Growing a Little Richer-*
It's funny how almost everyone I meet, regardless of his or her level of material success, considers being wealthy as something that's just over the horizon.
Are you the same? Do you believe you aren't quite up to the mark when it comes to being considered wealthy?
Soon I'm going to make some clear suggestions grounded in sound financial planning principles for you to follow if your heart's desire is to one day grow a little richer!
The truth is most of us want to be in the happy state of knowing each night as we drift off to sleep that we are a little bit richer than we were when we woke up that morning.
Can you relate to that desire? Of course, you can. After all, the importance of money in this interconnected world of ours grows each day. Yet, I still believe that if you hope to live a happy, balanced life, you'll want to heed the words of Calvin Coolidge, America's 30th President, "Prosperity is only an instrument to be used, not a deity to be worshipped." Smart man!
So, if you wish to maintain balance in your life, retain a sense of deep joy, and successfully grow richer and richer over time, it's important for you to focus on enhancing two personal quantities:
Your cash flow surplus and your net worth.
Strengthening the first will automatically beef up of the second. To learn more about cash flow enhancement, you may want to read this article entitled What is a Cash Flow Statement?
The way to ensure you grow a little bit richer each day is to focus on your cash flow patterns over just one day, then over one week, later over one month, and so on. If within each time slice you always make it a point to spend less than you bring in on a net basis (after tax and other standard deductions) then you will be transforming the unutilised portion of your net earnings into a personal store of capital; and you will be acting as a capitalist in the best sense of the word!
Possessing a growing store of capital will empower you to further load up your net worth statement with fruitful or productive assets like bank savings, money market funds, bond funds, domestic equity funds, international equity funds, property funds, rental-yielding properties, dividend-yielding stocks, and the like. In essence, you will be choosing to exercise delayed gratification by giving up a portion of your capacity to consume today for the opportunity to possess far more (and to enjoy a lot more) tomorrow.
It is important to realise that a net worth statement has two parts, as does a cash flow statement. The net worth statement's twin components are assets and liabilities. In general, it is tempting to mouth platitudes and say that assets are good and liabilities are bad. However, that would be an excessive generalisation.
Let me explain:
Assets can either be appreciating or depreciating ones. Obviously, appreciating assets like growing bank deposits, investment funds and high quality stocks are good. Depreciating assets, on the other hand, lose value over time. These may include your cars, computers and mobile phones.
The wise course is not to avoid owning depreciating assets but rather to ensure you have much more in appreciating assets.
Liabilities also can be good or bad. Good forms of debt might include well-structured mortgages on second or third pieces of property that you earn rental from. Bad types of liabilities most certainly include all unpaid, regularly carried over credit card debt.
It is a tremendous eye-opener for some of my clients when I take the time to explain that unpaid credit card balances are terrible liabilities for regular people like you and me to have, but are wonderful assets for the card-issuing banks!
So ask yourself if your goal in life is to sacrifice your personal long-term financial health to bolster the bottomline of some faceless financial institution, or is it to manage your money wisely to ensure you grow a little richer everyday?
Are you the same? Do you believe you aren't quite up to the mark when it comes to being considered wealthy?
Soon I'm going to make some clear suggestions grounded in sound financial planning principles for you to follow if your heart's desire is to one day grow a little richer!
The truth is most of us want to be in the happy state of knowing each night as we drift off to sleep that we are a little bit richer than we were when we woke up that morning.
Can you relate to that desire? Of course, you can. After all, the importance of money in this interconnected world of ours grows each day. Yet, I still believe that if you hope to live a happy, balanced life, you'll want to heed the words of Calvin Coolidge, America's 30th President, "Prosperity is only an instrument to be used, not a deity to be worshipped." Smart man!
So, if you wish to maintain balance in your life, retain a sense of deep joy, and successfully grow richer and richer over time, it's important for you to focus on enhancing two personal quantities:
Your cash flow surplus and your net worth.
Strengthening the first will automatically beef up of the second. To learn more about cash flow enhancement, you may want to read this article entitled What is a Cash Flow Statement?
The way to ensure you grow a little bit richer each day is to focus on your cash flow patterns over just one day, then over one week, later over one month, and so on. If within each time slice you always make it a point to spend less than you bring in on a net basis (after tax and other standard deductions) then you will be transforming the unutilised portion of your net earnings into a personal store of capital; and you will be acting as a capitalist in the best sense of the word!
Possessing a growing store of capital will empower you to further load up your net worth statement with fruitful or productive assets like bank savings, money market funds, bond funds, domestic equity funds, international equity funds, property funds, rental-yielding properties, dividend-yielding stocks, and the like. In essence, you will be choosing to exercise delayed gratification by giving up a portion of your capacity to consume today for the opportunity to possess far more (and to enjoy a lot more) tomorrow.
It is important to realise that a net worth statement has two parts, as does a cash flow statement. The net worth statement's twin components are assets and liabilities. In general, it is tempting to mouth platitudes and say that assets are good and liabilities are bad. However, that would be an excessive generalisation.
Let me explain:
Assets can either be appreciating or depreciating ones. Obviously, appreciating assets like growing bank deposits, investment funds and high quality stocks are good. Depreciating assets, on the other hand, lose value over time. These may include your cars, computers and mobile phones.
The wise course is not to avoid owning depreciating assets but rather to ensure you have much more in appreciating assets.
Liabilities also can be good or bad. Good forms of debt might include well-structured mortgages on second or third pieces of property that you earn rental from. Bad types of liabilities most certainly include all unpaid, regularly carried over credit card debt.
It is a tremendous eye-opener for some of my clients when I take the time to explain that unpaid credit card balances are terrible liabilities for regular people like you and me to have, but are wonderful assets for the card-issuing banks!
So ask yourself if your goal in life is to sacrifice your personal long-term financial health to bolster the bottomline of some faceless financial institution, or is it to manage your money wisely to ensure you grow a little richer everyday?
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