Tuesday, February 28, 2012

How to Build Your Wealth - Let Your Government Help You

Income tax time is soon approaching in North America.

Many individuals will be investing in their government tax deferred savings plans. They do this mainly to get the tax deduction on last years' tax return.

The focus of advertising for these plans is geared mainly at the tax savings and to provide a retirement income for your future. The problem is, none of the advertising tells you the real truth about these programs. These tax deferral programs are just that. They defer your tax to a later date when you withdraw funds. They are not tax shelters as many individuals are led to believe.

Let Your Government Accelerate Your Wealth

There is, however, one way you can make these plans work in your favor.

Calculate the amount of tax you will save by investing in the plan. Now, take this amount (which is paid to you by your government) and invest this as well.You can invest this within the plan itself or outside the plan as you wish. The choice is yours.

By doing this, your government will actually be helping you to grow your wealth at a faster rate.

When it comes time to withdraw an amount from the plan, you will have already made money on the tax portion that you already received. In essence, you will be making money on your future tax payable.

Wacky or What

A wacky concept perhaps, but one that should be considered if you are planning to contribute this year to your governments' tax deferral plan.If you don't use this concept, then you are truly just deferring your tax to a later date. The only other benefit of course would be the increased profits for your bank or financial institution.
As we all know they do need the extra income, don't they.

As you can probably tell, I am not a big fan of banks and financial institutions. They are always in business for themselves first, remember that.

Use Your Future Tax Dollars

Use the above concept and you will be investing your future tax dollars. It is new found money anyway, so what is the real cost ? That's right it's ZERO. What will your return on that investment really be ? That's right it's INFINITE. You do the math.

Let me guess. If you don't do the above with your tax refund, what will you do with it ? I know, you'll spend it of course. Opportunity lost.

As always, I welcome your comments and suggestions for future topics.

Friday, February 24, 2012

What is Real Wealth - Your Road to Financial Freedom

Wealth is a funny word. The word means something different for everyone. No two individuals will give you the same answer when asked for their definition of wealth.

In reality, wealth is a destination. It is usually defined as something you don't yet have but really want to have. Perhaps a new car, boat, yacht, etc. Maybe it means to be able to travel here, there and everywhere. Everyone wants something different.

What is Your Definition of Wealth

To define what your definition of wealth is, you must first ask yourself what it is that you really really want that you do not have today.

For some people it may mean to be debt free for the first time in their lives. For others, it may mean having x number of dollars in a bank account or in investments. For others it may mean to have a certain level of income in order to buy whatever they want.

The point here is that your definition of wealth will be unique. Even people that we may consider already wealthy may not feel wealthy themselves.It depends on your starting point on the road to financial freedom.
Everyone will be entering this road at a different point and their destinations will all be different. Some will want to go further than others.

How do you Know When you are Wealthy 

The easiest way to tell if you are wealthy is to look back at where you started from. If you have more money than you used to or if your income is higher than it used to be, then you are already wealthy to someone starting where you did. You may, however, not feel wealthy in your own eyes. That will depend on what your vision of your final destination is.

Travel the Road to Wealth

To achieve the things you want in life, the easiest way is to set incremental goals for yourself. In this way, you can focus on one goal at a time and achieve one goal (or step) at a time. You will then be able to determine where on your road to wealth you really are at any given point in time.

By dividing your journey into goals (or steps) you will also find it less discouraging and easier to focus. Many people give up their journey to building wealth because they focus too much on their final destination and not their incremental goals. They become discouraged because the distance is too far.

By taking it one step at a time, you will eventually reach your final destination. Focus on each step. Enjoy each step. Look back once in a while to see how far you have come.

Wealth is truly a funny word. However, once you start feeling it, living it, there is truly no better feeling. The feeling of achieving your goals (or steps).

As always, I welcome your comments and suggestions for future topics.

Tuesday, February 21, 2012

How To Get Rich - Spread Your Wealth

Spread your Wealth. Don't put all your eggs in one basket. Diversify. Spread your risk.

Whatever you call it, don't invest too heavily in any one investment !

Just as you should develop many sources of income, you should also develop many forms of investments to provide that income.( and gains down the road of course ).

Why Spread the Wealth

By not investing too heavily in any one investment, you will be protecting your future wealth building efforts from a potentially devastating loss.

