Tuesday, April 17, 2007

The true formula for riches . . .

After reading The Richest Man in Babylon , I found the real secret to getting rich is this formula:

Your income divided in this way . . .
10% Give Away (Donate, Tithe, etc.);
10% Save (Put in interest bearing account/investments);
80% live on.

Follow this formula steadily for 10 years or more and you will become rich. Interesting. And I do recommend reading The Richest Man in Babylon by the way. It's a a very quick read. If you read no other personal finance book, read this one.

But in this day and age does this concept really hold up? I mean with federal, state, medi-care and social security taxes added in, we are actually living on 65% or less of our income. That’s impossible, right?

Well, Steven Venti (of Darthmouth) and David Wise (of Harvard) who has studied wealth accumulation said that people who made saving a priority -- not investing, but saving -- and had a plan to become wealthy (I guess this means an investment plan), became wealthy almost every time.

Well damn, I wonder if I can pull of my plan to do this in a much shorter amount of time?

Okay, so I pledge that all money that comes in from my efforts with this website -- even if the checks come in cents -- will be divided up in this way . . .

Revenue – Business Expenses = NET INCOME
20% of NET INCOME will go to a TAX ACCOUNT (interest bearing account).
60% of NET INCOME will go to living costs.

So, let’s pretend that I've earned $1,000 in one month. (Pretend I extracted expenses already).
$200 goes to the Tax Account
$100 goes to the Charity Account
$100 goes to the Savings Account
$600 will go to Joint Account

Let's see if simplicity is the answer . . . but, you know my luck. Next month, I'll probably earn $100 and have to bear the laughter and the "are you crazy" looks when I deposit $20 - $10 - $10 into various accounts.

But, so what? I’m going to do it and in 20 years I better be rich!

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