The Secret to Amassing Great Riches – Personal Budgeting (Part 1)

There’s a big misconception about how to amass great wealth. Many people think that the ‘Rich’ have some sort of secret or magic formula. Not true!

While it is probably true that some people have a better head start, a more privileged background, and a more robust education than others, each and every one of us can amass wealth. At least on a relative basis. And that’s the key!

Throughout my career, I have advised family offices and ultra-high net worth (UHNW) individuals and families. A Family Office is a business office or entity that’s organized to manage the family’s wealth, investments and lifestyle expenses. I have worked with families who had a net worth of over $100 million but had no money. Amazingly enough, they had no liquid assets. But, you can beat this rap.

Regardless of whether you have a super-high income or a relatively low income, you can still create liquidity and amass wealth. Maybe we won’t own three or four homes or drive a Maserati or a Tesla. But we can live better, larger than we are today!

The first step to amassing great riches is getting a handle on your income and expenses. For most of us, our income is fixed or within some range. Perhaps we get paid a fixed salary, hourly or by the project, especially in the ‘Gig Economy.’

The secret is to align your expenses with your income.

You must either structure your expenses so they are less than or equal to your after-tax income. You can work to increase your income so you cover your expenses. Or both.

When you create positive cash flow – your after-tax income exceeds your expenses – you generate case. Free cash flow.

This strategy gives you the power to pay off debt, especially high-cost credit card debt; have funds for investment, for example to open a mutual fund account; save money for a new car or a down payment on a house; or save for college or retirement.

To get started, take a realistic look at your income – how you earn your money; and your expenses – how you spend your money.

For more information about how to make a personal budget, click here.