The Way to Wealth - 05 (Working from Home)

Greetings Friends

Today we will learn why it is important to make the difference between keeping your daytime job and taking care of your own business…

When talking with friends, family, and clients, I always try to explain the difference between a job and business. See, most people I talk to think that having a job and saving in their RRSP (Equivalent to 401K in the US) is the solution to a comfortable retirement. I tell them that it is not for a simple reason. When working for someone, you pay everyone first (Government, Bank, Etc...) and pay yourself last. When working for yourself, you pay yourself FIRST and everyone, including the government LAST

Let us take an average well paid 30 year old professional … sayyyy … hmmm … $120,000 per year, who owns a car and a $400,000 house. The counter part is the same professional working for himself from home.

I am taking this example only to prove that simply by saving in your RRSP will not generate enough money for a comfortable retirement. I will use Canadian figures, but trust me they apply as well to the US and Europe with simple small variations Sales Tax in Quebec is %12.875 (Federal and Provincial). Business Expenses are Tax Deductible, in other words, all expenses related to the business are tax free

Okay… Well let is start let us use the Budgeting information (The Way to Wealth - 04) and use the Accounting Principles (The Way to Wealth - 02) (The Way to Wealth - 03):

Income:	Professional	Business Man
Gross pay:	$120,000
Business Revenue		$120,000
Total	$120,000	$120,000

Business Expenses
Car – payment (tax incl) Car – Insurance Car Repairs (tax incl) Gas (tax incl) Cell Phone (tax incl) 10% Mortgage: 10% House Taxes: 10% House Insurance: 10% Heating (tax incl) 10% Electricity (tax incl) 10% House Phone (tax incl)		$4,252 $1,000 $1,328 $2,657 $1,063 $2,800 $400 $100 $88.59 $177.19 $53.16
Total		$13,919
Real Taxable Income	$120,000	$106,081

Personal Expenses:
Tax Deduction: (45%) Mortgage: House Taxes: House Insurance: Car – payment (tax incl) Car – Insurance (tax incl) Car Repairs (tax incl) Gas (tax incl) Cell Phone (tax incl) Groceries (tax incl) Clothing (tax incl) Heating (tax incl) Electricity (tax incl) House Phone (tax incl) Cable TV Vacation	$54,000 $28,000 $4,000 $1000 $4,800 $1,000 $1,500 $3,000 $1200 $5,200 $3,000 $1,000 $2,000 $600 $600 $2,000	$47,736 $25,200 $3,600 $900 $5,200 $3,000 $900 $1,800 $540 $600 $2,000
Total	$112,900	$91,476

Real Income

$7,100

$14,605

As you can see in this example, our professional working at home, is making more than twice the net income of the working professional.

Now with regards to the RRSP (401K), if we invest the net income over 35 years at the same profit rate of 8% per year, we will see a very different result for both professionals. As we all know, the inflation rate in North America is about 2.5% per year. Which means, every year, your dollars can buy you 2.5% less than the year before. In 35 years, to purchase something that costs today $1.00, you will need $2.37. So your real revenue in 35% will be worth 58% less

	Amount in RRSP	Revenue 8%	Real revenue (Value in 35 years)
Professional (Job):	$1,216,349	$97,308	$41,144
Professional (own business)	$2,502,082	$200,167	$84,635

In the above example, you can clearly see that the ONLY WAY you will be able to retire is to have your own business…

Good Luck

The Way to Wealth - 04 (Budgeting and investing in Assets)

Greetings Friends…

Today we will talk about something most of you HATE. If you thought that becoming rich would be easy… hahahaha … think again. You must be fit to be rich. It is just like going to the gym :)

Some of you are wondering how will I build wealth if I am barely paying my bills?? Well answer is simple your Expenses MUST decrease and become less than your Income

In order to do that, we should look into budgeting…

You can use a simple technique. I have built an excel sheet to count your weekly, monthly and annual expenses that you can download here. I have filled this sheet with numbers simply as an example. In order to adapt it to your needs, to change the numbers in the “Yellow” section only and the system will calculate your Net Income (See The Way to Wealth – 02 and The Way to Wealth – 03) to understand what that means

In our example, I have taken an average dual family income and expenses. This Family is creating what in Financial Words is a Deficit, which means that they spend more than they earn… it adds up on their credit card, line of credit, etc… which in other word is DEBT. That means that this family is increasing its debt by $1,347.67 per month or $16,172 per year.

