Important Formulas

From time to time I may refer to formulas. Instead of burying formulas into my posts, i thought I'd just provide a central place form them.

Definition of "Rich" formula:


Residual income formula:


Income Source formula:


Goal Setting Formula:


Savings Formula: x /y = z

x = total cost of expenditure
y = how many months you have to save before the spending takes place
z = required savings per month

Count by hundreds, not by hundredths

How much time do you spend balancing the check book? If you are like me, it's never. I was taught to balance a check book down to the penny. I was taught to track EVERYTHING. This countered what my gut was saying. Why?

It takes a lot of time to track every penny. If you weigh the amount of time you spend counting pennies vs the price of your time by the hour, you are wasting your time and money. You could be doing something more productive - like relaxing.

I've adopted a routine to counting money by the hundreds. If I have $99 in my pocket, it's like change. It's amazing how this habit alone can change your perception of money. If you treat $100 like it's $1 and $1,000 like it's $100, all the sudden, $1 million doesn't feel like a lot of money. It's a neat phsychological trick.

This habit may seem like it contradicts my post about being frugal so I will clarify. Being frugal is different than penny counting. You should do your best to limit your expenses (everyone's perception of what frugal is may be different) but don't waste your time counting pennies. Besides, pennies may not even exist anymore in the near future.

I want to enjoy life. Why do I have to be frugal to be rich?

So you think having material posessions means enjoying life. I can say from first hand experience, life is much better with just a roof over my head, a chair, desk and computer. Things such as cable tv, fancy cars, fancy houses and all the greatest toys only end up becoming distractions. Don't get me wrong, there is nothing better than watching my favorite TV show, waterskiing and heading to the beach in Miami in the middle of a noreaster, but i found it to be better to rent the items at the time i want to use them rather than owning and maintaining them. Thats just me. It took practically being homeless and having to sell everything I own to figure this out. You have to decide what's best for you.

If you truly get rich, you should focus your efforts on helping people whether through mentoring, coaching or leading by example.

How to Stay Rich

There are several ways to stay rich. first, live within your means. Be frugal.

Don't get me wrong, enjoy life for we coudl die as early as tomorrow, but get rid of anything that has a monthly payment. Yep, that includes car payments, house payments and even cable tv, gas and electric payments. Getting rid of utility bills may be unrealistic so do what you can to keep the monthly payments low.

First Things First

So you want to get rich? It's easy. It just takes time, planning and discipline. Here's how.

The first thing you have to do is set a goal. Is $1 million dollars in the bank considered being rich to you? What about $100,000, $10 million, or even a $1 billion.

To me, being rich means to be able to live off of my residual income. For example, if my total monthly expenses are $5,000 and I generate $5,000 in residual income, then by my own personal definition, I am rich.

If you work the formula backwards (see "Formula for Getting Rich" blog) you will see it takes millions of dollars in the bank to build a $5,000 per month residual. Getting rich is one thing. Staying rich is another. This is why many people who win the lottery lose it and end up where they were before they hit the jackpot.

Different ways to stay rich?

• invest cash into dividend producing stocks
• focus on one multilevel marketing company and build residuals via your downline
• buy real estate and generate rents
• Create a subscription based business (for example, run a member driven web site where people have to pay monthly or annual fees).
• Sell commodity based products where the sales become automatic, they include upsells and reorders.

The point is to pick two things and do it. Why two? you will need a job with a steady paycheck to guarrantee that your bills are going to be paid.

Financial Tip for the day

Do what you love, the money will come.