Money Secret #1: OPM
(Other People’s Money)
Wealthy individuals
often borrow money from banks at lower interest rates and invest it in assets
that generate returns exceeding the cost of the loan. For instance, if a loan
is taken out at 5%, they might invest in assets or stocks that yield at least double
that percentage. Real estate or index funds, which offer an annual return of
around 10%, are common investment choices.
Money Secret #2: The
Magic of Compounding
Albert Einstein
famously said, "Compound interest is the eighth wonder of the world. He
who understands it, earns it”.
He who doesn’t, pays it." Compound interest occurs when the interest earned on savings starts to generate its own interest. This principle also applies to dividends, which, when reinvested, can accumulate further earnings.
Money Secret #3:
Money Loves Speed
“Dumb works 90% on ideas
on 10% on Execution”
Action is more critical than planning. While you are procrastinating and strategizing, others are actively making moves. To succeed, stay ahead of the curve, lead emerging trends, and anticipate future developments.
Money Secret #4:
De-Link Money from Time
When you trade time for
money, your income ceases if you stop working. Time is a precious resource;
protect it diligently. Instead, use the AED technique:
- A =
Automate repetitive tasks
- E =
Eliminate unnecessary tasks
- D =
Delegate tasks that do not require your unique skills
Money Secret #5:
Recession as a Wealth Transfer Opportunity
Nathan Rothschild
famously said, "The time to buy is when there's blood in the
streets." Warren Buffett advises investors to be cautious when others are
greedy and to be opportunistic when others are fearful. Historically, the stock
market has fallen by more than 10% from a recent high at least 102 times.
Money Secret #6: Rich always keep their Money at work:
Money has a limited
lifespan and inflation declines in the purchasing power of your money over
time. Currency is not backed by physical assets and is mostly digital. Gold and
other tangible assets preserve value better over time. Economists estimate that
coins and banknotes represent only about 8% of the world's currency. Rich never
misses a day without compounding or without investing.
Money Secret #7:They pay themselves first:
Pay yourself first is a strategy for maximizing savings over time by
setting aside a portion of your monthly income in savings before you do
anything else.
The 80/20 rule is a
simple guideline that you can follow to pay yourself first. It means putting
20% of your income toward savings and 80% toward everything
Money Secret #8:
Inflation Benefits the Wealthy
Inflation generally
benefits the wealthy because it increases the value of their assets, such as
real estate and cars. In contrast, it poses challenges for those with fewer
assets.
Individuals do not
create money; they transfer it from others. Only governments have the authority
to print money. It is crucial to understand how money flows and how it is taken
from you.
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