Saturday, August 4, 2012

How to create wealth and attain financial freedom

Stop mismanaging your money well
The century old book by George S. Clason © 1929 The Richest Man in Babylon points out these secrets to offer yourself ability to increase your networth and have money work for you:
  1. Pay ‘yourself first’, put away at least 10% of your income consistently. "What have you to show for your earnings of the past month? What of past year? You pay to everyone but yourself! A part of all you earn is yours to keep. And it should be no less that a tenth no matter how little you earn." Open a separate bank account designated your Financial Freedom Account (Read T. Hav Eker's Secrets of the Millionaire Mind).  The job of this account is to build a golden goose that lays golden eggs called passive income. And when do you get to spend the money? Never! It is never spent-only invested. Eventually, you get to spend the income from the investments (the eggs), and never the principal (the goose) itself. In this way, it always keeps growing and you can never go broke. So,
  2. Act today, start saving not less than 10% of every dollar you receive (after taxes) to this account.
  3. Invest your savings where it’ll earn more money safely - use it for buying assets and investments to create passive-income streams. Re-invest the earnings to get more earnings. Increase your ability to earn  and multiply your income sources.
  4. Control your expenditure (live on less than you earn, at most 60-70% of your income – Budget and track your expenses).
  5. Guard your savings from loss - do not invest in areas you are not familiar with, or have no wise guidance in doing so.
  6. Make of thy dwelling a profitable investment - owning the house you live in is a plus to your net worth
  7. Insure your future income
When to take action
Time to start taking action towards a wealth goal is now. Why now? Because;
}  You spend an enormous amount of time thinking about money if you do not have it
}  Newton's First Law of Motion applies: A body in rest remains so and a body in motion tend to remain in motion, unless, it is acted upon by an unbalanced force. Nothing will change in how you manage your money if nothing changes!
}  Just like other natural laws, there are certain laws that govern acquisition of money and property (wealth)
}  To produce effect (result) there must be a  cause (law of cause and effect)
}  Financial success is not a result of entirely dependent on Environment, Talent, Hard-work, Thrift/ frugal rather it depends on doing things in a certain way – following the laws that govern acquisition of wealth.
}  If you set for yourself a SMART Goal, God has already given you potential to achieve it.  On the contrary, if you aim at nothing, you will achieve it.

It does not matter whether you have a lot of money (which is good), or have nothing. Until you show you can handle what you've got, you won't get any more! You must acquire habits and skills of managing a small amount of money before you can have a large amount. Remember, we are creatures of habit, and therefore the habit of managing your money is more important than the amount. Either you control money, or it will control you. To control money, you must manage it well. 

Our next post will delve more on personal financial management.

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