 |
| Simple Money Making Secrets |
Over the years, the frequency I've seen investors delude themselves is astounding. Sometimes they delude themselves into thinking that their financial situation is not as bad as it really is. Other times, they delude themselves into thinking that they can ignore their retirement and spend today 's cash, and then make up for it later which they rarely do.
When it comes to managing an investment portfolio, one of the most common illusions I see is that an individual investor passionately argues that the stock is "undervalued" at 100x earnings (learn how to calculate the price-to-earnings) or that the reason they are losing money is because of the "crooks" on Wall Street.
There were four keys we used in those early days that helped us in our quest to make money. If you take the time to remember each other, I believe that you're going to have a much better chance of achieving your financial goals than you would have by going it alone.
These keys are:
These keys are:
Don't forget that making money consists of one simple formula: income (sales or gross pay) minus cost (expenses) = profit. To make more money, you either need to increase your income, reduce your expenses, or both. There's no other way around. It's that simple, really. How you do that involves tradeoffs in terms of time, relationship and quality of life. Some people try to make money by going to law school and earning a higher salary, even though it means years of study and a lot of debt. Others are trying to make money by starting a successful business.
You should never be willing to take the risk of being wiped out just for the chance of making money. Don't start speculating with options in hopes of making you rich. Don't borrow money foolishly in an attempt to leverage yourself to the hilt and have one big score. Never rely on a single household income to pay all your bills (I prefer the Berkshire Hathaway model).
Think of every dollar as a potential employee who could earn more dollars if you protected them and put them to work. At some point, your dollars (workers) would have earned enough to live off the passive income.
During an international visit in 1982 the then-President Ronald Reagan said, "If history teaches anything, it teaches self-delusion in the face of unpleasant facts is folly." While Reagan was talking about political science, the same is true in economics. The first step in making progress is to confront reality, face it boldly, and recognize the situation in which you find yourself. Only then will you be able to develop a plan to improve your life. It may not be pleasant, but it is necessary.
In short, making money and building wealth is easy if you stay on track, keep costs low, and get your cash to work well for long periods of time. Compounding is going to do all the heavy lifting. An 18-year-old saving $500 a month in his or her career would retire at 65, with nearly $2,000,000 in wealth at a 7% rate of return. Add another decade, and the fortune grows to almost $4,000,000. Increase the return to 10% and increase the portfolio to $13,665,700. It's the nature of money and making money.
