November 30th, 2008 — Debt, Diversification, Financial Security, Income Streams, Investing, Leverage, Money, Mortgage, Personal Finance, Real Estate, good debt
Not all of us have had the luxury of spending the last 20 years to secure our financial future. Most of the time, through no fault of our own, putting aside money for retirement takes a back seat to handling emergencies or schooling for our kids, or simply the daily expenses of life. If you’re looking down the barrel of 65 and you don’t have anything put aside yet for your retirement, don’t worry. It’s never too late to start planning for your retirement. It may take a little extra work, but you can secure your financial future.
Let’s look at one of the best ways to ensure that you’re going to have a steady income coming in after you’ve retired. Millionaires across the world have used this technique for centuries to produce multiple streams of income. When you are no longer reliant on your 401K, or even your social security check, you’ve got a lot more freedom and a lot less worry.
This technique is called debt leveraging. Simply put, you got into a little debt in order to create a new stream of income. One of the easiest ways to illustrate this is through the purchase of a new second property. Let’s say that you find a great deal on a house that is in pretty decent shape. It’s in a good neighborhood and it’s close to good schools. You don’t have the money to buy it outright, but you don’t want to let this chance pass you by.
You can go to the bank to get a mortgage on that property and then start renting it out. Make sure that the monthly rent exceeds your monthly mortgage payment. Now, you’ve got a new stream of income coming in and you’re really not working for it. If you clear an extra $1500 a month, that’s an extra $18,000 a year on top of what you’re already making – and that’s just for one property.
Now, multiply that by a few properties and you’re making enough to really start planning for your retirement. However the key of good debt leverage is to make sure that you are not too heavily invested in one area. You’re going to want to change things up a bit to make sure that if something goes wrong you won’t take a big financial hint.
In addition to that rental property, you could put some of the profits you’re making or even get a new debt loan to put money into a high interest bearing account. Now, you’ve got a second stream of income coming in that will shore up your financial defenses. You can just keep perpetuating this until you are making enough every year to easily put aside quite a bit of money for your retirement. The best part is, this money will continue coming in, even after you’ve left your regular job. The key to a happy and fruitful retirement is having multiple streams of income that keep paying off, even when you’re not working.
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November 29th, 2008 — Debt, Financial Security, Investing, Leverage, Money, Personal Finance, Wealth
Financial planning at its smallest denominator is essentially what you’d like to have and how you plan to get it. That may be oversimplifying things just a bit, but sometimes when you look at things stripped away of all of their jargon, it’s a lot easier to understand it. So, in order to begin planning your financial future, make a list of everything you’d like to have. Whether it’s the freedom to take a vacation whenever the fancy strikes you or the ability to retire without having to worry about eating out of garbage cans, write it down.
Now, let’s work on how you plan to get there. If you’ve already got a great job, you’re well on your way. It’s easy to think that making X amount of dollars per year is going to make you rich, but when the realities of life start to creep in, it’s all too easy to become uncertain. There are going to be unexpected expenses for the rest of your life from orthodontia to cars that break down. There are going to be hurdles that will trip you up on your way to financial success.
You’ve got to accept this fact and realize that your job on its own, unless it is incredibly lucrative, is not going to be enough to secure your financial future. Your 401K cannot bear the burden of your future by itself. It’s going to need a little help. Somewhere along the line, you’re going to have to take risks and start investing. This can be pretty scary at first. All of us are familiar with the horror stories of people who took a gamble and lost everything.
However, this doesn’t have to be your story. If you want to start planning for your future, you’re going to have to take some risks. It’s being able to tell which risks are the ones worth taking and the ways that you finance these risks that make the difference. Many people are under the impression that in order to invest in something, they’ve got to have money put aside. In most cases, this means waiting until you’re well established to start making plans for your future. This is all well and good, but chances are, by the time you’re there, you’re not going to have much time left before you retirement.
Before waiting until you have a lot of money put aside, it’s a good idea to consider leveraging debt to start generating income right now. You’ll have a lot more time to start putting money away if you start now rather than waiting to get flush years down the road. If you’re already at the point where retirement is looming, debt leverage may be your first alternative.
