Michael Yardney, a director with Metropole Property Strategists, offers property advice and advocacy to his clients. In this featured article, Mr. Yardney gives us an interesting analysis of how the wealthy tend to make their money.
As you will see, the wealthy do some things very differently from the rest of the population that helps to increase their wealth. Geared towards property investing specifically, Michael explains these differences in this edition of Financial Freedom News. FFN Editors
Why property investors develop financial freedom
Friday, 06 September 2013 08:19
How did they do it? How can we do it too?
The truth is wealthy people don’t do different things; they just do things in a different way – from the way they think to the actions they take.
I’ll let you in on a little secret – not everybody has to work hard for their money.
People who own businesses have employees who are willing to work for money, whereas the business owner generally has his money working for him. The same is true for investors, their money works for them.
It’s called passive income. Being a property investor or a business owner is like owning the proverbial money tree – you control something that makes money for you, without the need to even be there.
In his Rich Dad, Poor Dad series of books, Robert Kiyosaki explains how the rich differ from the poor. It’s not just because they have more money. The main difference is how they think about and interact with their money and that when it comes to how people make money, we can all be placed in one of four categories.
1. The employed – have a job
Employees trade hours for dollars; however, what they really get are leftovers – after the government takes its share in taxes.
“So what? They do that to everyone!” you may be thinking.
Well no, they don’t. Business owners and investors only pay tax on what’s left over after their bills are paid.
Wouldn’t it be nice to only have to pay tax on what you don’t spend?
2. The self-employed – own a job
Self-employed people and professionals usually want to be their own boss. They’re prepared to work hard, but often what they’ve done is swap one boss for hundreds of bosses – customers or clients.
In reality, self-employed people aren’t business owners – they still work for their money, but they’re somewhat better off than employed people because they’re able to take advantage of tax deductions that allow them to pay their business expenses before being taxed on what’s left over.
3. The business owner – owns a system and people work for them
The true business owner not only doesn’t have to work, he doesn’t have to be at work every day, because he has a system and people to do it all for him, and possibly even supervisors to manage his workers.
The true business owner asks, “Why do it yourself when you can employ someone to do it for you?”
After initially investing in a business idea, and a business system, they let the money they have invested – which is now in the form of a business – work for them.
4. The investor – money works for them
Investors don’t have to work either, because their money works for them.
If you hope to become rich at some point, you have to belong to this group; because investors convert money into wealth.
Obviously, you’re not going to jump from being an employee to a full-time investor overnight. But you can start taking the steps to move from being an employee or self-employed, by building your own property portfolio.
Done correctly, income-earning residential real estate can be your vehicle for getting out of the rat race!
There are also many legal tax advantages available to investors. One of the reasons the rich get richer is that in some cases, they make millions and legally pay very little tax. That’s because they build their assets, not their income and make their money as investors, not workers.
Imagine you own investment properties worth $1 million that increases in value by 8% each year. In 12 months your asset base will have increased by $80,000, yet no tax is payable on this. Wealthy property investors can borrow against the increased value of their assets and use the money to reinvest or live off.
Where do you stand?
Which category do you fit in? Are you an employee, self-employed, a business owner or an investor?
In the past there has been a slow but steady transfer of wealth from employees and self-employed to business owners and investors. They’re all playing the same game, but each group is playing with a different set of rules and their mindsets are poles apart.
Employees and the self-employed work harder and harder, trying to build cashflow, yet many dig themselves deeper into a hole of consumer debt.
In the meantime, business owners and investors slowly build up their assets. The employed and self-employed pay the most tax, while business owners and investors take advantage of legal tax loopholes.
Logically, if you want to become wealthy you are going to have to become either a business owner or an investor. It’s just too hard to become rich as an employee or self-employed worker.
Does that mean you should give up your day job?
Not necessarily. Many employees have become very successful investors – in particular, property investors.
So rather than relinquish your job, I suggest you start educating yourself with the aim of becoming a property investor – initially in your spare time and then maybe, if you choose, on a full-time basis.
Should you become a business owner?
Most small businesses fail in the first five years.
In general, I think the opportunity to become rich through successful property investment is much easier for the average Australian. That’s why I recommend you seriously consider making your fortune as an educated, financially fluent real estate investor who treats their property like a business.
(Michael Yardney is a director of Metropole Property Strategists, who create wealth for their clients through independent, unbiased property advice and advocacy. Subscribe to his Property Update blog).