In order to start the way to wealth, they need to decrease their expenses by $1,694.98 per month or $20,339.80 per year… the reason why they need to decrease more than the actual deficit is simple…

They need to start making money and travel on the Way to Wealth…

The steps they need to follow are:

1. Decrease their Expenses! They need to site down as a family and look at the expenses and find a way to DECREASE their EXPENSES by $1,694.98 per month… That may be to sell one of the cars, maybe move into a less expensive house, etc… This is very hard to do but most important Step!!!

2. Gather all their debts! (Credit Cards, Line of Credit, etc…) under one umbrella with the lowest interest rate possible

3. Start buying Assets! Some people will tell you to pay down your debt… I believe that it will take TOO long in this case more than 4 years!!!

If you buy one asset, say stocks or even a condo that you can rent out, the increase in capital over time in addition to the rental or dividend income you will receive will pay down your debt and start creating wealth for you…

As per the The Way to Wealth - 03; Assets generates income, therefore, buying you even more assets which will eventually pay for your liabilities and/or expenses in the long term and star.

So it is extremely important to follow the three steps above. The time is NOW! TODAY! Because the more you wait, them more money you lose based on your expenses and the less money you make from your assets

The Way to Wealth - 03 (Sound Accounting Principles)

Hey guys…

Today we will talk about something interesting that you need to understand in order to ride on the Way to Wealth

If you read the first two articles, The Way to Wealth – 01 and The Way to Wealth – 02 you certainly understand that the Rich are Rich because they acquire ASSETS

Assets generates Income

Liability generates Expenses

I will use the accounting diagram of Mr. Robert Kiyosaki from Rich Dad Poor Dad

Income: Salary Rent Dividend Interest
Expenses: Rent/house mortgage Phone Bills Gas
Assets: Rented Condo Stocks Bonds	Liabilities: House Car Boat

If you can understand the above, you will understand how rich people think… They add acquisitions in the Asset Section FIRST, which creates income i.e.: a rented condo provides income without WORK :) A brand new boat for water ski provides expenses such as insurance, gas, maintenance, etc without generating a single penny…

Chances are that you already have one source of income… your salary… guess what? There are better ways to generate an income… Acquire Assets, they will work for you. Every Dollar you put into your asset works for you like little solders. Consequently, every dollar you put into your liability column is like a virus… it takes energy away from you because it generates expenses…

So it is extremely important not to fall into the liability trap… if you buy assets, then your assets will eventually pay for your pleasures…

The Way to Wealth - 01 (Think like Riche people)

Why do you think the Rich are Rich and the Middle Class & Poor will remain struggling?

Simple... they do not play the same game

The rich are rich simply because they do not work for money. If we were to take all the money in the world and divide it equally among all humans, 10 years from now, we will be back to what the world is today. This means there will be Rich, Middle Class and Poor...

You may ask yourself how? Well, see the rich teach their kids what the average Joe does not... they teach him not to work for money! Not work for money?? Are they crazy?? What do they work for??

Well you see, the rich teach their kids that money should work for them and they should work to learn how to make it work for them. How to take risks, how to learn from their investment mistakes etc...

Today I hear lots of creative ways how NOT OT MAKE MONEY... :) some of my friends say, don't buy this or that business it is too risky... the same friends can barely afford a new car? Too risky... how do they know? Have they tried? I don't think sooo... Therefore, I believe that you must make mistakes with your money in order to learn and become better at playing the investment game! There is no insurance that your will succeed in your first attempt, but it is a gamble, just like playing poker... you need to learn first, strike then!

