This Money Must Be Leveraged For Gain

Category: Finance, Financial Planning.

Leveraging money certainly is not a new concept. People converted their labor into goods and leveraged the goods to acquire other goods.

The idea has been around even before the concept of money itself. When you work for wages you are basically doing the same thing. Leveraging money can be used in many ways. If you are a carpenter you trade your skill for money and the contractor uses your finished product parlayed with other people s skilled work as a leverage to get a profit. One of the most simple ways is to lend money for percentage. They pay you a percentage on your money and in return they lend the money, say to the contractor for a higher percentage.

When you deposit money into a savings account you get a percentage back from the bank for their use of it. You can also go the the contractor and lend the money for a higher return, circumventing the bank. If you are going to invest your money by trusting it to a business consortium. Retailers leverage money by buying goods at wholesale and selling at retail, which produces a profit. Investigate the background of the people involved to assure the safety of your money. Be Faithful To The Program.

Don t listen to the get- rich- quick schemer, always look at past projects and the return he/ she has generated. No matter if you are buying and selling, trading labor or investing, you must be faithful to the ten percent rule. Ten percent of everything you make is yours! Remember from the last lesson? This is your nest egg, your ace in the hole. It s a simple matter of budgeting. This money must be leveraged for gain.

Maybe you won t be able to buy that new sound system, or you will have to drive a cheaper model car, but you will be laying a foundation for you and your loved one s future. You are a responsible person of vision as you have recognized your duty to yourself and your loved ones. You will be ready when the children are ready for collage, because you took the steps to prepare for the future. Ten percent. Tax yourself, and use that tax money to leverage your way to wealth and security. In many places you pay that much in sales tax. Second: most important leverage of money is in Insurance.

Term life is simply you lending money to the insurance company for a certain return. That s right insurance, life and health. When you are young the insurance company will pay for your money because they know the odds of you dieing is low. You can either ride out the term and use your accumulated interest to help pay your payments or cash out and invest the interest gained. As you grow older the odds increase and the payback is less, so goes the name" term insurance" . The important thing is, your benefactor gets paid because you covered any mishap that might befall you. If there were a thousand dollar bill attached to this article, could you start today and between now and the same time next year, double that amount?

The Earnings Are Automatic. It takes a little skill but it can be done. At the end of the second year, $4, 0000. Starting with$ 1, 0000, at the end of the first year, your investment has grown to$ 2, 0000. At the end of the tenth year, you will have accumulated wealth amounting to$ 1, 024, 000now your financial performance goes into high gear. You have yet to apply techniques of OPM or external leverage. The technique has been the simple on of investing your money for a given return over a given period.

Let s look at an example of using OPM to increase money. The amount grows at a 35% rate. The example begins with$ 1, 0000 investment and assumes you make no personal cash addition during the ten year growth period. However, you will borrow, in this instance against your net worth and amount equal to it, you borrow, in other words$ 1, 0000 against your initial investment of$ 1, 0000, and then invest the$ 2, 000at 35% yearly. Assuming that you have$ 1, 0000 to begin with, you then borrow another$ 1, 0000 which gives you a working capital of$ 2, 000the first year s earnings, at 35% then amount to$ 700From the total of working funds plus your 35% return, that is$ 2, 0000, or$ 2, 7000, you must deduct 8% interest paid and the repayment of OPM. The cost of this loan is, let s say, 8% . These deductions total$ 800 and$ 1, 0000 respectively, leaving you a year- end net worth of$ 1, 620 It s For Your Benefit.

Do It Today. Remembering that you will not add any more of your own money to your investments at this point, you will now take that$ 1, 6200 and project earnings for the second year, again borrowing an equal amount to give you investment capital of$ 240by adding a 35% return to this amount, and then deducting interest and repayment of OPM, your second year net worth will grow to$ 2, 6200 For the third year, you will borrow an equal amount, giving you working capital totaling$ 240Continue this projection for ten years, and you ll find that, from your initial investment of$ 1, 0000, your net worth has grown to$ 124, 3800 by simple reinvestment and the use of OPM. In the next chapter we will discuss leveraging OPM or Other People s Money more in depth. Ten percent for investing in a more secure future is a small price to pay. Always remember nothing will happen if you don t get started in paying yourself 10% of your earnings. Don t delay, pay yourself a personal security tax and put it to work. Happy Trails

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