How to Build Wealth Using Loans?

 

How to Build Wealth Using Loans?

Do you know that it is possible to build wealth by using Loans? Well, you may be surprised by this statement. You may ask that how can it be possible to build wealth by borrowing money?

In fact, the golden financial advise of personal finance is – Get out of debt and stay away from new debt and cut down all of your credit cards.

Well, the above personal finance advise is for the consumers and financially illiterate people who have bad spending consumer habits.

If you know how to read financial statements than you will realize that basically there are two types of loans (Debts). One is a good loan and one is a bad loan.

A Bad Loan is one which is used to finance the liabilities and consumer expenses such as Cars, Laptops, Credit card consumer spendings and shoppings, Foreign vacations…etc..

While A Good Loan is one which is used to finance assets such as Business, rental property, education or any other kind of asset. Not only this but a good loan is one which is used to protect the long term investments also. Let me give you an example of it.

Say for Example, you have invested in a real estate plot for a time horizon of 10 years. But after 5 years, you suffer a heart attack and you need some emergency cash. Now, in this case if you will sell your real estate plot than it will not only attract huge capital gains tax but also you will have to liquidate it before the completion of your time horizon. So you will miss all the future capital gains also.

So better to take some short term loan for this purpose. Because here your this loan is basically to protect your long term investment from liquidating.

Now, suppose you want to start your own business out of scratch and you don’t have any money. And you borrow this money from Banks, friends and relatives. Well, this is a good loan because it is going to finance the asset (Your Businesses) which will generate income in the future.

Now, suppose you want to buy a luxurious car and you take a car loan to finance your car than its your bad loan. Because a newly bought car will loose 60% of its value in first 4 years you buy it. And not only this but a car is not an asset so it will not appreciate and generate any kind of income for you.

So understand the difference between good and bad loans and always use loans to finance assets and not the liabilities and build enormous wealth for you.

How Much To Spend on a Car?

How Much To Spend on a Car?

Do you know that how much you spend on a car affects your wealth in the long run? Yes, This is true. Buying a Car is a Financial Decision and what will be your future wealth will really depends on which car you buy in the which stage of your life?

What most of the young working couple do is, they buy expensive and luxurious cars during the first 5 years of their working life. This is because they are earning a lot. But they don’t realize that this financial decision will erode their over all wealth over a period of long time.

Ideally you should buy a car which is less than 1 % of your total net worth. Rich people buy their new car in this way. While middle class people buy a car that may be worth of 30-70% of their total net worth…!!!

You will ask me than that, in my city I am seeing lots of luxurious cars. Does it mean that all of them are rich? Well, No. 95% of them are upper middle class. They just earn more and that’s why they qualify for large loans. But in reality they have a little accumulated wealth.

Remember, A Wealth is something which you accumulate. Your Income is not your wealth. Many people don’t agree with this argument. But this is the Truth. Your Bank or a Car Company will never tell you this Truth. Because they are not in the business of spreading financial awareness to the people. So if you understand the meaning of this article than never buy a car that is worth more than 1% of your total net worth.

Now, what if your current net worth is very low and it’s 1% is not sufficient to buy a new car? Well, than buy a second hand car. The people who are rich today have drive the second hand car for several years of their lives and that’s why they are rich today.

Average Wealth of Congress

Average Wealth of Congress

In the US Congress, 237 members are millionaires. This is even after declining of the wealth of all the Americans in USA.

According to Huffington Post:

According to a study of personal financial disclosure reports by the CRP, the median wealth of members of Congress dropped nearly 5 percent in 2008 compared to the previous year.

Don't feel sorry for them: Despite the drop, 237 members of Congress are still millionaires.

Senators' median worth currently stands at $1.79 million, down from $2.27 million the year before. House members' current median income is $622,254, down from $724,258 in 2007. Fifty lawmakers have an estimated wealth of at least $10 million.

"Generally speaking, members of Congress are wealthy by comparison with the vast majority of Americans. That doesn't mean they're immune to the effects of this ailing economy -- they're not," said Sheila Krumholz, the CRP's executive director, in a statement. "But they are much better positioned to withstand financial pressures than the people they represent."

Average Wealth of the World

Average Wealth of the World

The Wealth Distribution around the world is very much uneven. Just 2% people of this world own more than 50% of the world’s Total Wealth. Well, Yes. This is true. More than half of world’s total wealth is owned by 2% people of this world.

Here is a Wealth Distribution Chart on the World Map.

