What"s Your Wealthy?
Have you ever done the math to determine what would make you wealthy? What is Wealthy? Well, first you have to figure out what is wealthy in your eyes.
If you had $1 million in the bank, would that be considered wealthy to you? To some, this does sound wealthy.
That is, unless the expense column next to it on your financial report showed $2 million in expenses.
In that case, you would actually be broke.
What is Wealth? Wealth is simply Income VS Time.
If you quit your job today, how long could you continue your current lifestyle on your savings and assets before you would need to get a job? Let's say the answer is six months.
Well, this means you are only six months wealthy.
The idea behind being wealthy is to have wealth for life.
That means that your goal needs to be to obtain an infinite state of wealth.
That way, you could live your entire life how you want just off of what your assets produce.
This concept of wealth is just like planning to retire.
However, the problem people have with retirement planning always breaks down like this: A constant grind down process of your assets No steady stream of income in return No idea for increasing your asset values What is the Breakdown of Debt? Since we all have bills to pay, even after retirement, let's put this to the math.
Let's break down debt into three categories: Taxes Insurance Everything Else Why do we need to break debt down like this? Well, the concept is known as "Employee to Investor Status.
" While you are employed with someone else, taxes and insurance are normally handled for you.
Yet, and still, you are the one paying them.
Your employer simply arranges and makes the payments for you.
When you get your paycheck, all other debts you are responsible for fall into the "everything else" category.
And, after you finally stop working for someone else, your taxes and insurance immediately also become a part of the "everything else" category.
Okay.
Now, let's get to the math.
Calculating the Income You Need to Cover Your Debt Let's say you need $1,000 per month to cover all three debt categories.
I know we all have more than that.
But, let's keep it simple for now.
So, the question becomes: How much investment do we need to make and at what interest rate (APR) to get this monthly income? Investment X APR = $1,000 monthly Now, let's start with an interest rate return of 13% APR.
Some make more than this on their investments, while others make less.
For those of you whose return on investment (ROI) is less than 13% APR, you might want to up your risk a hair in few areas.
ROI on $10,000 Loan Investment So, if you're getting a return of 13% APR on a $10,000 loan investment, the ROI would be $108.
33 monthly.
The basic math equation being: $10,000.
00 X 0.
13 = 1,300.
00 ÷ 12 (months) = $108.
33 But, that doesn't cover your debt of $1,000 each month.
So, imagine that you're in the position to invest the wealthier amount of $100,000 at 13% APR.
That means the ROI on that same 13% APR on a $100,000 investment would be $1,083.
33 monthly.
$100,000.
00 X 0.
13 = 13,000.
00 ÷ 12 (months) = $1,083.
33 Compound Interest Grows the More You Invest This number may stress you a bit because your debts would most likely be higher than $1,000.
00 a month.
However, this where "time", and "compound interest" comes into play.
As you build your investment portfolio, your compound interest will grow.
So, even with a $10,000 investment at 13% APR, your ROI is $108.
33 each month in interest.
Multiply that by 12 months, and your ROI is $1,299.
96 annually, just from interest.
This, compounded with your regular investment contributions, equals a quickly growing portfolio of investments.
So, If we want to be wealthy, we need to calculate "What's your Wealthy"
If you had $1 million in the bank, would that be considered wealthy to you? To some, this does sound wealthy.
That is, unless the expense column next to it on your financial report showed $2 million in expenses.
In that case, you would actually be broke.
What is Wealth? Wealth is simply Income VS Time.
If you quit your job today, how long could you continue your current lifestyle on your savings and assets before you would need to get a job? Let's say the answer is six months.
Well, this means you are only six months wealthy.
The idea behind being wealthy is to have wealth for life.
That means that your goal needs to be to obtain an infinite state of wealth.
That way, you could live your entire life how you want just off of what your assets produce.
This concept of wealth is just like planning to retire.
However, the problem people have with retirement planning always breaks down like this: A constant grind down process of your assets No steady stream of income in return No idea for increasing your asset values What is the Breakdown of Debt? Since we all have bills to pay, even after retirement, let's put this to the math.
Let's break down debt into three categories: Taxes Insurance Everything Else Why do we need to break debt down like this? Well, the concept is known as "Employee to Investor Status.
" While you are employed with someone else, taxes and insurance are normally handled for you.
Yet, and still, you are the one paying them.
Your employer simply arranges and makes the payments for you.
When you get your paycheck, all other debts you are responsible for fall into the "everything else" category.
And, after you finally stop working for someone else, your taxes and insurance immediately also become a part of the "everything else" category.
Okay.
Now, let's get to the math.
Calculating the Income You Need to Cover Your Debt Let's say you need $1,000 per month to cover all three debt categories.
I know we all have more than that.
But, let's keep it simple for now.
So, the question becomes: How much investment do we need to make and at what interest rate (APR) to get this monthly income? Investment X APR = $1,000 monthly Now, let's start with an interest rate return of 13% APR.
Some make more than this on their investments, while others make less.
For those of you whose return on investment (ROI) is less than 13% APR, you might want to up your risk a hair in few areas.
ROI on $10,000 Loan Investment So, if you're getting a return of 13% APR on a $10,000 loan investment, the ROI would be $108.
33 monthly.
The basic math equation being: $10,000.
00 X 0.
13 = 1,300.
00 ÷ 12 (months) = $108.
33 But, that doesn't cover your debt of $1,000 each month.
So, imagine that you're in the position to invest the wealthier amount of $100,000 at 13% APR.
That means the ROI on that same 13% APR on a $100,000 investment would be $1,083.
33 monthly.
$100,000.
00 X 0.
13 = 13,000.
00 ÷ 12 (months) = $1,083.
33 Compound Interest Grows the More You Invest This number may stress you a bit because your debts would most likely be higher than $1,000.
00 a month.
However, this where "time", and "compound interest" comes into play.
As you build your investment portfolio, your compound interest will grow.
So, even with a $10,000 investment at 13% APR, your ROI is $108.
33 each month in interest.
Multiply that by 12 months, and your ROI is $1,299.
96 annually, just from interest.
This, compounded with your regular investment contributions, equals a quickly growing portfolio of investments.
So, If we want to be wealthy, we need to calculate "What's your Wealthy"
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