Tag Archives | Wealth Creation

A Solid Foundation

A Solid Foundation

Creating a significant amount of wealth during your lifetime cannot be done by saving alone and usually requires the use of other people’s money. Borrowing money from others to invest in businesses and property is referred to as a leveraged investment strategy. Leveraged investments are capable of producing significant wealth, providing the funds invested produce a return greater than the cost of borrowing. Most commonly, this strategy is used for investing in property. The problem with leveraged investments is that while they magnify the effect of good investment returns, they also magnify the effects of bad returns. A leveraged investment strategy therefore requires a solid foundation to avoid financial ruin. The basic building blocks are:

  • Money management skills. If you can’t manage your own money properly (i.e. you don’t know where it goes and you can’t save) then you aren’t going to be able to manage borrowed funds well either.
  • A financial buffer.  Borrowing up to the maximum limit with no room to move means you could easily come unstuck if things don’t go to plan. Have unused credit or savings to fall back on.
  • Consistent income from more than one source. Diversification is a key word for investment strategies and being reliant on only one primary source of income, such as a single salary, can be disastrous.
  • Risk protection. Borrowing money increases your financial risk. Put insurance cover in place to cover adverse events. Make sure you have the right ownership structures so your personal assets are protected if investments fail.
  • A store of wealth. Don’t risk everything you have. As you create wealth, set some aside in safe investments so that if your risky strategies fail, you don’t lose everything.

Building on these foundations won’t eliminate risk but will certainly reduce it.

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What it Takes to Have

An Extraordinary Life

People who consider themselves ordinary often wonder if it is possible to ever achieve the life of their dreams. Such people fail to understand two really important points. The first point, which almost goes without saying, is that ordinary people live ordinary lives, while extraordinary lives are lived by extraordinary people. The second point is that anybody, even ordinary people, can choose to be extraordinary. Being extraordinary is about having the right attitude to life and being prepared to do things differently than you have done before. Your ability to create wealth has very little to do with your level of education, your income from employment or your family circumstances and everything to do with your attitudes and behaviours. People who live extraordinary lives have certain things in common. They are confident, with a positive, optimistic attitude towards life. Rather than sitting on the couch they actively engage with the wider community, using their networks for ideas and support. The more widely they engage with others, the more contacts they have and the more ideas and support they receive. Extraordinary people are creative, and constantly looking for opportunities. They do their homework on new ventures but they are not afraid to take risks. Neither are they afraid of either failure or success. They set themselves clear, far-reaching goals that might seem impossible to others. To live an extraordinary life means letting go of living an ordinary life. Sometimes, that means letting go of property, people, or employment if these are things that hinder progress. Being extraordinary means having the courage to let go of what is familiar in order to make way for new things that open up new possibilities.

If you have the desire to live an extraordinary life, do you have the courage to change and let go?

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A Winning Team

A Winning Team

Whether you are a fan of ruby, football, netball or baseball, it’s a great feeling to see your home team take out the championship. Reaching high levels of success in sport can only be achieved with a total focus on teamwork, through which each player contributes their own individual strengths in a way that complements and enhances the skills of other players. Even top performing athletes in solitary sports have a team of support people behind them. Achieving financial success is no different. It is much harder to reach the top without the help of others to coach, encourage and impart their knowledge and skills. When it comes to your financial affairs, your support team should include your financial adviser or broker, accountant, solicitor, mortgage broker and insurance broker. If you are serious about wealth creation, find a team of people you can trust and confide in who understand your long term goals and who will help you get there one step at a time. Creating wealth doesn’t happen overnight (unless you are lucky enough to win a lottery) and your expert team needs to be prepared to help you over the long term rather than selling their services to you and then moving on. Your financial adviser will help you set the framework for your long term plan, your accountant and solicitor will ensure that your affairs are structured in the best way for tax and estate planning purposes, your mortgage broker will set up your borrowing so as to manage your cash flow and keep interest payments to a minimum and your insurance broker will ensure the wealth you create is protected from unexpected events. All these key players need to be working in tandem with you as the leader of the team. Then you can go for gold!

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