Let us know your thoughts regarding this information in the Reply section below. Also, please click “Like” and “Share” us with others who may be interested in achieving financial freedom.
(Disclaimer: The views expressed in this article are strictly those of the author. They do not necessarily represent those of FFN. Please use due diligence prior to applying the concepts and recommendations and/or in purchasing products or services from the author.) FFN Editors
Here are 10 forex trading tips from investing guru Vince Stanzione of 50WallStreet.net. Vince suggests an approach for taking advantage of the huge forex (i.e. Foreign Exchange) market that does not follow the suggestions commonly cited in the media. Instead, he uses an approach that is more like investing by using longer time frames. This is different from trading the forex market in a more short-term, day trading style.
Let us know what you think of this information in the Comment section below. And, please “Like” and “Share” this information with others who may be interested in achieving financial freedom. FFN Editors
(Disclaimer: The views expressed in the above video are strictly those of the presenter and their sponsor(s). They do not necessarily represent those of FFN. Please use due diligence in applying the concepts, recommendations and/or in the purchase of products or services offered by the presenter). FFN Editors
Thinking of starting your own business to achieve income growth and financial freedom? Perhaps you already own a business and are struggling to make it as successful as you would like.
Our guest contributor is, Monica Mehta, author of the book “The Entrepreneurial Instinct” and a managing partner with 7th Capital, Inc. in New York. In the following video, Monica provides important insight into the realities of the business start-up and management process.
Ms. Mehta is interviewed on MSNBC’s Your Business, “OPEN Forum” program and discuss the importance of using one’s instincts in ambiguous entrepreneurial situations.
Please let us know your thoughts/reactions to this information in the comments section at the end of this page.
(Notice: The expressed in the following video are strictly those of the presenter. They do not necessarily represent those of FFN, its’ management, editors, staff, affiliates, etc. Readers are advised to use due diligence prior to applying any of the concepts or recommendations of the presenter. Further, due diligence is urged regarding the purchase of products or services offered by the presenter’s publications(s) or website) FFN Editors
The drive towards financial freedom does not have to take an extended amount of time. Our featured article from the “Wealth Desire” blog, offers an 8 step approach to the faster achievement of financial independence.
With recommendations that range from debt management to savings investment to creating passive income streams, this article gives a workable guideline for successfully putting your life on a manageable course.
(Notice: The following views are strictly those of the author. they do not necessarily reflect those of FFN, its management, editors, staff or affiliates, etc. Readers are advised to use due diligence prior to applying any of the concepts or recommendations of the author.
Further, readers are urged to use due diligence with regards to the purchase of any products or services offered by the author’s publication(s) or website.) FFN Editors
How to Achieve Financial Freedom Quick in 2013
January 10, 2013 by Wealth Desire | 3 Comments
As you and your family welcome 2013, make this year the one to achieve your financial freedom. Financial freedom is defined as the state of having enough money or sufficient cash flow to live the life that you really want.
It is the independence of having enough money so that you can do the things that you really love to do. Now that you are aware of the meaning of financial freedom, look forward positively this year to improving your financial well-being and your family’s finances.
In this article, I will provide the proven steps to reaching your financial freedom and financial success.
Having “enough” money will not make you rich. It will help you attain your financial independence. If you want to enjoy the incentives and rewards of having financial freedom, first, you have to discover the different approaches that will lead to your financial liberty.
8 Steps to Achieve Financial Freedom
Pay Yourself First and Save
The very first step to having financial freedom is to pay yourself every time you receive your salary or income. In this step, you can start with saving a small amount…whatever you can afford. Then, as your income grows over time, increase your savings to 10% to 20% of your income.
Open a separate savings account specifically intended for paying yourself first. Make it a regular habit to deposit your share immediately upon receiving your income. You can also arrange for your bank to automatically deposit a certain amount of your pay into this savings account when you receive your monthly salary.
Budget and Control Expenses
Budgeting and living frugally can help you save more money and achieve financial freedom quickly. It is necessary to budget your income in order to control your expenses. Center your spending on what you really need and limit buying “want items” or unnecessary things.
Focus on creating budgets and spending plans for groceries, foods, eating out, shopping. etc. in order to have extra money for your savings. Remember, you can live quite decently and happily while living below your means.
Build an Emergency Fund
If you have a family, building an emergency fund is very important. While striving to attain financial independence, it will protect you from a temporary loss of income. You never know what will happen to you in your present job. There is no such thing as job security nowadays.
