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Your Wealth and Happiness

"For every investment, spend what you have to but don't spend more than you should."

You often hear people say, "I'd be very happy if only I could win the lottery." The truth is that money can only buy you moments of pleasure but not happiness. Happiness comes from the authentic power within that will last. None of us can take the money or possessions with us one day when we leave. Many people have plenty of money but a lot of them are nothing but rich. In his book How to be rich, J Paul Getty states the importance of understanding that the term rich has infinite shadings of meaning by the able, ambitious man who strives for success.

The world economy has its cycles of ups and downs. The interest rate will rise and fall during a cycle, so will the trends of the property and stock markets. If you understand the concept you will always do well in the long run. Some who don't are heading for a lot of trouble in the future when the circumstances change. Changes are inevitable. Many people, during a property boom, borrow beyond their means to buy properties that they can ill afford thinking that it is a smart move. In his book called Rich Dad: Cash Flow Quadrant, Robert Kiyosaki helps readers to distinguish the differences between Assets and Liabilities:

Assets vs. Liabilities

  • Asset: something that puts money in your pocket
  • Liability: something that takes money out of your pocket.

Is the home in which you live an asset or a liability? In Rich Dad's world, your house is a liability. Even if you own the property with no mortgage, you still pay property taxes, utilities, maintenance, etc. Therefore, money is being taken out of your pocket. (NB. The author is not saying that buying a property is necessarily bad or good but it is essential to be aware that it is a liability that needs to be handled with care.)

A famous philosopher states that there are two ways to make yourself rich: either make a lot of money or lower your expectations. Re-defining your material desires is certainly an easier way to get rich quick.

Steps to safeguard your wealth are also a prerequisite to being rich:

  • Managing your expenditure is vital to achieving financial freedom
  • Sorting out your material wants and needs
  • Earning at least enough for a comfortable retirement

There is an interesting formula in the book called Retire Young, Retire Rich. It shows how much money a person should have in order to be able to retire comfortably. The author says if your wealth ratio is over 1.0, you can consider retiring, obviously the higher the better.

Wealth Ratio = Passive Income + Portfolio Income
                                     Total Expenses

where there are 3 basic types of income

  • Earned Income = income from your normal job
  • Portfolio Income = from paper assets like shares and bonds
  • Passive Income = income from e.g. properties

If you are not happy with your current job then How to Make a Living by Being Yourself is a book you must read. The author, Neil Crofts, offers inspiration for individuals who are tired of career conformity. He shows how we arrived at a situation where many of us are tied to jobs we don't enjoy. He demonstrates the steps you need to take to find out who you are and what you want from life. Finally, he reveals how you can turn all that into a business idea that is authentic to you.

Well, I hope you are feeling richer already after reading this article ...

Wizdom updated on 28 Feb 2005

Would you like to set up your own business?

How to Increase the Profitability of Your Entrepreneurial Business

 

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Further Reading:

  ~ £9.59 Buying Bargains at Property Auctions by Howard Gooddie ~ £7.99 The Buy-to-let Bible by Ajay Ahuja  

 

Audio CD - The Millionaire Mindset Audio CD

 

Powerful personal finance management tools (inc. Tax Saver Deluxe) CD Rom

 

Publish It Profitably

Useful Sites

 

Business Wisdom Collection:

    • Whatever you sell, sell its benefits, not its features.
    • Don't try to sell something that is already sold.
    • Don't wish it was easier. Just wish you were tougher.
    • Turn bad experiences into opportunities.
    • When asking for help, appeal to people's interest, never to their mercy or gratitude.
    • Once we make a decision to do something, the means appear.
    • Deal with big difficulties one bit at a time.
    • Knowing what to do is not enough. You must do what you know.
    • The secret of being happy is not doing what one likes, but liking what one does.
    • Work to live. Don't live to work.
    • Repetition is the mother of success.
    • Say what you mean and mean what you say.
    • Setbacks are part of being alive. Problems are opportunities in disguise.
    • It's not how many brains you've got that matters, it's how you use your brains that counts.
    • Never underestimate your own intelligence and never over-estimate the intelligence of others.
    • It’s better to be out of the market wishing you were in, than in the market wishing you were out.

The Foundations for Successful Investment ( Article from http://www.share.com )

Before buying or selling shares it is advisable to decide what sort of investor you are. Are you looking for capital growth, income, or a mixture of both? You should decide what level of risk you are prepared to accept. Are you the type of person who doesn't want to take any risks, or cannot afford to take the possible losses that may occur - or are you prepared to accept higher risks with the possibility of gaining higher returns? In the broadest terms, if you are a cautious investor then a portfolio of solid, "Blue Chip" shares should be considered. However, if you are a more aggressive investor it may be an idea to look outside the FTSE 100, where greater risks carry the potential for greater rewards. A few points to remember when investing:-

  • Don't put all your eggs into one basket This well known saying is always of vital importance. In other words you should diversify your portfolio in order to spread the level of risk - not every decision you will make will produce the desired result. For example, buy five shares. Over a period of time three of the shares will probably perform in line with the market, another will be a star performer and one may be a disappointment.

  • Be a long term investor Those who reap the greater rewards hold their stock market investments over an extended period of time, gaining higher returns than many other forms of investment

  • Buy quality When making investment decisions it is necessary to look at the individual companies that have good long term growth potential, backed by a successful track record over a number of years.

  • Buy Big Our analysis shows that buying the larger stocks by market capitalisation has tended to produce impressive returns.

  • Be patient and don't panic with price fluctuations The price of shares will always go up and down. Investment success is built on the selection of core holdings with long term attractions, which will be unaffected by short term price movements.

  • Timing is everything A fall in the share price of a stock you like may represent a good buying opportunity, whereas a stock which has risen rapidly in a short period may now be overpriced and due for a "correction".

  • Think long and hard before selling a good share Has it reached its full potential?

  • Use professional advice It is easy to obtain the current "Hot Tips" and "Buy" recommendations - these are available from any newsagent. The difficult part is knowing what to do with the shares once you have bought them because the outlook for even "Blue Chip" companies can change. This is where the Share Centre will help. We will endeavour to give you the most up to date information regarding a company's long term potential to help you decide the correct action to take.

  • Do your homework Find out about the shares in which you are interested and bear in mind that there is a wealth of information on listed companies. Annual reports, press coverage and even using the companies products can provide as useful insight into the quality of a company and its prospects.

  • Have Fun Buying and selling shares can be a very enjoyable hobby!

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