It has been said that only about one per cent of the world’s population ever achieves great wealth. No wonder the 99 per cent majority thinks that there are some hidden secrets to becoming wealthy that rich people won’t divulge!
Recently, First Global Financial Services (FGFS) revealed some of the mysteries to wealth at its Dollars and Sense Money Management seminar. Jason Dear, FGFS Equity Trading manager, explained that the act of wealth creation was not shrouded in secrecy.
Dear explained that making money came with understanding and following simple money principles.
“There are universal rules that govern wealth creation,” he clarified. “To get rich you need to learn and execute these principles.” Dear outlined his top 10 list of ’secrets’ that could help ordinary people begin a successful journey to wealth:
1. Change your thoughts about money
To get the right start to wealth creation you have to stop thinking negatively about money, Dear explained. He encouraged persons to stop complaining and to replace worry with a positive energy. Adopting an attitude of gratitude was also important to financial success, he declared.
2. Realise that money in its simplest form has no value
Over time, money as a symbol of value is reduced by the effects of depreciation and inflation. Dear revealed that affluent people did not get rich by focusing on money alone, they became wealthy by creating assets with their money.
3. Don’t place money in items that depreciate
Dear cautioned persons from spending a lot of money on items such as cars, clothes and cellphones that depreciated even faster than inflation. “Once you drive a new vehicle off the lot you can immediately lose 30 per cent of its value,” Dear disclosed.
4. Understand the difference between assets and liabilities
An asset increases in value and generates income, while a liability doesn’t create money and its worth decreases over time. Dear explained that any item could be used in either way; once it could generate income then it could become an asset.
5. Create wealth from several types of income
Dear outlined the differences between earned income, portfolio income and passive income. Earned money comes from working for others for a fixed salary; portfolio income is derived from investments such as stocks and bonds; while passive earnings flow when your money works for you.
Earned income is not sufficient for persons to truly become wealthy, as it is dependent on personal effort and limited time, and has the highest tax rate. Dear encouraged persons to invest towards building wealth and to look for ways to generate passive income.
6. Work for free in your business
Entrepreneurs must be willing to initially work for free in their own businesses if they want to become successful, Dear opined. Many enterprises fail because the owners pay themselves when they should be re-investing the profits into their operations. Dear advised entrepreneurs to have enough money to sustain themselves before starting a business.
7. Differentiate between good debt and bad debt
Debt is not necessarily something to be avoided, Dear explained, as it could be considered ‘bad’ or ‘good’ depending on what it was used for. “If you use debt to buy an asset, it is good,” he clarified, “but if you borrow to buy a liability it is a bad debt.”
8. Understand the power of leverage
One of the mysteries of wealth is the fact that rich people are able to work less time and make more money than regular persons. Dear revealed that affluent persons use the power of leverage to make money. One definition of leverage is the use of an object’s power to gain a positional advantage.
By establishing a business, persons can leverage the work of others to create wealth for themselves. Dear also declared that you didn’t always need to have money to make money, as you could borrow other people’s resources through leverage.
9. Think rich, not poor
“To become wealthy, you have to think and act like rich people,” Dear pointed out. He advised persons to copy the actions of wealthy mentors, whether in real life or vicariously through books. “If you focus on debt instead of wealth,” he added, “you will only receive more debt.”
He noted some differences between prosperity and poverty thinkers: the poor think about money, while the rich think about assets; the poor worry about the risks, while the rich think about the returns; the poor don’t try because they are afraid to fail, while if the rich fail they keep trying until they succeed.
10. Focus on opportunities
Dear dared everyone to see opportunities where others could only perceive problems. When persons become creative in solving problems they will find ways to earn money, he affirmed. Dear closed with the reminder that great wealth could be generated in challenging times as ‘Necessity is the mother of all inventions.’
Copyright © 2009 Cherryl Hanson Simpson.