The rule of thumb is to set aside at least 3-6% of your family income in order to maintain your standard of living while looking for new jobs or other sources of income.
Remember. do not touch this fund…except in the case of an emergency.
Investing Your Savings
After setting aside enough money for your emergency fund and paying yourself, you can start looking at other money-making vehicles. The main key to achieving your financial freedom is to start investing as early as possible. The sooner in life the better.
This is one of the secrets of billionaires like Warren Buffett. He made a huge fortune by investing in quality companies. You can use a portion of your savings to invest so that your money will work hard for you, instead of you working hard for money.
If you are the family breadwinner, you are the family’s most precious asset. You are the one who is working and putting food on the table. You cannot attain financial independence without protecting your assets from uncertainty. By purchasing personal life insurance for yourself, you will have greater peace of mind. You will be worry free if anything unexpected happens.
Get Out of Bad Debt
If you are decided to achieve financial freedom, then you must consider living a debt free life. Plan to pay off your mortgages, your credit card debt and personal loans. It is much easier to manage your finances if you do not have any debt to pay off. Most financial gurus’ advise us to start by paying down debts that have the highest interest rates followed by the next higher ones and so on.
Save for Retirement Fund
As soon as you get out of debt, your next step is to save for retirement. Your goal should be to save as much money as you can in order to reach the financial freedom mark, quickly. At the same time this could possibly allow you to retire early.
You can use a portion of your savings to invest in stocks or mutual funds or any other vehicle that lets you multiply your money. Any gains from these investments should be used to reinvest in your income-producing vehicle. And a portion can be placed in your savings account, retirement fund and your emergency fund.
Remember, having enough money for retirement can give you not only financial freedom but also personal freedom. You have the choice whether to continue working for someone or to do something else you really love.
Build Passive or Multiple Stream of Income
Look for money-making opportunities that can create passive income for you. For example, earning income from different investment portfolios can support your cost of living. It can also fast track you to financial independence.
Having multiple streams of income can help you build wealth quickly. In short, with multiple streams of income, you improve your chances of reaching your goal of financial success and financial freedom.
I believe that these 8 steps will increase your financial education and help improve your financial future. You will have a far better chance of achieving financial freedom. In attaining your financial dream, it doesn’t matter how much you are earning, but how you control, spend, and invest your income.
Dream big and think big in 2013 and you will surely achieve your dream life, which is to have financial freedom.
Lastly, I will share with you what Pauline Kael said; “Where there is a will, there is a way. If there is a chance in a million that you can do something, anything, to keep what you want from ending, do it. Pry the door open or, if need be, wedge your foot in that door and keep it open”.
It could be argued that without some sort of safety net in our lives, there can be little sense of financial security. However, building a meaningful safety net, in case of an emergency, continues to elude many of us.
Trent Hamm, a writer for The Simple Dollar blog, offers a four step approach to building a financial safety net to see us through difficult times.
And, that net is not only monetary. While certainly an important component there are other important components that Trent discusses.
(Notice: The views expressed in the following article are strictly those of the author. They do not necessarily represent those of FFN, its management, editors, staff, affiliates, etc. Readers are advised to use due diligence prior to applying any of the author’s concepts or recommendations. It is further urged that due diligence be applied to the purchase of any products/services offered by the author’s publication(s) or website.)
How to build a financial safety net
If life is something like a high wire act, everyone needs a financial safety net. Hamm offers his advice for developing a financial safety net for if you fall on hard times.
We balance ourselves on that high wire and attempt to walk through life. We’re carrying a lot of weight to make the balancing act even trickier – children, marriage, and other responsibilities.
Eventually, something happens and we fall. Something interfered with our walk – a personal failing, a job loss, or something else entirely.
When we fall, there’s a safety net there to catch us. Some of us have family wealth or personally accumulated wealth. Others are surrounded by family and close friends for support. Still others have built up a long history of professional contacts. Skills and personal attributes also make up a part of that safety net.
Not everyone can draw upon all of those threads to weave their safety net, though. For some of us, the threads are much stronger. For others, they’re weaker, and for still others, there’s nothing there at all.
So, what does all that mean?
Some people can afford acrobatics on the high wire, while others cannot. The person who isn’t burdened by responsibilities and has an extremely strong net to fall onto can manage things in life that the person who is carrying a great deal of responsibility with a weak safety net cannot.
