How To Become Rich

1. Calculate your own personal balance sheet

The first step is to come up with your own personalized balance sheet. A balance sheet is essentially a combination of all your assets and liabilities. To simplify things, assets are anything that puts money into your wallet while liabilities are anything that takes money out of your wallet. Below is an example of a simplified balance sheet:

Assets                                                                Liabilities

-Dividend Stocks                                             -Student debt

-Growth Stocks                                                -Housing Loan

-Rent                                                                -Monthly expenses 

-Job income

After coming up with your own balance sheet, you need to determine your own cash flow. To simplify things, cash flow = Assets – Liabilities. We are trying to achieve a positive cash flow to invest in more assets to get even higher cash flow. After calculating your balance sheet and cash flow, you can move on to the next step.

 

2. Minimise liabilities and accumulate assets

The second step is to find ways to minimise your liabilities and accumulate assets. For example, you could decrease your monthly expenses by eating at home more often, forgo that additional weekly Starbucks coffee or fanciful dinner. You can also look for ways to refinance your debt to pay it off faster or minimise the debt interest. Next, you can research and look for assets to accumulate. For example, it could be as simple as buying blue-chip dividend stocks or ETFs. There are many ways to minimise your liabilities and accumulate assets. You just have to be motivated and disciplined to achieve it.

3. Come up with a financial plan and stick to it

The last step is to come up with your own financial plan and be disciplined to adhere to it. For example, it can be as simple as investing 20% of your income every month to accumulate assets and 80% to pay off your liabilities. What matters is you have a financial plan and you stick to it religiously. If you fail to plan, you plan to fail. Many people don’t become rich simply because they fail to have the discipline to stick to their own financial plan.

TLDR: The simplest and proven way to get rich is to accumulate assets and minimise your liabilities throughout your life