FP Article 25
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Growing a
Little Richer - How?
by Rajen Devadason
When prosperity comes, do not use all of it.
Confucius
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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!
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This is an article on how to grow a
little richer over the long-term. I hope you enjoy
reading it. But if it isn't what
you're looking for, you're welcome
to search for something that better meets
your needs. Thank you for allowing
me to serve you.
Rajen Devadason |
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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?
(On a serious note: If out-of-control
credit card debt is something you are struggling
with
- perhaps secretly - you may want to help
yourself to my free 6-day eCourse entitled
Defeating Credit Card Debt.)
No one cares more about your
long-term financial success than... you. So,
take the time and make the effort to put into
practice at least two of the simple ideas I've
outlined here. Remember, your goal is to figure
out how to grow (at least) a little richer...
everyday!
© Rajen Devadason
