the rate he was going, there wouldn’t be enough money to meet his family’s financial goals. So he chose to embark on a personal wealth-creation strategy. His first major step was to learn the language of wealth creation. The first lesson was to understand the meaning of assets, liabilities, and net worth.
They make up this very important formula:
A wealth-creating asset is a possession that generally increases in value or provides a return, such as:
- A savings account.
- A Mutual Fund investment.
- Investment in PPF.
- A retirement contribution like EPF or NPS.
- A house.
Some possessions (like your car, big-screen TV, and clothes) are assets, but they aren’t wealth-creating assets because they don’t earn money or rise in value. And we spend a major portion of earnings on these so called assets. A new car drops in value the second it’s driven off the lot. Your car is a tool that takes you to work, but it’s not a wealth-creating asset.
A liability, also called debt, is money you owe, such as:
- A home loan.
- Credit card balances.
- Loan from a friend.
- A car loan.
- Hospital and other medical bills.
- Student loans.
Net worth is the difference between your assets (what you own) and your liabilities (what you owe).
Your net worth is your wealth.
This is how Aman Calculated his Networth. Also on the right side, the Template is BLANK… for you to do the same exercise:
With this, we end the part 1, with the assurance that subsequent parts will make you ready to understand more about creating wealth and strategies that make your financial goals achieved.
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