Thursday, November 3, 2011

Rules of Money

Week 1 – The New Rules of Money

The new rules of money became established during the 70s after Nixon had canceled the gold standard. No longer would the dollar be worthwhile, as its value would continue to drop over the years. Even now, the dollar’s value is lower than that of many foreign currencies.
Consequently, prices rise while your income remains the same. This causes many problems as you end up spending all your money just to survive. You will continue this pattern until you learn the new rules of money. Once this becomes engraved in your mind, you will have the power to become rich.
Such a concept is maybe difficult to believe. You maybe think that in order to become rich, you must be super-intelligent. In reality, intelligence has very little to do with being rich. What really matters is how you handle your money. This is a skill that rich people always had, though in the olden days the concept was applied differently.
To get a better understanding, take a look at the section below as it will discuss the old rules behind making money.

The Old Rules of Money

1.Get an Education
In the olden days, school was the ultimate answer to financial success. After graduating, you would get a job that you would stay with for most of your adult life. Then, when it came time to retire, the job would provide a pension. Today, not only is it hard to find a job, but getting a pension is usually out of the question. Most are lucky if they even get health insurance.
Outsourcing has not made the problem any better. With a click of a button, a company can hire a foreign person for significantly less money. This leaves Americans with very few alternatives. Some even turn to outsourcing for themselves, especially as freelancing sites become more popular. However, when this happens, they typically work for the same wages as their foreign counterparts. So, either way, they are not making the money they need.
If you are working a traditional job you do not have things any easier. Unlike your parents and grandparents, who stayed with one job forever, nowadays you will work several different jobs throughout your lifetime. Indeed, with today’s work force, you cannot expect one company to provide financial security. Instead, expect to work more than three jobs in your lifetime.
2. Work Your Way Up
In today’s time, you get taxed more as your income rises. As a result, it is possible that you end up paying more taxes than your company’s CEO, (who may have more deductions available).
Warren Buffet is an example. Even though he is a billionaire, his secretary is actually taxed more than him. She is getting penalized for being an employee, something that happens maybe to you too as you use hard work to increase your salary.
3. Put Your Money Away
This strategy worked well in the past, when the US dollar was actually worth something. It can still be useful, but only to a point. If hyperinflation happens, your savings do not mean anything. The $10,000 you were able to save today may only be worth $5,000 ten years down the road.
4. Eliminate Debt
In the past you had to work harder to get loans. This is because credit was not readily available. If you wanted to buy a house, you needed to have little debt and at least 10 percent down. Today, you need credit to build your financial portfolio. You just have to make sure you have a handle on your debt. Otherwise, it will become a stumbling block.
5. Use Your 401K to Diversify Mutual Funds Investments
The problem with this approach is that the mutual fund company takes most of the money. This is while you assume all of the risk. It is just not worth it considering the small percentage you will receive in the end. Plus, if you use your 401K for the funds, you are essentially spending away your retirement money.
Before, you could do this because stocks were just that profitable. They would earn tens of thousands even after the mutual fund company took their cut. Now stocks are not profitable enough to make such a return, especially as the economy continues to get worse.
There you have it‚ the old ways of making money. These are the rules that gave you in the past very happy lives. If they are applied now, you will earn a little bit of money, but you will limit your potential in the process. To become rich in the present day, you must learn the new rules of money.

The New Rules of Money

1.Start a Business at Home
In between your regular job, consider starting a business from home. In addition to being a lot of fun, at-home businesses tend to offer many tax benefits. This is because you are allowed to make more deductions. In some cases, you do not even have to buy anything. Your mortgage and utility bills by themselves could result in a generous deductible.
Do not become too enamored with your business, though. If you do not make enough to cover your household expenses, you need to do whatever you can to keep your day job. At most, you can consider getting your spouse to work a job while you do your business at home.
2. Be Entrepreneurial
To be entrepreneurial, you must think outside of the box. School alone will not teach you this skill. It is obtained through your creative mind. Use it to make money on your talents. For instance, if you love writing, you can make money self-publishing books. If you like to draw, you could freelance as an illustrator or sell T-shirts with catchy slogans. Handymen can help repair problems in people’s houses. The list of possibilities is endless.
3. Invest in Commodities
You should never keep your funds in dollar form. Instead, consider investing in gold, silver and other commodities. These tend to rise in value over time. So, when you go to sell them, you will end up doubling or tripling your original investment.
Going back to Warren Buffet, he was able to make millions with this very method. He invested much of his money in silver, during a time when that type of thing was not popular. Other investors laughed at him. They were not laughing when he sold his silver. Now other investors are earning thousands doing the exact same thing.
4. Make Debt an Advantage
Good debt not only makes you more attractive to lenders, but it can also earn you more money. For example, a business loan of $100K is indeed a big debt. However, if your business can make a decent return, it is a debt that is worth having. Debt can be an excellent leverage!
Your mortgage is another example. If it is paid off in its entirety, you have to pay property taxes out of your own pocket. In some jurisdictions, this could be tens of thousands‚ almost a mortgage in itself. To avoid this problem, consider renting out your property. With the money that the renter provides, you will be able to make a decent return while still letting the mortgage company handle your property taxes.
5. Do not Listen to Salespeople
The get-rich-quick schemes you see on television usually make suggestions based off of the old ways of making money. They sound good on the surface, but in the end only one person makes money; the individual who created the program.
Instead, consider reading materials created by people who do not have an agenda. Entrepreneurial magazines, blogs and similar resources can be used to gather more ideas on the new rules of money. Just remember to find information written by people who do as they say. Anything else is just a ploy designed to sell an over-priced product.
In conclusion, the new rules of money must be learned if you want to get out of a financial rut. The old rules of yesterday just do not apply anymore, even if they seem to make sense. As the dollar continues to inflate, and job security weakens, it is important to keep an open mind towards money-making. Doing so could make you a wealthier person.

1 comment:

How To Get Your Own Reality TV Show said...

I totaly agree with your views..Cool post.