wealth

All posts tagged wealth

There are tons of books devoted to building wealth through various endeavors. If you could build wealth by reading books, then Americans would all be billionaires!

In order to become wealthy, you need to stop being a laborer and become a capitalist.

Laborers exchange time for money. Capitalists have investments that generate money for them.

It doesn’t matter if you’re a doctor, a lawyer, or a minimum-wage grocery-bagger – you’re stilling exchanging time for money. Unless you accumulate income-producing assets that replace your income, you’ll never become a capitalist, or achieve financial freedom.

So here’s the 2-minute guide that contains pretty much the gist of building wealth.

There are three basic things you need to do in order to be a financial success.

1. Spend less than you make 

Surprisingly, less than 60% of Americans implement this crucial step. Regardless of how much, or how little, you make, if you can’t afford to save even 10-15% of your income, you’ll never be wealthy.

Understand your needs vs wants. If you can cut down on your wants, you should be able to free up money to save. That brings us to step 2…

2. Invest your savings in a portfolio that includes equities

Only 75% of Americans who save their money actually invest it (so this is 45% of all Americans).

Investing in equities will ensure your money outpaces inflation in the long run. Of course, you should have a rainy-day fund for emergencies before you start investing.

3. Use low-cost index funds

Only 20% of Americans who save and invest use low-cost index funds – that’s a meager 9% of Americans who do all three!

Most people have neither the time, nor aptitude for picking individual stock. So instead of speculating in individual stocks, which can be very profitable, the average investor is better off investing via index funds.

A large majority of those who do all three of the above steps are very wealthy. You can be too if you follow their lead.

 

Check out this excellent, excellent video where Ron Paul rips Bernanke a new one. He explains why lowering the interest rates is screwing the US citizens. Low rates leads to a weak dollar which causes inflation (since we import nearly everything from foreign countries).


By lowering the rates, the Feds are enabling inflation. Which they probably want because it makes it is much easier to pay back all the money the government has borrowed from foreigners. The government currently needs around $2 Billion per day to sustain itself. Paying back foreign countries with dollars that are worthless is quite an enticing option.However, it doesn’t come without any cost. Putting more dollars in circulation devalues the current value of each existing dollar. If the Fed increases the money supply by 10% per year, the value of each dollar of your savings is decreased by a corresponding 10% too. Since you’re not getting 10% interest in the bank, your savings are being eroded every year. This is what Ron Paul was concerned about. The savings of elderly people are being eroded while simultaneously, everything is getting more expensive.

As the cost of everything goes up, eventually the cost of real assets will catch up. Real assets include commodities like gold, wheat, corn, lumber, oil and especially investments like real estate. So the low interest rates has the effect of propping up real estate prices and engendering the so-called soft landing in the real estate market. However, since its mostly wealthy people who own multiple properties that are leveraged with mortgages, as the value of the dollar drops and the value of real estate increases, they get to pay down their mortgage with cheaper dollars while simultaneously enjoying the appreciation in their properties.

This is basically a redistribution of wealth from the poor and middle classes to the wealthy. So you should either vote for Ron Paul or invest in gold (pretty easy to do), foreign currencies (slightly more difficult) or cash-flowing properties (pretty difficult right now). The worst thing to do is nothing or whine about how unfair life is.

How you think about saving, spending and investing [about money in general] affects where you end up financially. If you think wealth is limited and you’ll never make any, you’re absolutely right. If you think wealth is unlimited and you just have to figure out how to get your share, you’ll be right too!

Its a self-fulfilling prophecy where your actions follow your beliefs. Either spend time learning how to make money and eventually start making a lot of it, or you give up, figure you’ll always be poor and you never figure out how get ahead in life.

Hanging out with like-minded people also has a big affect. Do you spend most of your time with people who complain about how unfair life is, how they’re always broke and how they can never catch a break? Lose them! Their negativity will drag you down too!

Always try to surround yourself with successful people, who have achieved a lot in life and are constantly looking for the next opportunity. These people usually think there’s ample opportunity in life for everyone and rarely complain about getting the short end of the stick. They take responsibility for their failures and don’t waste time blaming others for their misfortunes. A lot of them are more than willing to give you insight into how to achieve wealth yourself and usually for the price of a lunch or dinner will spend a few hours with you. Thats much cheaper than spending $5k on mentoring courses that seem so popular nowadays!

Anyway, if you’re starting out I recommend you read books that will change your thinking and get you into the mindset of becoming rich. After that you can figure out how you want to actually make money be it through stocks, commodities, real estate, a business or working longer hours.

Here are some basic investing books and when you’re done with those, you can read my favorite selection.

Getting wealthy isn’t easy. Its takes time, effort and dedication but its not impossible. Remember, no one ever got wealthy sitting at home on their couch!

On the other extreme, here’s some personal philosophy from Gene Simmons, the front man for KISS


“Be clear, be truthful.
Stand there proudly,
unapologetically,
unabashed, and say,
‘I love cash.
It will get me
everything
I want in life!'”