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Building wealth

Posted: Wed Sep 10, 2008 10:48 pm
by josh
I am going to teach you how to be wealthy in a few sentences.

Generally speaking, "wealth" is the value of everything you own, minus any debts. For purposes of studying wealth, economists define wealth in terms of marketable assets. Under this definition your car, your house, etc.. are liabilities. Only something you can take to market, that makes you money *while you are sleeping* is wealth.

The only difference between someone who is broke and some one who is wealthy is the broke person chooses to purchase liabilities. That's right, you can spend all your money and be broke like Donald Trump and still be very wealthy. Wealth is like a ratio, if you stopped working now each month what would your self worth do, go up, stay the same or go down.

Usually trying to make more money at your job, is the hugest mistake in my opinion, because you are converting your best asset. Your time. Into liabilities like eating out, gas for commute, etc..

Choose to start purchasing assets choose to become wealthy.


http://www.templetons.com/brad/billg.html :wink:

Re: Building wealth

Posted: Fri Sep 12, 2008 3:51 pm
by allspiritseve
I'm going to teach you how to be happy in a sentence:

Don't get too obsessed with becoming wealthy.

Re: Building wealth

Posted: Sat Sep 13, 2008 1:52 am
by matthijs
allspiritseve wrote:I'm going to teach you how to be happy in a sentence:

Don't get too obsessed with becoming wealthy.
:D

Not only funny, also so very true

Re: Building wealth

Posted: Sat Sep 13, 2008 3:17 am
by onion2k
allspiritseve wrote:I'm going to teach you how to be happy in a sentence:

Don't get too obsessed with becoming wealthy.
Big high-five! o/\o

Re: Building wealth

Posted: Sat Sep 13, 2008 3:33 am
by josh
You might be confusing wealth with being rich, money doesn't buy happiness, but I've been both financially burdened and financially free. I guess after you jump out the hot tub and into the pool and back a few times, you get a little obsessed with the hot tub ;-)

It's not the money, its the process that brings me joy, bringing an idea from concept to reality. The only kind of happiness money buys, is being on the other side of the table when some bright kid comes along with a brilliant idea.

Money may not make you happy...

But spending your life making other people money doesn't make you happy either ( from my experience ). It took something I love, PHP and made me view it as work. I stopped caring about furthering my skills and got caught up in the rat race of a 9-5, working all day so i can go home and pay bills.

Re: Building wealth

Posted: Sun Nov 02, 2008 11:13 pm
by allspiritseve
jshpro2 wrote:Choose to start purchasing assets to become wealthy.
Care to share some concrete ideas, aside from investing in the stock market and ad revenue? What "assets" can we as web developers obtain?

Re: Building wealth

Posted: Mon Nov 03, 2008 7:24 am
by josh
Sure, technically stocks are assets but they are much more volatile. Since an asset is only something that generates you money while you sleep, you need something automatic ( a website perhaps? ). I like to think about wealth like a ratio, most people have a ratio of 0, that is if they stopped working now each month they would take in $0. If your living costs were lets say $2,000 a month ( rent, food, all basic expenses ), and you had stocks giving you dividends in the amount of $2,000 a month, you would have a wealth ratio of 1. If you had a passive ( its important that its passive or its not wealth ) income of $4,000, you'd divide that by your monthly expenses of $2,000 to get a total wealth ratio of 2.0, that is if you stopped working each month you would make a profit of 100% of your actual expenses, just being alive for you is profitable. A high enough wealth index and you get the Bill Gates phenomenon, ( where it would cost him more to pickup a $100 bill then he would make at the office if he didn't stop to pick it up ). You naturally start finding ways to become more wealthy since the more wealthy you become, the more time the "invisible hand of the market" will allocate to you in the form of wealth. You can almost think of wealth like a psuedo karma, if you want to become wealthy you need to provide something to the market that helps people on a sustainable ( automatic basis ).

For instance a consultant might make a lot more money then someone who sells a product, but a consultant is not wealthy ( technically speaking, of course you can be a consultant and be wealthy ). Basically he helps people linearly, for each hour he contributes, he gets rewarded linearly. A wealthy person is someone who has set up an automatic system to replace the consultant or trade persons job in a pragmatic way. Such as the consultant who decides to launch a website with video screen casts so he no longer has to appear at his seminars in person, he can sit at home and drink beer and continue to make just as much if not more money if he/she choose.