If something bad were to happen to your one big investment, it could take you years to recover, if ever. Bad things do sometimes happen to good investments and by the time you find out it can be too late. Markets react extremely fast, especially to bad news.

Develop a Plan 

To avoid investing too heavily into one investment, or even one sector of the economy, it is important to develop your own plan. This plan must be tailored to your own personal comfort level.

Everyone's plan will be different, because everyone has a different definition of risk. However, there is one
guideline I would recommend you use when developing your plan. You should decide how much of your money you could afford to lose if you make a mistake. You then tell yourself not to invest more than that amount in any one investment.Simple, but effective.

Another example is if you are developing an income portfolio, decide how much income you want to receive from one investment. You then invest whatever you need to make that income and no more. You then look for your next investment opportunity, and so on.

By having a plan and sticking to it, you will never be tempted to let your emotions take control. It is easy to get excited about a seemingly great opportunity. That's ok, but limit your investment to your previously  planned amount and no more.

Work Your Plan

As your wealth grows, so will your plan. For instance, as your wealth grows, you may feel you can afford to lose more of your money and still survive. This will effectively allocate more money to each investment, but it should always be allocated equally, therefore still spreading the wealth.

By constantly reviewing your plan, you should be able to avoid a devastating loss should something go wrong with one of your investments. You could simply absorb the loss and carry on with the next opportunity.

The Future is Unknown 

No one can predict the future. If they could, they would already own the world.

You can, however, protect your future by spreading your wealth into many investments. Choose good investments and follow your plan.

By spreading your wealth, you will be able to withstand any situation that will be thrown at you in the future.
Develop your plan and stick to your plan. Simple, but extremely effective.

As always, I welcome your comments and suggestions for future topics.

Friday, February 17, 2012

How to Get Rich - Don't Work for Your Government

Most of us have started our working lives by working for an employer. It is the easiest and most common way to start earning an income to pay for our everyday needs.

Unfortunately, our governments also realize that most individuals earn their income in this way. As a result, they have targeted their tax collection efforts squarely at the employed worker. Average workers can pay up to half of their income in taxes, therefore, almost half of the year they are in essence working for their government.

Your job as a current employee and future investor should be  to do whatever you can to reduce the effect your government's tax collection efforts has on your bottom line. Everything that is legal of course.

What Can Be Done

Don't get me wrong, I believe everyone should pay their fair share of taxes to support the societies we live in.
The problem is though, there is nothing fair about most government tax structures today. They tax the masses and the wealthy get off paying much less.

What can you do to turn the tables on your government ? Quite simple -  Become wealthy yourself !

Start earning more of your income from sources other than your employment income. This means you must learn to save a portion of your employment income and invest it in a way to attract less tax on your earnings.

Many forms of investments attract much less tax. Dividends from Corporations often have tax breaks built in for the investors. Capital Gains ( if you sell something for more than you pay for it ) are often taxed at a much lower rate if not exempt altogether.

Get to know the different tax rates on the types of income in your area. Once you know this, start developing a plan to take advantage of the preferred rates as soon as possible. Now you can start working fewer days for your government and more days for yourself.

Not So Simple ?

I realize that what I have said may sound too simple.However, please remember it is the concept that is simple, the action plan for the concept may not be so simple. It will all depend on where it is you are starting from.

Once you have a solid financial foundation (as mentioned in a previous posting ) you will be in a much better position to attack your tax position and start working more for yourself and less for your government.

No Magic Pill

There is no magic pill for an easy way to become wealthy. There are, however, many techniques and strategies that can make the road to wealth creation easier and faster. The concept of working fewer days for your government is one of those strategies that combined with others will accelerate your growth.

A simple rule of thumb to take with you from this concept. Work More For Yourself and Work Less For Your Government. You owe it to yourself, your family and your future generations. They will all benefit.

As always, I welcome your comments and suggestions for future postings.

Tuesday, February 14, 2012

Real Estate Wealth - Renovate to Increase Profits

Renovations can drastically increase the profit you will make on a Revenue Property. There are many forms of renovations that can be done, but not all have the same effect on your bottom line. It is important to know which ones pay and which ones just waste your hard earned money.

The following suggestions will help you decide what is most profitable for your given situation.

