Money is always needed. It is needed in the difficult days of the country, and in the good days of the country. It is needed when you are healthy, and when you lose your health. It is needed when you are young, and when you are old. But very few people know how to create wealth. In today's article, I will present you the formula for this. How is wealth created? I do not actually present this formula, by the way, chat gpt does. Then it also presents you with a table about it. I will add something more to this and when you finish the article, you will see how much wealth you will have 20 years from now, how much that wealth is worth today, or if you are more in a hurry, how much wealth you will have in 10 years, how much that money is worth today, or how much wealth you will have in 5 years, how much that money is worth today, and what you need to do to reach that wealth. I wish someone had taught me this at the time.

You can do all the things I did using chat gpt. My first command is; What is the formula for creating wealth, think about both its mathematical and behavioral elements. Answer; The formula for creating wealth is like both a mathematical and behavioral equation. It is not enough to just save money, how you think, how you act, how sustainable a system you establish is also decisive. Let's examine this under two main headings. Now, first, let's look at the mathematical side of the matter, it is quite simple. Wealth equals income minus expense, that is, how much money you earn, how much expense is deducted from this. You direct the remaining money, your savings, to investment. What is your average return on this investment and how long will you continue to do this. In other words, the parts of the formula are income minus expense equals return on savings investment. ROI: return on investment, the return on your money, this could be the rental income, this could be the return on Eurobond, if you have invested in crypto or stocks, it could be their return, what percentage does it bring per year.

You also need time. In other words, the compound effect needs to come into play. For this, you need to not eat the extra income that comes. You need to keep adding to it so that your wealth grows like a snow ball over time. In short, wealth equals savings times (1 + return on investment) over time. Then chat gpt focused on behavioral elements. He created a mental and habit-based formula for us, the ability to delay gratification is very important. Instead of spending that money now and enjoying it, he says investing in the future is the basis of wealth. Don't spend money today, let it accumulate and turn into something bigger in the future. Consistent habits constantly create small but correct financial behaviors that make a big difference in the long run, just like brushing your teeth, he says. It seems unimportant but when done regularly, its effect grows. Financial literacy is very important. What does investment mean, what does return mean, what does debt mean, what does tax planning mean. All of these will change your wealth.

Mental discipline and emotional resilience, for example, not panicking when the stock markets crash. In the American stock markets, the S&P 500 has fallen by 2.5% since the beginning of the year, if you look at it, people feel like they are dead. Not falling into the trap of getting rich quick. We all do it sometimes, we get into crypto and get rich. I tried it with Trump the other day, it doesn't take you anywhere. It probably eats away at your wealth and the will to increase your income. This is also very important, finding ways to constantly earn more money. This does not work by just cutting spending. In other words, saving is important here, keeping expenses low is useful, but increasing income is more important. Because you have a limit in saving expenses, increasing income can be an endless game. This formula also focused on this, I liked it very much. I can say that Chat gpt is on the same page as me.

Finally, he says that the equation for creating the simplest wealth is this; Wealth equals increase your earnings, increase your income, control your expenses, save and make the right investments. The formula for wealth formation is also complicated, it has turned it into a mathematical formula that people who do not like mathematics will be afraid of. But let's not get into that for now, then Chat gpt made an example calculation. Let's assume that there is no initial capital. You start with zero, if you can save a fixed amount every year. For example, 10,000 dollars, now this number is bigger or smaller, let's not get into that discussion. This is the formula, we can play around with it, you can start with $1000, $2000, $100. You have to start somewhere. But if you can only save $100 a year, you have other problems. We will have to solve them in the future.

Let's say you set the period as 20 years here, you are 35 years old and aim for 55 years old or you are 20 years old and aim for 40 years old. Now, at 40, what should I do with money, at 55, what should I do, please don't think, money is needed at those ages. In fact, it is needed even more. On the one hand, your responsibilities increase. On the other hand, your health risks increase. On the other hand, since your manners have increased, you want to eat, drink and travel better. Money is always needed. I think 20 years would not be a bad period for a young friend. Annual savings are 10,000 dollars, you may find this exaggerated, we will play with this figure a little later. Annual investment return is 8%. In other words, I know that 8% return on dollar base is not easy. The discount rate is also 5%. This is quite logical, what does discount rate mean, let's say you have 1 million dollars in 20 years, but that money is also affected by inflation. That money needs to be brought forward to today in the calculations. There is a discount rate used there. Chat gpt also suggests 5%, I think this is a very reasonable suggestion. If you ask why it is reasonable, considering America's inflation, interest rates etc., such a 5% discount rate is not bad these days. 8% as an annual investment return is not too exaggerated by the way, you can think of it as the annual average return of the S&P 500.

In this case, you actually get a net return of around 3% on your money, think about it that way. Because you need to deduct the discount so that we can take inflation out of the calculation. Then he gives us an example scenario. He says you save $10,000 per year for 20 years. You have no initial capital, you evaluate your money with an annual return of 8%, you are a good investor. You also use a discount rate of 5% for the time value of money, this complex formula works and you reach $406,000 with its current value. I leave it completely to you whether $406,000 is good money or bad money with its current value. It depends on your habits and goals in life, but there are very few people who have $406,000 today. That's why it didn't seem so bad to me.

