Money & The Law Of Conservation

The law of conservation states that it is not how much money you make which is important to your financial future, but rather how much money you keep.

There are many people for example who will make a lot of money over the course of their working life, but because they do not manage their money well and spend it needlessly, they retire broke and poor.

On the other hand there are people who do not make much money, yet because they use their money wisely, they are able to retire extremely wealthy and spend the rest of their days in comfort.

Therefore when it comes to financial success what really determines how well you are doing is not how much you make, but rather how much of your money you save.

The Difference Between The Rich & Poor

Financially successful people are experts at cutting costs and saving their money away for the future. This ensures that should the economy take a turn for the worse, or they lose their job, they will always have something to fall back on.

People who are not financially successful tend to do the exact opposite. They are experts at spending their money, and ensuring they have nothing left for the future.

Then when the economy goes bad, or they lose their job, they find they have nothing to fall back on except the streets.

What Is Your Net Worth?

Your net worth determines how much money you currently have, how much you are worth.

This can be calculated simply by adding together the value of all the items that you own today. These are known as your assets, the value of which is determined by the money you would be able to get if you sold them right now.

Once you have calculated the value of your assets, it is time to calculate your liabilities, or all the things which are currently losing you money. This includes things such as credit card debts, car loans and mortgages.

After you have done this, divide the number of years you have been working into your net worth. This will show you exactly how much you have earned each year after your cost of living has been subtracted.

If you are happy with this number then good for you, but if not, then it is your responsibility to do something about it if you wish to become financially successful.

The only way you can do this however, is to increase your net worth by managing your money so that your expenses never exceed your income.