How we trade options building wealth creating income and reducing risk
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Synopsis Product Details Shipping. Some of the top financial mentors in the world often suggest being wealthy is being able to do what you want, when you want with whoever you want. The fact of wealth creation is you do need to generate some income, but many very wealthy people have had a standard salary their entire working life.
Often what happens is as their income increases their expenses increase. The best way to increase your income is to generate multiple streams of income or to have money coming in from several different areas. James Althucher, one of the most prolific finance writers, stresses that the average millionaire has seven sources of income. If one of your income streams stops for any reason, you still have other income to rely on.
If you are looking at retirement planning, then creating multiple sources of passive income is the way to go. If something were to happen to this income stream, the financial stress can be overwhelming. Wealthy people do not rely on income from one area as a successful business does not rely on income from selling only one product.
Start investing in shares in the stock market, property or cash to increase your sources of income. Nowadays, the cost to build an online business is quite low. Consider the options of creating additional income streams via a business. The idea is to start. You will pick up the skills along the way. While focusing on increasing your income, it is also important to manage your expenses.
There is a very simple rule for creating wealth. If you had 10 minutes to calculate how much you earned last year, it is very likely that you could do this very accurately. However, if you were given 10 minutes to calculate how much you spent last year, you will struggle. Keeping track of where your money goes is an important part of wealth creation. There is a great book called the Richest Man in Babylon link to Amazon on the right which details the process of accumulating wealth.
What is the biggest expense that you will face in your lifetime? Many people respond that it is their house, their children or their partner. All of these are expensive items, but it is not the biggest expense you will face. If you are paying the highest tax rate in Australia, then almost half of your money disappears before you see a cent. That is before you pay GST, petrol or alcohol taxes. Tax is by far the largest expense you will face during your lifetime.
It is important you spend time focusing on reducing your tax. Many people will drive across town to save one cent on their petrol or visit many different supermarkets to save a few dollars on groceries.
If they spent as much time focusing on legally reducing their tax, then they would be in a much better financial position than saving a few dollars here or there. The goal of a person seeking to create wealth is to increase their assets so that they can generate an income from them. The starting point is to recognise what is an asset. The real definition of an asset is something that puts money in your pocket. Anything that takes money out of your pocket is considered a liability.
Many of the things you consider to be assets are in fact liabilities as they cost you money. The car the house and the boat are all lifestyle assets. Rental property, shares and cash are considered investment assets. People who struggle to become wealthy make a critical error throughout their best income producing years. They get a high paying job and buy the house, the boat and the car the wealthy drive. The link they missed was the rich person bought investment assets to pay for the house, the boat and the car.
They are purchasing them through their business. Debt is not right or wrong. It is how the debt is used that will determine whether the debt is of benefit to you or detrimental to your financial well-being. You would have memories and photographs maybe, but no money. Managing risk is about reducing the impact on your financial situation when things do go wrong. Risks fall into two categories, insurable risks and uninsurable risks.
Most people have insurance for their house, car and contents, but fewer protect the things that can have a huge impact on your financial well-being. This can be protected with income protection insurance which will replace an income if you are unable to work for any length of time.