If today’s blog post helps just one person toward financial success, then I will feel successful. So if you start to follow these practices and study these concepts in greater detail- and find yourself doing financially better as a result, PLEASE LET ME KNOW.
Getting rich is not easy, but it can be spelled out very simple–
Turn your earned income from slaving away on little sleep–> into passive income which will pay you, without you doing any work!

Let me repeat that, but rephrase for emphasis.
Turn the money you earn from working a gig or a job, into money that you earn by doing nothing.

You can become wealthy by following four steps:

1. Know what you are spending on.
Become aware of your spending habits. I did this by carrying very little cash. Then, I started analyzing what I spend on a weekly basis. The first week, I looked every night. I found that my food spending habits were out of control.

You might find that as soon as you are aware of what you are spending on, the next step will be much more easy…

2. Spend less.
For me, this meant cutting down on my eating out habits, which also reduced my spending on gas. I made a budget for myself that would allow me some entertainment, but overall cut my spending by 30%.

Reducing your spending should open up some funds for the next step..

3. Acquire Assets

Assets- what does that mean?

Wikipedia says:

assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset).

But I will say it even simpler. Assets have the potential to make you money.
In just a few moments, I will describe assets in detail for you.
First, I want to reiterate what we have here.
How to become rich:

  1. Track Your Spending
  2. Reduce Your Spending
  3. Then Spend on Assets

BUT WAIT.
You may have remembered earlier that I mentioned FOUR steps to becoming rich.
So here is step 4.

**Protect your wealth**
I will describe that in more detail further down.
…Got it?

  1. Track Your Spending
  2. Reduce Your Spending
  3. Then Spend on Assets
  4. Protect Your Wealth

Track your expenditures with a Balance Sheet.

On Wikipedia, you can find way too much information on a Balance Sheet, along with external links:
http://en.wikipedia.org/wiki/Balance_sheet

But I want to make it even simpler.
Image

Add up all of your bills for a time period– those are your Liabilities.
Add up all of your income for that same time period– that is your Assets.
Then Subtract.
Assets – Liabilities= Your Net Worth.
This is how you track your progress.

You are reading this, and you want to become rich.
What is Rich, and how will you know if you reach it?

It is important when you are going towards a goal, that the goal is very clear.
My goal for becoming rich is a Net Worth for one year of Six Billion Dollars. Yes, that high.
Your goal might be more realistic, say a net worth of one year of $250,000.
Once you have determined your current NET WORTH and reduced your LIABILITIES, the next step toward becoming rich is to ACQUIRE ASSETS.

If you are working a job, I suggest you budget a percentage or a set dollar amount toward acquiring assets. If you do not have enough to get the assets you want, then I suggest you set aside a percentage or a set dollar amount in a savings account toward getting the asset you want. This concept is called “Paying Yourself First”. After your bare necessity bills are paid, you Pay Yourself First. You set aside a percentage or a set dollar amount toward becoming rich.
Spending your money on things that make you money, or saving your money so that you can spend on things that will make you money, is the hardest part of becoming rich. 
If you are self-employed, you may find it more difficult to do this, than someone with a regular paycheck. What you can do is set a time period, for example: three months (A business quarter). During that three months, you track your expenses and your earnings. Then, at the end of that quarter, you pay your bare necessity bills, and set aside a percentage or a set dollar amount toward acquiring assets.

You may have been wondering, what exactly are assets? What are things that can make me money without me doing any work?
Well, I admit that “not doing any work” varies, depending on the asset.
Assets can be classified in three different categories:

  1. Current
  2. Fixed
  3. Other

categories of assets
Current assets are liquid assets and can be used or converted into cash within a short time period, like a year. This includes: currency, deposit accounts, and cash equivalents, such as: money orders, checks, and bank drafts.

dollars

Fixed assets are tangible assets, such as equipment, plants and real estate.

OLYMPUS DIGITAL CAMERA

Intangible assets are sometimes difficult to determine worth. Intangible assets are intellectual property, technology, goodwill, and processes.

Intellectual_property

 

Look out for a blog post really soon that is all about assets!

At this point:

  1. Tracking Spending Habits
  2. Reducing Wasteful Spending
  3. Investing or Saving for Assets
  4. THEN- Protect Your Assets

**BEFORE** spending on assets, especially large purchases like Real Estate, you should consult an expert in that market.
An expert can also tell you in more detail how to Protect Your Assets

If you invent something, You should have a properly registered patent for it.
If you create a business, you should have a legal business identity and a safety net for possible problems that arise.
You should research insurance for your assets.
You should consult with an IRS representative about your tax liabilities, and how your liabilities may change with assets that you acquire.

In whatever you do, it is much safer to have a reserve of LIQUID assets- such as a savings of cash, that you can go to if you have trouble or loose an investment.
Hope this helps!

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