A single, healthy child of a supportive and wealthy family can easily dive into career paths and education without any sort of short-term return without having to worry too much about it.
On the other hand, I know of at least one older sibling who is barely twenty and is caring for her two younger siblings. There is no money for them and no functional family. That person has a great deal of burden and no safety net. That person cannot afford to take many risks at all on the high wire, so that person is consigned to getting the best possible paying job now and living with whatever it is.
It is completely unreasonable to think that the same financial and career plans would apply to these two people. They simply live in different worlds. Even things that they could both utilize, like being very frugal with their money, applies much more strongly to one than the other.
Whenever you read about personal finance tactics and you recognize that some of them don’t apply to you, remember that they do apply to people carrying different burdens and to people with a stronger – or weaker – safety net than you have.
First, build up an emergency fund. Try to get to at least $1,000 in cash in a savings account and just let it sit there. When an emergency happens in your life, you have the cash to deal with it.
Beyond that, focus on paying off debts and not acquiring new ones. If you don’t have a safety net, minimizing your bills and maximizing the amount of money you can save each month is your best path.
Second, build a strong social circle and be there for the people in it. The best thing you can do is identify people that seem reliable and, when they need a hand in their life, step up and give them a hand without expecting anything in return. Do that enough to other reliable people and you begin to build a relationship with them, one that will be there for you when you stumble and fall.
When a person loses a job, help them find another one. When a person is moving, help them to move. When a person needs help with something, just step up and help, even if they don’t ask for it. There is no better way to build a lasting and valuable relationship with someone than actually helping them when they need it.
Third, take your work seriously, even when it seems trivial. Yes, sweeping the floor is a very simple task and it’s boring, but do it with focus and strive to do it well. If you have a task to do, don’t just do the minimum to get it “done.” Try to get it done as well as you can within the alloted time (or within reasonable time). If you’re standing around with nothing to do, look for something to do.
Sure, some of the stuff you do will be overlooked, but it won’t be long before you begin to establish a pattern of excellence and the people who rely on you in the workplace will notice. When your chips are down, that pattern of excellence will be the thing that sets you apart and gives you the help you need.
Finally, stop wasting time and energy on things you can’t control. Sure, someone else might have a wealthy and supportive family while you do not. Don’t waste a second being jealous of them or wishing you were in their shoes. Instead, focus on what you can control, including the things above.
We’re all walking the tightrope, but the journey is a little different for each of us.
Motley Fool contributor, Chuck Saletta, provides great insights into the reality of achieving financial freedom.
His article for the Motley Fool is entitled “The Incredible Joy of Financial Independence”. In it he discusses both the lifestyle strategy to which he and his family adhere and their investment approach, in detail.
Mr. Saletta refers to the goal as realizing the family’s own financial independence day. He describes their strategy as “simple” but not “quick or easy”.
Nevertheless, the Salettas reached their goal. And, the rewards are enviable.
They are living proof that with a plan, discipline and persistence…gaining financial freedom is far from a fool’s errand.
(Notice: The views expressed in the following article are strictly those of the author. They do not necessarily reflect those of FFN, its management, editors, staff or affiliates,etc.
The reader is urged to exercise due diligence prior to applying any of the concepts or recommendations of the author. Further, due diligence is urged prior to the purchase of any products or services offered by the author’s publication(s)/website.) FFN Editors
The Incredible Joy of Financial Independence
About a year ago — around Independence Day 2012 — my wife and I reached an important financial milestone, our own Financial Independence Day. We were in our mid-30s, with four kids and only one working-for-pay adult amid one of the worst job markets in generations, but we were free. Not rich, mind you, but free nonetheless.
When we ran the numbers, we discovered that with reasonable returns on our investments, we could stay in our house, cover COBRA/HIPAA health insurance premiums, and feed our family home-cooked meals. The kids would be on their own for college, our entertainment budget would consist of walks to the park for picnics, and we’d have to downsize our transportation to just the (paid-off) minivan. But still, we had a reasonable chance of making bare-minimum ends meet without working.
Peace throughout turbulent times
The transformation in our lives was astounding and almost instantaneous. I still work, as we want better than subsistence living and to help our kids start their lives without excessive debt, but I was able to land two jobs that were about as close to ideal fits for me as exist in the job market. That only happened because we had the freedom to ask for what we wanted at a time when many others were simply happy to have any job.