Renovate When You Purchase

Some Renovations may need to be done after first purchasing a property in order to get it up to code and to ensure that the property can be insurable by your insurance provider. Insurance companies seem to be getting much more strict than in the past, especially when it comes to electrical issues. For example, you may need to replace older wiring systems and/or service panels. Ensure to check with your insurance provider before purchasing the property.

I would also recommend upgrading old plumbing if needed. A leaky pipe later on can cause a lot of damage.
Most tenants won't report a problem until it is seen, often after the damage has already been done.

A good roof is a must as well. Keep on top of the condition of your roof and don't let it get too far gone. A leaky roof can cause a lot of damage as well.

An upgrade to a kitchen and bath area can ensure you get the top rent for your area as well. Be careful though not to overdo it in this area. For example, in most cases, I would not recommend granite counter tops or stainless steel appliances, etc. New laminate counter tops and inexpensive cupboards will suffice. Also, new plain appliances are good enough.

The reason not to overdo it is simple. You likely won't get much more rent and your insurance provider won't cover you for vandalism. Tenants will never treat your property as you would. Damage will happen and the lowest cost replacement is the best for your bottom line.

Renovate to Increase Rent

Some governments restrict how much you can increase rent from year to year. Generally, this is called rent control and it is bad for the investor. You may find that over time your rents are lower than the average in your area.

Fortunately, there is a solution (in most cases) for the above. You must first vacate your property. To do this, you simply don't renew your tenants' lease which will leave the property vacant.

While vacant, you renovate. This may include replacing flooring, a new paint job, upgrading kitchen and bath areas, etc. Again, be careful not to overdo it as mentioned above.

Now you can advertise the property as newly renovated and charge whatever rent you feel is fair.Your rent will now be up to the market level and more importantly your profits should be up as well.

Renovations Pay

By using the above suggestions, you will be able to ensure that your investment is well taken care of and there should be fewer surprises down the road. A properly renovated property will ensure you the highest possible profits with the least amount of hassle.

Remember, when it comes to investing, boring is good.

As always, I welcome your comments and suggestions for future topics.

Friday, February 10, 2012

The 5 Steps to Financial Freedom

In order to build Real Wealth, a person must first free themselves of the everyday financial burden of living and paying the bills.There are 5 distinct steps (or goals) that every person can take to shake off the chains that are holding them down.

Step 1

 Solidify Your Main Income Stream - What this means is that you must provide yourself and your family with a good, solid level of steady income that you can count on. This income must be of sufficient amount to pay all of your everyday bills with money left over. For most of us, this income stream will be your job or your career of choice.

It should be your first goal to do whatever it takes to ensure a strong steady stream of income flowing into your bank account. Without this steady flow of income, it will be near impossible to ever be truly Financially Free.

Step 2

Pay Down All Consumer Debt - In order to be Financially Free, you must pay down all consumer debt. This includes all credit card balances, student loans, lines of credit, car loans, etc. The only exception here would be the mortgage on the home you own ( if any ) .

Start with the debt that you pay the highest interest rate on. Most commonly, this would be Credit Card debt.
Once first debt is paid, go on to the next one, etc. Your goal here is to reduce your costs of borrowing as quickly as possible.

Step 3

Protect Yourself from Financial Ruin  - Get protection for the many things that could destroy your future financial plan. Basically, this is buying the proper forms of insurance that will protect your future wealth.

Examples are Life insurance ( if needed ) , property insurance to guard against fire, theft and vandalism, liability insurance to protect against any future personal law suits, health insurance to protect from future injury or disease, disability insurance to protect against loss of income due to a disability or injury.

Step 4

Own the Home you live In - Stop paying a landlord for the place you live. Buy yourself an affordable home in the area you wish to live. Put your monthly rent payments towards paying your mortgage and build equity in your home. Make it a goal to pay off your mortgage completely.

Once your mortgage is paid off completely, your cost of living will become much lower. Extra funds can then be used to accelerate your building of True Wealth.

Step 5

Start Saving Regularly - Start saving a portion of your income every pay period. Get in the habit of saving as soon as possible. Savings can be used to pay down debt at first, if necessary, and then eventually to start a regular investment plan for building future wealth.

By learning this habit early in life, it will become much easier to continue without interruption in the future. It will also make it much easier to ride out the many financial bumps that will always be in the road ahead.

These 5 steps will become your foundation upon which to build your future Real Wealth. As in all good buildings, a solid foundation is a must before construction on the rest can begin.

