Jesse Meijers

In a previous post I was writing about the difference between being rich and being wealthy. As I intended in that post, I will post an update of my own wealth every month. I won’t disclose any details about the values most of the time, but I will tell you what decisions I made and how I think they are going to work out for me. In the end I hope this series will be a valuable resource for beginning entrepreneurs, who want to learn more about which decisions make the most sense.

Updated Formula

The first thing to notice is that I have updated the formula. I updated it because I have been listening to The Snowball: Warren Buffett and the Business of Life. You must understand that I look up to Buffet, he is a very good investor. But I heard someone say ‘Warren Buffet is the most succesful investor of all time’. And that simply isn’t true.

Success comes from being rich as much as it comes from being happy. Now, listening to the audio book, I came to the conclusion that Warren probably made the most of his life, overcoming obstacles that most of us may never overcome. However, he worked all the time, spending time in his study while his wife was eating with the kids. And herein lies the flaw of my formula. It doesn’t take into account the amount of time you work!

So I have fixed this. The less you work, the more your income is worth, since basically your hourly rate is infinite. This is important, because your hourly rate is a bottleneck. If you work zero hours per week and do that for exactly zero weeks per year … whatever money you make is truly residual. This is the best way to earn money; doesn’t everybody want to become rich while doing whatever they want? Therefore the formula is updated with the values w (the number of weeks you work per year) and t (the number of hours you work per week, on average):

W = (3H * 2h * R) / (0,001 + (w/52 * t/100))

The values of the formula are otherwise still the same, with R being calculated from your income minus your expenses:

R = i – e

So now the formula is built up of the following values:

• W means wealth, ranging from zero to infinity
• H means happiness, ranging from zero (very depressed) to 1 (as happy as you’ve ever been)
• h means health, ranging from zero (dead) to 1 (there is nothing wrong with you)
• R means riches, ranging from negative (expenses are higher than income) to infinity (remember R = i – e)
• w means weeks, ranging from zero to 52, the number of weeks you work per year
• t means time, ranging from zero to 100, the number of hours you work per week (on average)

I have simplified the formula by making each year 52 weeks and maximizing the number of hours you can work to 100. If you work more than this, you should seriously consider making drastic changes in your life. Because there is no way you will be able to maintain that lifestyle without having a burnout!

September 2009

This month I have made some investments. Basically I have made a product for a niche that I intend to sell online. I was able to do this because I had some extra money come in. Instead of having my wealth go up by not spending it, I am trying to make the money work for me in the long run, by investing it in something that will hopefully bring in money for a long time. And much more than I have invested in it, of course.

This strategy is one that I will follow diligently; probably for the rest of my life. I would rather spend 100.000,- on a good investment that returns 1.000,- a month, than to spend it on a sportscar. The sportscar will decrease in value (while being fun to ride, I admit). My investment should either stay the same value, or increase in value, while bringing in money each month. This way, the total earnings of the investment are way bigger than what I first spent on it.

Anyway, this is my first attempt at it, so it might fail. Then again, it might make me a lot of money. We’ll see.

Related posts

1. How to accept yourself
2. The 4 Hour Work Week – Tim Ferriss
3. How automatic or ‘residual’ income works
4. Everyone can be wealthy
5. Your house is not an asset… nor is anything else you own