If you really want to become wealthy you first need to understand how wealth works. Many people approach wealth as if it were a matter of luck! Others think that you have to have a lot of money to make money. Neither is true: wealth is created following some basic rules that you need to understand so that you can make use of them.
Being wealthy is not about having a lot of income. It is about having a lot of capital. The ultimate aim, financial freedom so that you have the life you want, is to have a lot of income, but this has to be passive income that is, income that you get without having to work. Passive income can only come from capital, and so you have to grow your capital so that you can get plenty of passive income. Capitalism is the name of the game. Many people confuse having high income with being rich. People who have high income give every appearance of being rich,but they are not. Being rich is about having capital, capital that can be converted into assets that will give you passive income. It is passive income that allows you to live the life of your dreams. Then you are free to spend your time on what is important to you and you have enough income to do so.
Having lots of capital is the final objective , capitalism is the name of the game. You have to be an owner: an owner of the right things. What you do with your income during the time that you are trying to get rich is important. A lot of people manage to get high incomes from their businesses or investment activities but because of how they use this income, not all of them get rich.
Income has four important uses:
1• Consumption You have to live. A proportion of your income will have to be spent on groceries, transport, utilities, etc.
2• Reinvestment If you retain income it is added to your capital and will grow. When income is
added to a Wealth-Creating Asset it will compound at a high rate and so grow very quickly.
3• Paying for borrowings Nearly everyone who becomes rich gears up the capital that they have by borrowing. Borrowing reduces the amount of disposable income that you have but increases the amount of your growth of capital .
4• Setting capital value The income that you get from your assets values those assets. Regardless of whether it is a business,shares or property, the value is set by the amount of income that comes from them. Therefore, increase the amount of income from your Wealth-Creating Assets and you increase the value of them. For example, an increase in the rents that you get from a warehouse that you own not only increases your income but also makes the warehouseUSING more valuable.
To become rich, to grow your capital quickly, you need to own Wealth-Creating Assets, things that will give a total return of at least 15 per cent p.a. on your money. As we have said before there are only three things that will give that sort of return a business, property investment and/or development, and shares.
To get rich, you have to own something from one of these three categories. This is what you will have your capital in, what you will get your income from and what will make you wealthy. If you can average 15 per cent p.a. from your business or other activities, you will become rich.
You cannot continue to own these Wealth-Creating Assets if you want financial freedom. Living the life of your dreams means that you need to be free to do what you want with your time and to have enough money to do so. But to get a 15 per cent return from your Wealth-Creating Assets, you will have to manage what you own actively and take risks. As we have said before, active management and being in a high risk situation is not our idea of financial freedom. Therefore you need to become rich through some risky enterprise, but over time move that capital into something that will give passive income with low risk .The first thing to think about is how to get rich.
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Being wealthy is not about having a lot of income. It is about having a lot of capital. The ultimate aim, financial freedom so that you have the life you want, is to have a lot of income, but this has to be passive income that is, income that you get without having to work. Passive income can only come from capital, and so you have to grow your capital so that you can get plenty of passive income. Capitalism is the name of the game. Many people confuse having high income with being rich. People who have high income give every appearance of being rich,but they are not. Being rich is about having capital, capital that can be converted into assets that will give you passive income. It is passive income that allows you to live the life of your dreams. Then you are free to spend your time on what is important to you and you have enough income to do so.
Having lots of capital is the final objective , capitalism is the name of the game. You have to be an owner: an owner of the right things. What you do with your income during the time that you are trying to get rich is important. A lot of people manage to get high incomes from their businesses or investment activities but because of how they use this income, not all of them get rich.
Income has four important uses:
1• Consumption You have to live. A proportion of your income will have to be spent on groceries, transport, utilities, etc.
2• Reinvestment If you retain income it is added to your capital and will grow. When income is
added to a Wealth-Creating Asset it will compound at a high rate and so grow very quickly.
3• Paying for borrowings Nearly everyone who becomes rich gears up the capital that they have by borrowing. Borrowing reduces the amount of disposable income that you have but increases the amount of your growth of capital .
4• Setting capital value The income that you get from your assets values those assets. Regardless of whether it is a business,shares or property, the value is set by the amount of income that comes from them. Therefore, increase the amount of income from your Wealth-Creating Assets and you increase the value of them. For example, an increase in the rents that you get from a warehouse that you own not only increases your income but also makes the warehouseUSING more valuable.
To become rich, to grow your capital quickly, you need to own Wealth-Creating Assets, things that will give a total return of at least 15 per cent p.a. on your money. As we have said before there are only three things that will give that sort of return a business, property investment and/or development, and shares.
To get rich, you have to own something from one of these three categories. This is what you will have your capital in, what you will get your income from and what will make you wealthy. If you can average 15 per cent p.a. from your business or other activities, you will become rich.
You cannot continue to own these Wealth-Creating Assets if you want financial freedom. Living the life of your dreams means that you need to be free to do what you want with your time and to have enough money to do so. But to get a 15 per cent return from your Wealth-Creating Assets, you will have to manage what you own actively and take risks. As we have said before, active management and being in a high risk situation is not our idea of financial freedom. Therefore you need to become rich through some risky enterprise, but over time move that capital into something that will give passive income with low risk .The first thing to think about is how to get rich.
Related posts
Investing on 401 k advice on sufficient funds for retirement
Saving money techniques for happy retirement
Setting budget Control expenditure for early retirement
Good money investments for happy retirement
Invest money in stock and bond funds for good returns
