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So You Want To Be Rich

Formula for Wealth

Can a formula for becoming rich be disseminated in less than three pages? No way. But some suggestions for consideration can be offered to find the gateway to the road to wealth accumulation.

First, you need to define your value system in order to ascertain what rich means to you. There are many millionaires who do not consider themselves rich. Instead, they may consider themselves fairly well off. Others just getting by might fantasize about having a net worth of a million dollars.

How does one become rich? You could buy the winning lottery ticket. You could develop a cure for the common cold. Or you could build a perpetual motion machine. These possibilities are not likely or maybe not even possibilities. So, other than inheritance or making a fortune in real estate flipping or starting a hugely successful business, how is it done? We'll do a little money math to consider some courses of action.

The Retirement Factor

A large component of wealth building comes from retirement planning and implementation. When employers match an employee's contribution to a retirement account the deal becomes even sweeter. Usually there is a ceiling on the matching amounts, but be sure to maximize in order to capitalize on the generosity of the employer! The dollars going into the qualified retirement account are tax deferred and the earnings on those dollars are also tax deferred. In other words, you can make money on the deferred tax dollars too. Such a deal.

Here is an example of an employee who earns $30,000 per year and contributes 5% to a retirement investment account forecasted to have an overall average return of 9%. Indeed, this is a feasible rate of return for the long haul.

Contribution to a Company Sponsored Retirement Plan

Year end contribution $1,500
Accumulation potential in 10 years $ 22,790
Accumulation potential in 20 years 76,740
Accumulation potential in 30 years 204,465
Accumulation potential in 40 years 506,835

Consider how much more would accumulate with larger contributions and/or matching employer contributions!

Of course, market conditions fluctuate and outcomes will vary. You should consult with your retirement fund advisor to fully understand the risk and reward relationship with the various options of investing. In any event, this illustrates possibilities for wealth building as a part of your work life.


Consider what matters to you. As mentioned earlier, know your value system. Is time off work more important than overtime compensation? What are your needs for challenge, accomplishment, leisure, recognition, creativity, and acknowledgement? These are but a few of the questions to consider. A job that is congruent with your value system can be a recipe for self-actualization. What a find! Certainly, this is a richness, money included or money aside.

Job Options and Value Considerations

The world of work is an essential part of our lives. What kind of job have you prepared for? Are you searching for a job? Different organizations offer various options for employees. Is salary always the most important aspect of a job? Probably not. When considering two companies; one company that pays 100% of health care costs but pays $3,000 less in salary, and another company that only pays 25% of the health care cost, a comparative analysis is necessary to calculate the best value. If we assume a health care package worth $7,000 per year then the company paying a lower salary is indeed offering more aggregate value.

Let's try some more basic money math. This is nothing more complicated than adding and subtracting. The chart that follows is a comparative analysis of two different organizations with the same job offer but with different compensation packages.

Component Company A Company B Variance
Salary $49,000 $43,000 ($6,000)
Health Care 3,000 7,000 4,000
Cost of Living Increases -0- 1,140 1,140
Retirement Plan 1,470 3,800 2,330
Education Incentives 500 2,000 1,500
Vacation Time 1,885 2,200 315
Personal Time/Sick Time 1,023 940 ( 83)
Day Care 1,000 750 (250)
Total Value $57,878 $60,830 $2,952

Although Company A is offering a higher salary the aggregate compensation is less than Company B's offer. In addition, there are tax advantages with education and retirement contributions among other fringe benefits as offered by Company B. Remember to consider what counts as much as or more than money to you. Three weeks vacation could mean much more than two. That could be a kind of richness.

Other Wealth Building Tips

Live your life below your means. Develop a viable budget and live with it. Understand that there is a difference between being frugal and being a tightwad. Differentiate between needs and wants. Don't pay at the pump. Pay at the store. Avoid credit card use. These devices can easily become instruments of evil. Except for emergency items you don't really need instant gratification. Avoid compulsive buying. Be aware of point-of-purchase attractors. These items are bait and you are the fish. These products are located at or near the check out counter and are very tempting to the spontaneous buyer. Save cash for large purchases. Set up payroll deductions for contributions to your retirement account. You won't use your tax refund for this purpose. Stay focused and keep wealth accumulation a higher priority than a new sports utility vehicle or a 4,000 square foot house for a family of four. Many times less is more.

Wealth building begins with a philosophy. Dare to try non-brand name products. You may be pleasantly surprised that satisfactory substitutes do exist. Remember, the road to riches is not paved with gold. It is uneven and bumpy and it is a continuum. Stay on track- you will arrive. Bon voyage!

Richard Van Ness, Ph.D.
Edie Donohue, Ph.D.
OLB Group


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