Experts tips to wealth creation
There is an old maxim that proposes in effect that if you want to know the best way to do something then ask those who have done it.
The question ‘How do I grow rich’ might seem trite but let’s face it if you are in business, doing the hard slog and taking the risk then if you are not driven to make a lot of money then what the hell are you doing in business? For more business tips check this review about this software used to make pay stubs.
A financial journalist at the Financial Review took the trouble to do just that and either personally asked some notable Australian achievers or researched what some notables from elsewhere have said about the topic; how to grow rich for which we also recommend to check out Skrumble.
Mark Bouris, Warren Buffett and many others were duly canvassed on the topic. Their answers were disseminated and presented as a consensus. Warren Buffett’s investment vehicle Berkshire Hathaway has returned no less than 20% annually for 45 years! He has enjoyed occupancy of the top 10 World Rich List for some decade or more.
Those answers are summarised below noting my commentary is a precise of a much longer dissertation.
There are essentially 5 over riding and commonly used approaches that work.
- Build your own business and sell it at full value
- Borrow viz a viz UOPM
- Buy and hold capital growth assets noting that ‘the rich do not follow the herd’
- Minimise the tax impost and
- Budget.
Build your own business
This is proposed to be the fastest way to grow rich though success occurs typically when you do what you are good at, you are prepared to take risks, you work hard and you get lucky.
If your business provides substantial leverage then you will have something valuable to sell at exit time. If there is minimal leverage then you will have to find something else into which you can divert your earnings to provide the leverage.
Importantly to optimize business sale value you need to have your business ready for sale (some time before the sale is to occur) and then timing is everything.
To find leverage elsewhere then you need to employ the following proven approaches.
Gearing
Borrow to give you more to invest and take advantage of leverage and the fact that as a general proposition the interest is tax deductible. This is what is known as UOPM or Using Other People’s Money.
Recognise once you borrow you also increase risk hence it is a wealth creation tool to be used wisely. Given market volatility is the norm then you should maintain a cash reserve viz a viz cash holding or undrawn portion of a loan facility.
Buy and hold growth assets
Use gearing to acquire growth assets.
Property features at some point in most success stories either as the means to wealth or preserving it.
Buy when everyone else is selling (or trying to), seek cash flow generating assets and be patient.
Success through the share market requires discipline, patience, doing your own homework (and seek good advice) and being open to opportunity.
‘Becoming rich through the share market is not about how much you make on any one investment but how much do you lose’. Discipline is needed to keep losses to the minimum.
Discussion of this issue brings to mind the commentary of a long term successful property investor and adviser friend of mine. In essence his attitude was ‘property is very forgiving as even if we buy at the top of the market provided we are patient we will come out OK in the end’.
Minimise tax impost
Quite simply the less tax we lose from gains the more we have to reinvest. Compound this outcome over many years and the cumulative difference can be staggering.
Good tax planning requires a proactive approach to management of our affairs which compels us to have an overall strategy for dealing with tax under pinning our wealth creation program with https://selfassessmentaccountant.uk/.
Budget
This should be understood within a broad context and includes everything from managing our cash flow, accelerating reduction of private debt to taking advantage of purchase discounts.
Do not procrastinate
The current market place level of low confidence can readily influence adversely our own decision making and in this respect ignore opportunity.
The earlier mentioned tips include buying growth assets at the bottom of growth cycle.
The property market in Queensland is in the opinion of many industry commentators at or near the bottom of the growth cycle.
Do not follow the herd!