CHASHA FARMING
JF-Expert Member
- Jun 4, 2011
- 7,872
- 9,263
The e = (a - s) t wealth equation was developed in 1988 by the founder of East Group Australia, Bill Wieland, after many years of both formal and informal study and research on wealth creation.
Equity (which is your wealth) equals Appreciating Assets less Sensible Debt as a function of Timing (which is planning). The elements of the equation are as follows:
Equity is your net worth. It is what you are left with after you take your liabilities away from your assets. The higher the value that your assets are over your liabilities then the greater your net worth or wealth.
There are two types of assets; depreciating assets (assets that decline in value over time) and Appreciating Assets (assets that increase in value over time). Examples of appreciating assets may be a house, land, a profitable business or quality shares. Examples of depreciating assets may be modern furniture, a business that makes a loss or a motor vehicle. You need more appreciating assets than depreciating assets so that your net wealth continues to grow over time.
Sensible Debt is another essential element. There are many types of debt, but these can be classified into either good or bad debt. Consumer debt (debt incurred for private items that will be used up in the short term, i.e. food, alcohol or holidays) is an example of bad debt.
Debt incurred on items that increase in value or generate extra income (i.e. real estate or plant and equipment for your business) are examples of good or sensible debt.
Timing may be considered the most important element.There is a saying that "timing is everything" and timing is a matter of planning. Those who plan are better able to take advantage of business and investment opportunities as they arise. Planning makes you proactive rather than reactive (you make things happen rather than have things happen to you).
Equity (which is your wealth) equals Appreciating Assets less Sensible Debt as a function of Timing (which is planning). The elements of the equation are as follows:
Equity is your net worth. It is what you are left with after you take your liabilities away from your assets. The higher the value that your assets are over your liabilities then the greater your net worth or wealth.
There are two types of assets; depreciating assets (assets that decline in value over time) and Appreciating Assets (assets that increase in value over time). Examples of appreciating assets may be a house, land, a profitable business or quality shares. Examples of depreciating assets may be modern furniture, a business that makes a loss or a motor vehicle. You need more appreciating assets than depreciating assets so that your net wealth continues to grow over time.
Sensible Debt is another essential element. There are many types of debt, but these can be classified into either good or bad debt. Consumer debt (debt incurred for private items that will be used up in the short term, i.e. food, alcohol or holidays) is an example of bad debt.
Debt incurred on items that increase in value or generate extra income (i.e. real estate or plant and equipment for your business) are examples of good or sensible debt.
Timing may be considered the most important element.There is a saying that "timing is everything" and timing is a matter of planning. Those who plan are better able to take advantage of business and investment opportunities as they arise. Planning makes you proactive rather than reactive (you make things happen rather than have things happen to you).
