The Simple Wealth Formula

July 25, 2014 by  
Filed under blog

As promised, here is the simple formula for building Great Wealth!

When I was 27 years old I was lucky to meet a guy who knew and had applied this “Simple Wealth Formula” (SWF).  My mentor was Larry Rosenberg of Denver, Colorado.  He practiced SWF which made him a multi-multi-multi-millionaire. The best part is, at least for me, he was so very generous with his time and taught me just how I could do what he had done.  And yes, this SWF still works wonders today, especially with our super low interest rates.

The first thing a person needs to do to begin their own road to a fortune is to save, save, save!  It’s sad that Americans save so much less than they did in even just the 1980s when the average American saved over 11% of their after tax earnings. Now it is down around 2%.  The key to savings is simple–pay yourself first!  Take a certain amount of your earnings right off the top–let’s say just 10%–and put it away every time you get paid and then force yourself to live on what’s left over. You won’t be sorry because what you can do with that money is nothing short of a financial miracle.

That financial miracle can and will happen by using a lever, a financial lever.  Using a lever on the right assets will make millions of dollars for you.  We all know what a lever is and how a person can lift many times their weight by using a lever—it’s a very simple but very powerful tool that multiplies the strength you have, or in terms of the SWF, the power of your investment.  Here’s a simple example of how “financial leverage” works:

Let’s say that you bought a $500,000 asset putting up $100,000 of your own money and borrowing $400,000 from a bank or the seller.  6 months later you sell that asset for $550,000 dollars. (I’ll talk about how that happens in next week’s blog.) If you did that, you would have just turned that 10% increase in the value of that asset into a whopping 50% return to you on your $100,000 dollars. If we are talking about your return on an annualized basis it would be 100%–but more on that later.

I remember when my mentor showed me this on paper. My eyes just about popped out of my head.  I was even more shocked when he showed me the next key to the SWF method–compounding.  Just $1,000 dollars compounded at 100% per year turns into over a MILLION DOLLARS in just 10 years. And yes, that means $10,000 dollars compounded at 100% annually is more than ten million dollars in 10 years!

Amazing, isn’t it? But like you and most people the next big question is how in the world can you find an asset that will move up in value by 50% in 6 months or even in one year?  The answer is where the real work comes into play.  It can be done by just about anyone and you don’t have to be a genius to do it.  I’ve done it over and over and over again over the span of many years.  In the next few weeks I will talk about what the best assets are to buy, how to find them, how to purchase them and how to push their value up by 10% and even more.