Of course, you can change a lot of things on this. For example, you can increase your savings. Because over the years you can advance in your career, grow your business. You can find new ways to save. Of course, it is possible to make the return variable. In other words, we can come here with 8%, but there may be better numbers. Also, the discount rate may be below or above 5%. These always need to be played with, they need to be formulated. Then he said to me, should I put these in an excel file for you, should I turn them into a formula? I said, please first add a starting wealth to the formula. Because some people may have a starting money. He added that too and we came to the updated new formula. The current value of the starting wealth is the current value of annual savings. Let's say we have a starting capital of $100,000. We keep it there for 20 years and it also continuously earns a return and if the return rate is higher than the discount rate, the money grows over time. We discount it to the present and bring it back. We also regularly invested our income and bring back the total money earned from them.

If your starting wealth is 50,000 dollars, if you save 10,000 annually, if the return on investment is 8%, if the discount is 5%, if the period is 20 years, a miracle works, you will have 494,225 dollars in today's money in 20 years. Of course, its value in 20 years will be much higher. But we are pulling it to the present. Then I say, can you also convert this into a web calculator for me and the miracle of chat gpt works, it codes it in the background. Of course, I can't do anything, I don't know how to code. The only thing I can do is, after finishing that coding, there is a section called preview, I click on it and the preview screen appears. Now I can play with it here. Let's say you're in the early stages of your life, you only have $5,000, your grandparents gave it to you or your family gave it to you and with your current salary, you can only earn $5,000 a year. But you've learned a little bit about investing and you're bringing in around 8%, the average of the S&P 500 is 8%. So it's not a terrible rate. Let's keep the discount rate around 5%. If we think of it as 20 years, when we calculate it, you can reach $141,199 with today's value.

So far so good but we will not earn the same amount of money for the rest of our lives, maybe it is possible to increase the amount we earn over the years. That is why I say add the annual increase in the savings amount to the formula and add it to the web calculator. Now the calculator is exactly where I want it to be. Let's say I have a starting wealth of $10,000, I can save another $10,000 per year. But I will increase it in the coming years. I don't think I can increase it very fast. It only increases by 3%. I know how to earn 8% per year, which is the average return of the S&P 500, I have become such a good investor. I still kept the discount rate at 5%, and the number of years is 20. It has become exactly what I wanted. I want to dwell on what is important and how important it is.

When we calculate according to the formula, our total wealth will be $363,685 with its current value. If we continue saving for 20 years. I will make the savings increase rate 5% instead of 3%. $363,000 turned into $435,000. I am even more hardworking, I know how to generate side income, I add so much value to my company that my bosses add 10% to it so as not to lose me. I have started some initiatives, I give private lessons. I do whatever it takes to increase my annual return in dollars by 10%. Then instead of $435,000, we come to $713,000. In other words, increasing savings is really important. If you can increase savings, this is only possible with an increase in your income. Of course, there is some room in expenses, but we are limited there, after all, we cannot go on forever. In this case, you can really reach serious wealth.

Let's go back to 3%, let's recalculate it so that you understand how important it is, remember it was $363,000. Let's think that we have improved our investment skills, we are bringing an annual average of 10% instead of 8%, it is not easy at all. We are beating the S&P 500 here. Many funds in America cannot beat the S&P 500. Then instead of $363,000 we come to $439,000. Let's say you became an even better investor, let's increase it to 20%. Then it comes to $1,260,000. So knowing about investing is also very important. Okay, let's go back to 8% and this time let's play with the number of years we will save. Instead of 20 years, let's reduce it to 10 years and see what happens. We went down to $142,000, remember we were $363,000 at first. So how long we save is also important. Because it has a cumulative effect.

You can also create the same screen by giving the orders I gave to chat gpt. Then you can do your calculations. If you wish, it can also be exported to Excel. You can also play with these in Excel. But no matter how much you play with these, the important thing is basically this; I wonder how much money I put aside per year. Wealth does not occur unless you grow it. How much can I grow it over time and how well I know investing. How patient am I on top of these three. If you are patient for years, great. Everything changes in 20 years, and even more in 30 years. So this is the formula, but whether we will show this willpower or not is up to you and believe me, the importance of the initial wealth is quite low. If you completely reset the initial wealth of 363,000 dollars, it becomes 346,000 dollars. It does not really have much effect if you look at it. Of course, it would be good, it would be great if you start with a lot of money. But the total effect is small, the main effect is how much we save. How much can we increase it every year and how much investment return can we get on it.

And patience, if you are patient, things get even better. Therefore, I think having wealth is actually a behavioral issue. If our behaviors are right, creating wealth is not that difficult. Please forget this; Money is always important, it will become even more important as we get older. It is a very enjoyable thing to spread the pleasure of life over many years. You don't have to live everything when you are young, plus there are many ways to be happier by spending less money when you are young. When you get older, you need a little more money. I hope it was useful.