The best way to start is google adsense, or those kinds of sites. Bandwidth can be found quite cheap if you shop around and video websites in my experience do quite well. You could also look in to SaaS theory ( software as a service ).

To answer your original question, in a web design context other then ad revenue, how about E-business ( E-commerce as in online retailing as well as services ). I could sit here and lists thousands of subscription based sites but I'm sure you can think of some.

The best IT asset is always going to be data though. If you have proprietary data noone else has, and you apply an algorithm to apply that data in new ways to help society, society will reward with you more resources ( $$$) to shop for new solutions.. Its the invisible hand of the market or free enterprise at work. This is evident with Amazon ( related products meta data that only they have, and they have applied some quite revolutionary ideas ), netflix, ebay, google, yahoo, etc.. Every successfully entity in business shares this common denominator of wealth

Re: Building wealth

Posted: Mon Nov 03, 2008 9:28 am
by onion2k
If you count interest on savings I think my ratio is probably about 0.3. That sucks.

Re: Building wealth

Posted: Mon Nov 03, 2008 10:51 am
by allspiritseve
onion2k wrote:If you count interest on savings I think my ratio is probably about 0.3. That sucks.
You get 30% APY? 8O What bank are you using???

I get 2.75% at ING Direct...

Re: Building wealth

Posted: Mon Nov 03, 2008 12:46 pm
by josh
interest on savings is profit, not debt. APY applies to financing, i think you misread that. .3 is actually pretty good, im probably less then that.

Web hosting is another great way to start building passive income. You can basically think of wealth as some sort of mystical power ( its obviously not ). If you selflessly allocate your own resources to help people with their needs, you gain power or wealth. Technically someone could consider an abundance of currency itself as wealth, while a wise investor would see past the illusion the $ creates and see the true value is that people have a need for the paper, therefore it gives the holder of the paper power. Basic concepts of supply and demand yes? But like the pattern languages in programming, making a pragmatic system for thinking about the subject and defining new vocabulary for financial concepts can help you understand it at deeper levels

Re: Building wealth

Posted: Mon Nov 03, 2008 1:02 pm
by allspiritseve
jshpro2 wrote:interest on savings is profit, not debt. APY applies to financing, i think you misread that. .3 is actually pretty good, im probably less then that.
APY = Annual Percentage Yield. I believe you're thinking about APR, or Annual Percentage Rate, which is the interest someone pays on a loan.

Oh, and the average for an online savings account is probably 3.00% (compounded monthly), or .03 by your standards (I think?). They say you should count on an average of 7-10% APY (compounded daily) if you invest in mutual funds. So .3 is pretty damn good.

Re: Building wealth

Posted: Mon Nov 03, 2008 1:05 pm
by onion2k
allspiritseve wrote:
onion2k wrote:If you count interest on savings I think my ratio is probably about 0.3. That sucks.
You get 30% APY? 8O What bank are you using???

I get 2.75% at ING Direct...
I get about 5% on average. I thought the point of the ratio was that it's how much of your costs the residual income covers ... 1 means your passive earning covers it all. I think the earnings on my savings covers about 1/3 of what I spend each month. But I have got the equivalent of 2 years net income in the bank... That's what comes from having no social life for years on end I guess.

Re: Building wealth

Posted: Mon Nov 03, 2008 1:08 pm
by allspiritseve
onion2k wrote:I get about 5% on average. I thought the point of the ratio was that it's how much of your costs the residual income covers ... 1 means your passive earning covers it all. I think the earnings on my savings covers about 1/3 of what I spend each month. But I have got the equivalent of 2 years net income in the bank... That's what comes from having no social life for years on end I guess.
Ah, that makes sense. You must have a couple of CDs then? I don't think any bank has that high of interest on a savings account. Some checking accounts do, if you use their debit card and direct deposit.

Re: Building wealth

Posted: Mon Nov 03, 2008 1:12 pm
by onion2k
allspiritseve wrote:Ah, that makes sense. You must have a couple of CDs then? I don't think any bank has that high of interest on a savings account. Some checking accounts do, if you use their debit card and direct deposit.
I get the impression we live in different countries. I'm in the UK. 5% is a pretty standard interest rate on a savings account, and 4.5% is normal for an ISA (a tax exempt savings account that you don't pay any income tax on the interest from). I have both.

Re: Building wealth

Posted: Mon Nov 03, 2008 1:27 pm
by allspiritseve
Ah... I'm in the US. That is impressive though... I'm sorta jealous :D