The Map shows the Per Capita Wealth in US $. The red area shows the Per Capita Wealth over $ 50,000. Which is highest. Countries like USA, Australia & Europe are in red. while countries like India are poorest among the wealth.

The richest 2% of adults in the world own more than half of global household wealth according to a path-breaking study released today by UNU World Institute for Development Economics Research (UNU-WIDER).

The most comprehensive study of personal wealth ever undertaken also reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. In contrast, the bottom half of the world adult population owned barely 1% of global wealth.

One should be clear about What is “Wealth”?. Your Income is not your Wealth. In simple words, the wealth is something which you accumulate over the time. Wealth is the value of your assets minus the value of your liabilities. Say for Example if your Business Valuation is US $ 800,000 and your total debt/liabilities are US $ 200,000 than your Net Worth/Wealth is US $ 600,000. Wealth is calculated in the Net Worth in the United States means Assets – Liabilities.

According to studies, IQ and Wealth of Nations are sometimes correlated. However, there are few exceptions also.

Thus, the wealth is highly unevenly distributed in the world. And that’s why if you want to enter into the rich club than you should be the wealth creator. You should create and own Assets. You should create new wealth in the economy if you want to get rich and stay wealthy…

Average Wealth in Australia

Average Wealth of Australians

Wealth is always distributed unequally world wide. The wealth follows the principle of 80/20 means the 20% people around the world own the 80% of the total wealth in the world while the rest of the 80% in this world share just 20% of the wealth. I know that this sounds cruel but it’s true. And the logical reason behind it is The Compound Interest. The Compound Interest is so powerful over the time that rich get richer.

The first comprehensive survey of household assets, debts and savings has been released by the Reserve Bank of Australia in 2002.

The report results showed the median wealth of the average Australian household was $218,500. The most valuable non-financial asset of most households in the survey was their home.

According to the report, New South Wales and Queensland households were likely to have higher levels of wealth than other states predominately as a result of the boom in median property prices in these states.

In New South Wales the median household wealth was $265,000 in 2002, compared to a median household wealth in Queensland of $173,000 and a median household wealth in South Australia of $153,100.

Household wealth was also determined by stage of life, with households towards the end of their working life, perhaps not surprisingly, having more savings, greater equity in their homes and lower mortgages than younger families.

Other findings in the studies include:

•The average wealth of the wealthiest 10 per cent is about $1.8 million;
•The largest component of both assets and debt is property;
•Wealth is strongly associated with age. The median wealth of 55–65 year-olds was $444,000 compared to $8000 among 18–24 year-olds;
•University education is associated with substantially higher levels of wealth;
•Singles and single-parent households have the lowest levels of wealth;
•Pensioners are well short of the wealth that would enable them to live a ‘comfortable lifestyle’, as determined by the Association of Superannuation Funds of Australia;
•Even accounting for age differences, marriage and to a lesser extent de facto relationships, are associated with greater wealth;
•The affect of divorce on wealth differs between men and women;
•Children are associated with less wealth;
•Smokers are less wealthy;
•Drinkers are wealthier, unless they are heavy drinkers;
•Exercise makes no difference to levels of wealth.

Average Wealth of Canadians

Average Wealth of Canadians

According to the 2006 data,

The average Canadian is worth $142,900 — on paper, at least — as rising real estate values offset a rise in personal debt and last spring's stock market correction, Statistics Canada said Friday.

In its regular report on the national balance sheet, Statistics Canada said the nation was worth $4.7 trillion at the end of the second quarter, or $142,900 per person.

Here also the wealthiest 10% people own almost 90% of the total wealth and rest of the people share just 10% of the total wealth. This kind of un even distribution is every where. This is known as the 80/20 Principle of the Wealth means 20% people of this world own 80% of the total wealth of the world and the rest of 80% people share just 20% of the world’s total wealth.

According to the economists, the money is concentrated in fewer hands because of the compound interest. Because of the compound interest, the rich are getting richer and poor are getting poorer. Once you save & invest your money in some asset, the compound interest will start working for you and make you richer and richer day by day.

But you never save and invest your money, the compound interest will never work for you and you can never be rich. The wealthiest people own Assets like Businesses, Investments & Real Estate since generations and they pass on their assets to their following generations and that’s why they are getting richer and richer.

So now just tell me that, what is your average net worth? Is your net worth more or less than the average standards? But start acquiring assets as early as possible in your life to get rich.