In addition to the awesome jobs, I also regained the ability to attend most of my kids’ sporting events, spend most weekends and some evenings with them, and tackle some of the overdue “honey-do” list. For the first time in years, our work and life were in some semblance of balance, thanks almost entirely to reaching that state of financial independence.
We got there, so can you
We followed an incredibly simple strategy to reach that point of financial independence:
- Spend less than we earn.
- Invest the rest, in tax-advantaged accounts when possible.
- Reinvest dividends in something, though not necessarily the dividend payer.
The strategy was simple, but it certainly wasn’t easy or quick. Kids got sick. Cars broke down. The air conditioner, water heater, furnace, and other appliances needed to be replaced. Vacations were reduced to driving trips to visit out-of-town family. Entertainment came largely from the public library and neighborhood sports. And notice that I mentioned working two jobs…
I followed that four-step strategy before my wife and I were married, and once she realized that it was her best shot of being able to stay home with the kids, she quickly converted. Yes, it took years of sacrifice and being extremely choosy in our spending. Still, having emerged intact on the side of financial independence, we can attest that the benefits, from peace of mind to improved work-life balance and family time, are certainly worth it.
How we invest
The centerpiece of our plan was consistent investing in a strategy that has its roots in Benjamin Graham’s timeless classic, The Intelligent Investor. The keys to that strategy are:
- Dividends: We look for companies that pay dividends, have a history of raising their dividends, and look capable of continuing to raise their dividends over time.
- Valuation: We look for companies that trade at what look like reasonable-to-cheap prices based on some fundamental measure of their worth. Since the financial crisis took out some of our weaker holdings, we began including balance sheet strength in that valuation consideration.
- Diversification: We follow Graham’s advice to look for companies that meet our other investing criteria and that operate in different industries. This absolutely saved us during the financial crisis, as many financial institutions looked good in the rearview mirror at the same time they were busy melting down. We lost more than I would have liked due to our holdings of financial companies, but far less than we would have were it not for Graham’s diversification principles.
As we worked through that strategy, we had some good years and some bad years, and we didn’t consistently beat the market. But we were able to keep on plugging away, because we understood the strategy and believed from Graham’s experience and his followers’ that it would work for us over time. And with every paycheck with money automatically sent to the 401(k), every IRA contribution, every reinvested dividend payment, and the occasional after-tax investment, we kept at it.
Why almost anyone can succeed
Perhaps the most important lesson we learned along the way is that you don’t need to trounce the market to wind up comfortable. Indeed, the act of investing is in many ways more important than the returns you get from investing. You just need a reasonable strategy that you can consistently follow and the persistence, perseverance, and time to see it through.
The strategy that got us to our Financial Independence Day may or may not work for you. But in honor of our nation’s Independence Day this Fourth of July, I encourage you to take the time to consider what your path to your Financial Independence Day might look like. Because the sooner you start, the better your chances are of reaching that goal, and the longer you’ll be able to enjoy the fruits of your effort and sacrifice.
How will you reach your Financial Independence Day?
Making the right financial decisions today makes a world of difference in your golden years, but with most people chronically under-saving for retirement, it’s clear not enough is being done. Don’t make the same mistakes as the masses. Learn about The Shocking Can’t-Miss Truth About Your Retirement. It won’t cost you a thing, but don’t wait, because your free report won’t be available forever.
(Motley Fool contributor Chuck Saletta is honored to call the Fool the home of one of his two awesome jobs.)
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Please let us know thoughts regarding this article in the comments section below. FFN Editors
Robert Kiyosaki, author of the “Rich Dad, Poor Dad”, book series offers his views on how to achieve financial freedom in this post.
Mr. Kiyosaki has been a vocal advocate for the idea of pursuing wealth building approaches to ensure ones financial growth and well-being. This approach, he tells us, was taught to him by his “rich dad”.
The opposite course, of getting a “secure”, 9-5 job with benefits and hoping to retire comfortably in 20 -30 years, was the advice of his “poor dad”.
Kiyosaki outlines his philosophy in the following video.
Please let us know your thoughts in the comments section at the end of the post.
(Notice: The following views are strictly those of the author. They do not necessarily reflect those of FFN, its management, editors, staff or affiliates. Please use due diligence prior to applying any of the concepts/recommendations offered by the author. Further, the reader is urged to use due diligence regarding the purchase of any products or services offered by the authors publication(s) or website.) FFN Editors