By using smart debt management practices, you can leverage it to start making money. Whether it’s investing in stocks that you couldn’t afford on your own, or taking a chance on a new company, debt is a very powerful tool
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November 28th, 2008 — Diversification, Financial Security, Goal, Income Streams, Personal Finance, retirement
Most of us think about retirement and panic. It can be tough trying to figure out how we’re going to survive and plan for our futures when we’re just trying to make ends meet right now. If you’re strapped for cash at the end of every month, chances are you are not saving anything for retirement or for that rainy day. Although many of us have 401k’s, we cannot rely on these for our sole source of retirement money.
It’s easy to think that your 401k will always be safe, but this is not always the case. Companies go under, investments go bad. Never rely on this, or your Social Security benefit as the sole source of your future income. The key to planning and financing your future is creating multiple streams of income right now.
80% of Americans are living paycheck to paycheck right now. That means that millions of us are facing homelessness if we lose our jobs. This is a startling figure and it really drives home how important it is to have more than one stream of income coming in every month. If you are relying on your paycheck right now and it barely meets your needs, think about what would happen if that paycheck disappeared? How would you pay your bills?
Setting up multiple streams of income can be a bit daunting, especially if you have no capital right now to invest. There are many different ways that you can create multiple streams of income, even if you don’t have much money. First, let’s look at creating active streams of income, then we’ll move onto passive. Active income is something that pays you money for work that you do. This can mean getting a second job for a few hours every week, or channeling your talents into extra work.
For example, if you’re handy at fixing cars, consider setting up your own little shop in your garage. Only take on as much work as you have time for, and you’ll be bringing in extra money every month. If you’re good at something, and most of you are, there is a way to leverage that into more income.
Now, let’s look at passive income, or income that comes in requiring no extra work on your part. This is the best kind of income and it’s important to have at least one passive stream. Passive income includes returns from investments, or dividends that come in. If you don’t have any money right now, consider getting a small loan to invest in a proven stock or to put into a high interest bearing account. This is called leveraging debt and it is a concept used by millionaires across the world.
You can also get passive income from rental properties or from buying homes and selling them at a higher cost. Talk with a financial planner about your passive income options and take that step towards achieving your financial freedom. You don’t have to rely on one paycheck!
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November 26th, 2008 — Budget, Cash Flow, Debt, Financial Security, Income Streams, Long Term, Money, Personal Finance, retirement
Whether we realize it or not, many of us face financial risks every single day. From the high powered investor, to the minimum wage earner, every one of us has the potential to lose everything we own. How can you evaluate your financial risks and find ways to secure your future? Let’s take a look!
First, it is important to figure out exactly how much you spend in a single month. Get a notebook and write down everything you spend over the space of one month. Include everything from the smallest item to the largest, and don’t forget to include your monthly bills as well. At the end of the month, total up everything you spent and compare it to how much you make.
If you are overspending or cutting it close, you are definitely at risk for financial ruin. If you have more than enough left over at the end of the month, your risks are quite a bit less, but they may still be there. One of the best ways to tell how close you are to the brink is to experience what it is like when your paycheck is a few days late. Do you panic? Do your bill collectors panic? If the answer is yes, you may be cutting things a little too close.
Not many of us realize how much we depend on our paychecks every month. We may think we’re doing ok, and we have plenty of stuff to make us comfortable. Few of us put aside anything and before we know it, we’re living paycheck to paycheck. Add in credit cards and you’ve got a recipe for disaster.
Now, let’s look at the other end of the spectrum. Let’s say you’re financially well off, you’ve got plenty of investments bringing in some pretty decent returns. You’ve come to rely on those returns and you’ve always got the back up of your 401k, right? Now, let’s say the market takes a nosedive, ala Black Monday or the dot com fallout. How well off would you be then?
No matter if you make $800 a month or $8000, diversity and multiple streams of income are the best answer to shoring up your defenses against financial ruin. Let’s face it, most of us would not turn down more income every month, especially if we didn’t have to work hard to get it.
By reducing your reliance on your paycheck, or your standard investments, you are increasing your chances of being able to withstand a finance shattering event, such as a market crash or the loss of a job. The more ways you have to make money, the less likely you are to fall into financial ruin.
One of the secrets that millionaires have is leveraging debt to create a new stream of income. For example, let’s say you take out a loan to use to buy an investment property that you rent out. This is now an income producing property and you’ve got more money coming in. As you pay off that loan, the profits keep rolling in, and you’re less reliant on your standard means of income. That is one powerful way to avoid financial ruin.
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