You have heard this many times…right? The rich get richer..why do you think this happens?

Well it is because whenever we buy something we pay a price, right? Well let us say you go to a hotel where a ‘masala dosa’ is sold to you for Rs. 75. Immediately your mind goes to the costing and you tell your partner…’Just see this..the material costs are Rs. 3 and he is selling it for Rs. 75…’

NOT TRUE.

Sales price of Rs. 75 includes material costs, interest costs, salary costs, rent (another form of interest), managerial costs, taxes, bribes, and MARGINS.

Now this is true for all the things that you buy. So if you earn Rs. 10 lakhs a year (post tax) and your annual expenses are Rs. 4 lakhs, you are adding Rs. 6 lakhs to your kitty. YOU ARE GETTING WEALTHY…by Rs. 6 lakhs ONLY IF YOU WORK.

Now a rich man who is earning Rs. 6 lakhs as dividend / interest / rent and is spending say Rs. 4 lakhs and he is earning Rs. 6 lakhs from his efforts, HE is getting rich by Rs. 2 lakhs a year EVEN IF HE STOPS WORKING and he is getting rich by Rs. 8 lakhs if he continues to work.

Thus if your UNEARNED income is greater than ALL YOUR EXPENSES…you are EARNING more interest than what you are paying. If you manage your assets well, and EARN well to add to your kitty you get wealthier faster…

These numbers are of course very small…to get seriously rich you need to have some nice big amounts with a lot of zeroes in your bank account. However the principle is the same

“if your UNEARNED income is greater than your total expenses you are getting richer…if the income is from various sources and you are still adding to it, YOU are WEALTHY’ – not too many know the distinction…

 

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  1. Subra,
    “nice big amounts with a lot of zeroes in your bank account” will this help of the amount should be out of bank account somewhere else earning interest 🙂

    Otherwise the customer will be privilege customer 🙂 🙂

  2. Adding zeros to the a/c in rupees is the most easiest these days with its depreciation.

    Thank God as i was willing to take a big risk and buying a “land” three years back which is quoting 3 times now 🙂
    Thanks to Subrasir and the all the believers in stocks to teach about SIP and choosing & managing funds… my a/c is still in green from the investments in last 5 years which thankfully is almost 50% of my retirement req & hope the market will reward… one day 🙂

  3. the anti -rich brigade like to use the rich get richer argument.but they miss the point that the people who are rich today werent so 20 years back. the tendulkars or the IPL millionaires of today and the software moguls were so one generation back.the mafatlals of the 80s arent so rich anymore.
    the ‘constituents’ of the rich keep changing.i am richer than i was 15 years back,so if i hate the rich,it means,15 years earlier i should have hated my 15 year into the future version.

    all poverty studies face this fatal flaw. rare is the study of people/set of people across time. ie checking to see if a 15 yr old poor person is still poor 40 years later.

  4. I must say…. you have given new and beautiful dimension to the reality we all know….

    Well i agree to what you have said, passive income should be more that your monthly expense. It is not so easy task. Trust me, the only thing that would give you regular income is your 9 to 5 job.

    For generating any additional income, you need to work with double effort. It takes time and effort to build passive income.

    Some time i ask myself. How can i earn additional 5k per month. Honestly you wont get an easy answer. I may be sounding like a pessimist but honestly i am not.

  5. Subra

    What is a realistic approach a salaried person can choose make his passive income more than his expenses? Will Stock Dividends do? how long will it take me to get that kind of dividend if i am to start at 25

  6. have any of you EVER found easy answers on this site? No. So prabee please do your research. You will need to work to find an answer to this question.

  7. Subra: THis post, marks for reading 100 times and internalize for ever..

    @Prabee: counting on dividend income as a mainstay will work when one has invested in multibaggers and high div yield players like coromandel/ Colgate etc. So their is a need to get ready for investing in a beaten market…

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