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Developing financial intelligence is elemental in developing the skills that will teach you to make money and create wealth. It is difficult for people in general to commit to wealth creation. In part, this has to do with the overwhelming effort that people perceive as necessary to creating wealth, and in part it has to do with the attitudes we have grown up with in regards to wealth. Schools, colleges, and universities teach us lots of things; lots of useful things that we can really use in life. Unfortunately, in terms of wealth creation, there are also a lot of things school didn't teach us. It is difficult for people in general to commit to wealth creation. In part, this has to do with the overwhelming effort that people perceive as necessary to creating wealth, and in part it has to do with the attitudes we have grown up with in regards to wealth. When we are trying to work towards some goal or success, it can be difficult to remove our focused perspective. So often, we talk about nothing but our dreams and how we will reach them. Mention the word 'stocks', and many people have painful experiences to narrate. Stories abound of how people have had their life savings wiped out overnight. A mutual fund (called 'unit trust' in Asia) is an investment vehicle that pools money from many individual investors. A professional fund manager invests and manages these funds into stocks, bonds and other securities. Let me give you an example to illustrate the power of compounding. Let's say we played a game of golf and we made a friendly bet of 10-cent on the first hole, with the bet doubling on each hole. Would you take on this bet? Now, if you were familiar with the game of golf, you would know that there are only 18 holes, so how much can the bet be on the 18th hole? Besides taking steps too increase your value, you must also increase the time you spend creating value to boost your income. If you are self-employed, then you are usually paid by the hour or by the job. So obviously, when you work longer hours and more days, your income will increase! In the classic best-selling book 'Think & Grow Rich', Napoleon Hill found through intensive research that the five hundred richest men in the world all had one thing in common, they all belonged to a strong support group of like-minded individuals where they received the knowledge, advice, resources, contacts and emotional support to succeed in their creation of massive wealth. Before you can ever reduce your expenses and increase your savings, you must first know where your money is going to. Many people share the same experience of having no idea where their $5,000 salary went. 'How did I spend so much money?' 'I thought that I should have $1,000 left at the end of the month, but it seems to have all disappeared!' Many people have the wrong idea about what being a millionaire is all about. Many also equate instant gratification with happiness. They believe that millionaires live lavish lifestyles and all that self-indulgence brings lasting happiness. Let me illustrate to you a very well known example of the power of goals. In 1952, there was a research study done on the impact of goal setting on the graduating batch of students at Yale University. If you think about, many people will make over a million dollars in their lifetime! If you were to earn an average income of $3,000 a month ($36,000 a year) over 40 years (age 25-65), then you would have a total of $1.44 million ($36,000 x 40 years) flow through your hands. There are three major steps that master investors take and they are: 1) identify very good businesses, 2) buy them only at a huge discount and 3) wait for the market to realize its true value or overvalue it. The first step to take to increase your savings is to start reducing your expenses. So what is the first expense you must reduce and eventually eliminate? It is the interest expense you pay on consumer debt. I am sure that no matter where you are in your career, you desire to create more income for yourself. For most people, only two options come to mind. Either they work much harder in their job and hope their boss notices their efforts and gives them a raise of 5-10%, or quit their job and find another company that will pay them 10-20% more. As an entrepreneur today, you must do a lot more than expected in order to run a successful business and create wealth! Some individuals do obtain and come into contact with wealth at a certain point in their lives. Unfortunately, most people tend to be mistaken in their attitudes of being wealthy. Instead of using and building up what they have to their advantage, most of them tend to lose what they have acquired. So with all these money multiplication strategies, where should you put your hard earned savings? How should you allocate your funds to generate maximum gains yet minimize your risks? 1 2 | ||