As a Habs fan (Montreal Hockey Team) I always wonder how many times did Maurice Richard, or Guy Lafleur, or any other athlete fall before they learned how to skate, then play hockey and become a legend... Simple math... the more you try, the more you practice, the more you will learn and the more successful you will become.

So my advice today is: Take a risk, even if it is a small one, but take it in order to learn. To become rich is like to learn how to ride a bicycle, you will fall few times, but then you will be able to ride without thinking :)

Good luck in your first RISK!!!

The Way to Wealth - 02 (Accounting Variation)

Hello again... :)

Today we shall talk about the difference between an Asset and a Liability

If you have read "Rich Dad Poor Dad" from Robert Kiyosaki you will understand what I am trying to explain if not, I need you to keep an open mind

First thing you need to understand is the difference between four Accounting Principles

1. Asset

2. Liability

3. Income

4. Expenses

I will start with number 3 and 4 as they are the easiest to understand

Income is simply the money that you generate. Most of you generate that money by working for others (Pay check)

Expenses is simply the bills that you pay (Mortgage, Phone Bill, Cable, Gas, Car, Insurance, trips, gambling etc)

The other two items to understand are Asset & Liability. They are quite simple to understand, but you need to have an open mind about it...

Asset is everything you purchase that generates Money (Income)

Liability is everything that generates bills (Expenses)

Now is your beautiful suburb house an asset or liability? I bet you think it is an Asset... right?? Wrong... It is a liability. You may ask yourself "why?". Well quite simply, you need to ask yourself, does my house generate an income? If it does, then it becomes an asset... Since a house generates expenses, such as interest, heating, grass cutting, snow removal, repairs, etc, then it is a Liability!!

Is a condo that you purchase and rented out an Asset or Liability? To answer the questions, you need to ask it in a different way. Is rent an expense or an income? Since in most cases the rent that you receive from a condo that you own is an income, then it becomes an asset... what about the interest and repairs you will ask... well, they truly are expenses but related to an asset, therefore, part of the expenses generated by an asset... Since the true income is what you earn minus what you pay, then the net becomes your INCOME

Robert Kiyosaki said and I certainly agree with him that in order to be RICH, you need to acquire assets, which in return will generate income, and pay for YOUR EXPENSES.

Hope you like this little lesson. I will continue teaching you a course every now and then in the meantime think of purchasing ASSETS!!!

MoNeY iS mY sLaVe

How can I put this in simple words.... hmmmm…

My friends think I am lazy because I do not believe in what 90% of parents teach their kids. You see, I stopped believing that Corporate America will some day making me rich.

Growing up in admiring Corporate CEO’s, I thought one day I will be the CEO of some North American Blue-chip company and be among the richest of the world. And in order to do that, I had to go to Business School and climb the ladder in a large company.

I did go to a renowned business school and climbed the ladder little by little. At the age of 32, I was already the Managing Director of a Brokerage firm making a very very comfortable living.

Seeing how things were evolving, I still had a boss… the chairman of this firm had made his money ALONE and without any help from his family or anyone else. My chairman was 27… WHAT?? 27 years old?? At 32, I was the old one between us and thought WOW … how did this guy make so much money at this age… without ANY education????

I so decided to quite my job in order to make sure that I will never work for money again.

Since I do not believe in making money playing poker or going to the casino, I decided that the best way to be rich is do as the rich people do… They make money work for them instead of the other way around (90% of us work for a pay check).

Going for Business on your own is not an insurance policy … You may succeed and you may learn from mistakes and trust me … you will make mistakes… The important thing is not to surrender to them but learn from them

The fact that you need money to make money is long overpasses… you may easily apply for a personal loan or business loan in order to purchase an asset (real estate; business, stocks, etc) and in some cases; you don’t need money at all… The internet is “almost” free

Today I will share with you some easy ways to make money while SLEEPING :)

I started a website to help some of you better understand how to make money online. I certainly hope this will help you to start thinking for a solution that will best be adapted for you on the long term.

Good Luck