The 17 Principles of Creating Wealth

Chapters 1-2

Learning How To Make Money

Warren Buffett once stated, “It is easier to create money than it is to spend it.”  The operative word in this statement is his use of the word “create.” By create, Buffett does not mean to make or earn money. Creating wealth is not about getting a second job or negotiating a pay raise, although these things can certainly help in the beginning stages of wealth building.

Creating wealth is about finding ways to preserve the money you do earn, putting it to proper use, and learning how to develop income sources from outside your normal day job, as discussed in the section above.

Warren Buffett created his billion-dollar empire by investing in companies and adding value to their product or service. As a beginning wealth builder you can similarly add value to the enterprises you undertake by producing a better product, marketing your services more effectively, and making wise investments in real estate, stocks, bonds, and intellectual properties.

Another quote from Warren Buffett illustrates his philosophy towards investing. Buffet states: “I don’t try to jump over 7-foot bars: I look around for 1-foot bars that I can step over.” This is an interesting strategy that you will see over and over in creating wealth and investment success type books. Essentially, Buffett is telling you not to overwhelm yourself with the need to hit a homerun every time you step up to bat. A steady stream of singles wins games. From an investment or business startup perspective, this means you don’t have to bet the entire farm on one deal, nor do you have to make a million on your next stock market investment. This philosophy is echoed throughout this report, where I implore you to think big, but to also think in terms of small successes repeated over and over. Again, if you can make a hundred bucks doing something within your current capabilities and resources, could you repeat it? Creating wealth can be that simple.

Donald Trump is an excellent example of this numbers game. While he came from a long line of successful entrepreneurs, Trump can be considered a self-made billionaire. In his book “Think Like a Billionaire,” Trump outlines his strategy for success. One of his key points that most self-made men and women can relate to is the need to go it alone. Aside from the investor and lender support you will need along the way (which you will pay for in the form of interest and dividends), the process of creating personal wealth is a solitary one. Nobody cares about your finances quite as much as you. Nobody will hand you an empire. And nobody will sell you a thriving business. Creating personal wealth is up to you. It’s up to you to take a lump of clay, known as an idea, and shape it into something valuable.

Fortunately, we live in a society that rewards ingenuity, hard work, and perseverance. Use the 17 Principles below to educate yourself and start the potter’s wheel turning in your direction.

Spend Less Than You Earn

The first step in the wealth building process is the most difficult. Spending less than you earn is an obstacle to success, and in my experience, trashes the dreams of more wealth builders than anything else.

Quite simply, if you cannot control your spending habits, you do not have the potential to achieve wealth—short of winning the lottery, landing a mega-millions sports contract, or inventing a cure for cancer. Here’s the challenge I’m laying down for you: Learn to spend less than you earn by either decreasing your expenditures or increasing your income.

Try not to focus on cutting out all the good things in your life or forcing a draconian budget on your family. Instead, cut out the obvious wasting of money, stop buying frivolous things on credit, and figure out how to make $300 to $500 extra each month, outside your current job. Please don’t think in terms of another part time job. Think in terms of what home-based business or investment can bring in the money.

At a minimum, you should strive to spend less than 90% of your after tax income, while ideally this number should be closer to 70%.  Use the remaining 10-30% of your after tax income to build your savings account, and establish a cash reserve equal to at least six months worth of your living expenses.  Ironically, by spending less than you earn you dramatically alter the wealth quotient, as discussed in the Introduction. Technically, you have become wealthy. However, this is not good enough for me, and I doubt you or your family will find it acceptable either.

National statistics on housing and the cost of living can help put your expenses into perspective. According to the Bureau of Labor Statistics (BLS), the average employed adult in America earns $36,764. At least 17% of that will be consumed by income and Social Security taxes, leaving about $30,500 in spendable income, or about $2,500 per month. As renters, the median gross rent is $602 per month, and as homeowners the median costs are $1,088. Homeowners in America use around 21.7% of their income for housing, and while homeowners without mortgages represent up to 30% of all homeowners, they must still pay taxes equaling about $300 per month. Anyway you look at it, it takes money just to get through the month.

What are your monthly living expenses? How does it compare to the national averages? Are you overspending? There are numerous cost of living calculators and information sources available on the Internet. One of the best series of financial calculators is located at bankrate.com.

I don’t want you to just get by, working the same old job, and perhaps having a little left over at the end of each month. That’s the kind of lifestyle they teach in budgeting books—and I hate budgeting books. Rather, I want you to get by, leave your job, and have enough cash left over to enjoy life and make bigger investments. A great book to read on this subject is “The Richest Man in Babylon,” by George Clason. It has been a bestseller for over 80 years and is readily available in most libraries and bookstores.

 

Now that you know I hate budgets, I want you to make one. Not a budget that restricts your spending, but a budget that identifies where you stand today. What is the rock-bottom number of dollars it takes to get you through a month? This number should include your rent or mortgage, groceries, automobile expenses, and utilities. I’m not talking about dinners in your favorite restaurant, movie rentals, and weekends at the lake.

 

Housing Costs:

 

Utilities:

 

Groceries:

 

Insurance:

 

Auto & Gas:

 

 

Total:

 

This is the dollar amount I want you to focus on replacing through passive and portfolio income.

 

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All Rights Reserved. No part may be duplicated or distributed without express written permission. This report is an original creation of XOR Career Guides, and is not a part of any affiliate or associate distribution plan. Rights to distribution of this report should not be implied or conferred. Information in this report should not be construed as legal or accounting advice. Keywords: business, success, wealth, money, finance, rich, investments, real estate, stock. This report is for information use only and is not intended to provide investment advice. Concepts and ideas depicted in this report should be used at the reader’s discretion. Use due diligence in all of your investment decisions.

 

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