As always, I welcome your comments and suggestions for future topics.

Tuesday, February 7, 2012

How To Get Rich - High Income is Not Enough

Individuals with a high income face many additional challenges when it comes to building real wealth.


The biggest challenge is the amount of income tax their governments charge on their earnings. In many countries, tax systems are designed to take a higher percentage of your earnings on the upper portions of your income.

In fact, I have seen the government take almost half of the upper income portions on high income earners.When this income is earned through employment or pensions, there is quite often very little that can be done without expert help.


Another challenge for high income earners is lifestyle. It is human nature to spend more as your income increases. Most people adjust their lifestyle to their current income level. Just look at the many celebrities and sports stars who were paid high incomes and are now broke.

True wealth is not measured by how much income you earn. True wealth is measured by how much of your income you actually keep and put towards your future.

                                                     High Income is a Good Goal

Don't get me wrong, I am not saying that you should not try to achieve a high income level.A higher income gives you much more opportunities for investment and to build your true wealth. I am just trying to point out the additional challenges you will face as your income grows.

As your income grows, it will also become more vital for you to do proper planning. High income individuals should almost always employ the services of a qualified financial adviser or planner. Any fees charged for their services should be deductible against their income when filing their tax returns. This is a good example of using other peoples time as discussed in my previous post.

                                                                 What To Do 

As your income grows, resist adjusting your lifestyle to follow. Instead, you should be increasing your savings amount and looking for good investments to earn you more income. It is good to reward yourself for a raise in income by going on a trip or out for a good meal. However, do not reward yourself with something that you continuously have to pay for.

As far as income tax goes, income from many investments will be treated much more favorably by our governments than income earned through employment or pension plans. Take advantage of the opportunities in your local area as much as possible. Again, use the services of a qualified adviser whenever you are unsure of which direction to take. However, be careful to not be too dependent on your advisers' help. You should be in control of your own direction and using your advisers' advise as a tool in your overall success.

Remember, it is not solely the amount of your income level that is going to make you rich. It will be how much of that income you are able to keep and invest for your future that will determine your true wealth.

As always, I welcome your comments and suggestions for future topics.


Friday, February 3, 2012

How to Get Rich - Use Other Peoples' Time

We all have only so much time each day. How is it then that the really wealthy seem to get so much done in a short period of time ?

Quite simple actually. They use other peoples' time.

In other words, they pay individuals to work for them to do the less desirable and often very repetitive tasks.
This basically frees up their own time to concentrate on what really makes them the money. Finding new opportunities.

For instance, the top salespersons in many fields pay an assistant a fixed salary to do the basics of customer follow up and to fill out paperwork etc. This allows them to contact more potential customers and generate new leads and sales opportunities.

                                                             How Investors Use OPT

As an investor, you can use other peoples time as well.

For instance, if you own one or more pieces of revenue real estate, consider hiring a management company. You will generally pay them about 10% of the rent collected. They will then do everything for you, collecting the rent, taking care of maintenance issues, following up on late rent payments and occasionally evicting a tenant if needed. All that is left for you to do is cash the monthly rent checks.

Instead of your time being bogged down dealing with tenant problems, you will be able to look for new opportunities to buy more properties. You will also be able to expand your geographical horizons and invest anywhere the numbers look good.

Another example is to hire a professional to do your tax filing for you. Here again, all the time you will need to spend is collecting the papers that are needed and making the payments once things are done.

This will free up your time to do as you wish, whether it be to look for more opportunities or to spend more time with family, etc. The choice will be yours.

                                                           Make More and Relax More

By using other peoples' time, you should be able to increase your income as long as you use the time to develop other opportunities. Once these opportunities are fully developed, you put them on auto pilot and start looking for the next one.

Another huge benefit of using other peoples'  time is that it will be much easier for you to take time off whenever you want. You will not have to worry about how things will run without you because they already are running without you.

                                                                     Boring is Good

The biggest problem with using other peoples' time is that life can become awfully boring. In this case though being bored is actually the desired goal. If it's boring it means everything is running smoothly.

Look for your thrills and excitement in other areas. For example go on Roller Coasters, go River Rafting, or learn something new that really excites you. The caution here though is to never get your thrills from your investments. Investing should only have one purpose. To increase your wealth and your level of income.
There is no room for thrills when it comes to investing.

As always, I welcome your comments and suggestions for future topics.