In the book The Next Millionaires by Paul Pilzer, the idea is put forth that our financial success is not only based on what resources we have available to us but also what tools we use.
The Next Millionaires is a great book on the new economics that will shape our current and future generations and it challenges many old economic principles. One of the great gems found inside is an equation that Paul discovered.
W = P * T
Wealth = Personal Resources * Technology
This theory suggests that our wealth (as a society) is determined not only by the resources we have, but those resources multiplied by the technology that we have. This is a very interesting way of looking at things. The example is given of the oil/gas crisis of the 1970s in America. There was a projected shortage of gas and so, it was even rationed at the time. Then, average gas mileage was about 9 miles/gallon from a $300 mechanical carburetor. Newer technology in the next decade brought the computerized electronic fuel injector for $25 and yielding mileage of 22 miles/gallon. The amount of gas (the resource) remained about the same (actually it went down slightly as usage continued) but the technology effectively doubled the supply.
Thus, the overall wealth was increased by tecnology. Considering the resource on its own is not an effective way to measure its use. Technology truly does have a great impact.
Similarly, with personal finances, we typically have a relatively fixed set of resources. In most cases, it is not easy or possible to simply increase our income, assets, etc. However, the technology we use to manage these resources can make a huge difference. Those who use tools to manage their money typically understand their income flow and spending habits better and can make better and more informed decisions about saving and spending, resulting in an increase in wealth.
There are many different types and forms of tools to help, from old-school paper and pencil, electronic spreadsheets, to sophisticated computer programs and online tools that can track every penny and tell you exactly where you are and where you will be if you maintain similar behavior.
Whatever tool you choose is better than nothing. But keep in mind the formula – the better your technology, the more wealth you’ll have as you manage your resources more effectively!