Building Financial Security Steps 1 To 3

Building Financial Security Steps 1 To 3

Building Financial Security Steps 1 to​ 3.
We would all like to​ think of​ ourselves enjoying the good things in​ life, not having to​ stress about finances, and not having to​ be concerned about growing old, poor.
But if​ we are currently living from pay cheque to​ pay cheque, never seeming to​ get ahead or​ having any savings, how do we change things? Where do we start in​ our quest for financial security?
The best thing we can do, is​ sit down, take a​ deep breath and contemplate the differences between the haves and the have nots, the achievers and the laymen .​
What is​ it​ that the successful and wealthy do, that is​ different to​ us? What are the principles that they utilise to​ create wealth?
Once we find out the principles that others who have created financial security have used, it​ seems that then the only step left would be for us to​ try and duplicate the process.
Following is​ a​ list of​ some of​ the wealth building principles that I​ have discovered in​ my study of​ and conversations with successful people.
These concepts have been utilised extensively by those who have already created enormous wealth.
1 .​
Use the power of​ Compounding Interest/Growth .​
John D .​
Rockerfeller once described compounding interest as​ the Eighth Wonder of​ the World.
Compounding is​ also referred to​ as​ Rate & Time because the longer the time, and the higher the growth rate, the greater the effects of​ compounding become.
Compounding works by letting any interest earned get added to​ the initial investment, and then the next lot of​ interest is​ calculated on the sum of​ the two, and so on .​
Interest is​ earned on interest .​
This gives the effect of​ exponentially increasing the value of​ an​ investment.
One of​ easiest ways to​ calculate how compounding interest works with different rates of​ return is​ to​ become familiar with the Rule of​ 72 .​
This rule states that The number of​ years that it​ will take for your money to​ double is​ 72 divided by the interest (growth) rate .​
Therefore if​ you have $1,000.00 invested at​ 10% interest, then the number of​ years that it​ will take for your money to​ double to​ $2000.00 is​ 7.2.
72 divided by 10 = 7.2
2 .​
Use the tried and true method of​ investing in​ residential real estate .​
Statistics show that over 98% of​ the world’s millionaires have made their money through property.
It should really not come as​ a​ surprise, because everyone needs a​ place to​ live, and generally at​ least one third of​ the population are renting .​
Property is​ a​ necessity, so it​ can never go out of​ fashion.
As the population increases, so does the need for housing .​
The laws of​ supply and demand therefore will ensure that prices keep rising.
Banks consider property to​ be one of​ the most secure investments and because of​ this they will loan you a​ high percentage of​ the value .​
This leads to​ the next principle.
3 .​
Using Other Peoples Money or​ Gearing is​ a​ tool used extensively by the wealthy.
Why is​ using Other People’s Money so important? The reason is​ that it​ is​ possible to​ use leverage, also known as​ gearing to​ obtain a​ greater result, than you could have obtained using only your own contributions .​
The word leverage comes from lever .​
As you know a​ small amount of​ force applied on one end of​ a​ lever, can produce force far greater than what was initially exerted .​
a​ lever has the effect of​ multiplying the power exerted.
In the case of​ investing, it​ is​ referred to​ as​ leveraging when you use just a​ small portion of​ your own money, say 10% deposit on a​ $300,000.00 house, and borrow (leverage) the rest, in​ this case 90% .​
The capital growth that you benefit from is​ then calculated on the full $300,000.00, not just the $30,000.00 that you personally contributed, having the effect of​ multiplying your capital gain.
Gearing allows you to​ purchase a​ far more expensive property than you could if​ you were using only your own money .​
Controlling assets of​ a​ higher value means that compounding growth has more to​ work on, and therefore your net worth will increase much quicker .​
Gearing allows you to​ build an​ investment portfolio more quickly than would otherwise be possible.

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