Average Wealth UK

Average Wealth UK

The richest 2% of this world own more than 50% of the world’s total wealth. And the richest 10% of the world own more than 85% of the total wealth and assets of the world and the rest 90% people around the world share just 15% of the wealth in this world.

I know that it sounds cruel but it’s the sad truth.

If we discuss about the Britain Economy than in UK the average household wealth is US $ 126,832 per adult which is the third highest in the world after USA & Japan. Yes, United States has the highest net worth per adult in the world.

Those with assets of $500,000 could consider themselves to be among the richest 1 per cent in the world. Those with net assets of $2,200 per adult were in the top half of the wealth distribution.

Although global income was distributed unequally, the spread of wealth was more skewed, according to the study by the World Institute for Development Economics Research of the UN University.

“Wealth is heavily concentrated in North America, Europe and high-income AsiaPacific countries. People in these countries collectively hold almost 90 per cent of total world wealth,” the report said.

Researchers defined wealth as the value of physical and financial assets minus debts.

In India, the average wealth per adult is just US $ 1100.

However, the countries like India & China are growing very very fast since past decade and at this rate, soon they will be world’s one of the largest economies.

Average Wealth of Americans

Average Wealth of Americans

In the United States is considered as Net Worth. Net Worth is Calculated as Total number of Assets minus total number of liabilities. It means that what you own (Assets) – What you owe.

Say for Example, if you own a Car worth of US $ 300,000 and you have a car loan of $ 100,000 than your Net Worth is US $ 200,000. Thus, you have to calculate all of your assets and subtract all of yur liabilities from your assets.

The Wealth Distribution in United States is very uneven. Just 25% of the households of United States own total 87% of the Total Wealth according to 2004 data. And this is a very common phenomena worldwide.

Across all groups, the 2007 median net worth was $120,300 and the mean was $556,300 (guys like Bill Gates and Warren Buffett really mess things up).

Here are a few of the more interesting ones (2007 median data, 2007 dollars):
Current work status of head:

• Working for someone else: $350,100
• Self-employed: $1,961,300
• Retired: $543,100
• Other not working: $124,100

Race or ethnicity of respondent:

• White non-Hispanic: $692,200
• Nonwhite or Hispanic: $228,500

Housing status:

• Owner: $778,200
• Renter or other: $70,600

The easiest way to see how you stack up is by using CNN Money’s Net Worth calculator. I don’t know how fresh the data is, they only cite Nielsen Claritas as their source (with no date), but it’s good enough for our entertainment purposes. They offer two median net worth charts, one based on your income and one based on your age (the two charts are independent).

Age:

• < 25: $1,475
• 25 – 34: $8,525
• 35 – 44: $51,575
• 45 – 54: $98,350
• 55 – 64: $180,125
• 65+: $232,000

Income:

• < $25K: $1,250
• $25K – $49K: $34,375
• $50K – $74K: $168,500
• $75K – $99K: $301,475
• $100K – $124K: $301,475
• $125K – $149K: $644,100
• $150K+: $1,122,900

So now check that weather your current net worth is above the average standards or below it? Tell me that where do you stand in the above wealth averages of the Americans?

Dr.Jones Versus Mr.Blue – A Financial Story

Dr.Jones Versus Mr.Blue – A Financial Story

Do you love to read stories? I love to read and listen stories. Let me today tell you a story of 2 students – Jones & Blue. Both have studied from the same high school and both are same in the age. But after completing a school, Jones joined the Medical School because he wanted to become a doctor while Blue started his own Business when he was just 22 years old. Mr.Blue started working on developing his own business at the age of 22 years only. Yes, Mr.Blue drop out from his college. Mr.Blue has never ever finished his college education.

While jones joined the medical school. After 30 years when both became 50 years of age they met again to compare their wealth. Dr.Jones was thinking that he must have several folds higher wealth than Blue because after all he was a doctor earning half a million dollars a year…. But when they compared their wealth, Mr.Blue was several times ahead in building a wealth than Dr.Jones. Both were Millionaires but Mr.Blue was Deca-Millionaire.

Now, how can this be possible? We have been taught in the school that doctors earn more and that’s why logically they should be richer than someone who is college drop out. Than how can Mr.Blue, a College drop out has much more wealth than Dr.Jones who is a Specialist Doctor?

Well, the reason is simple. Dr.Jones has wasted spent more than a dozen years in Medical school to become a doctor. And he started his clinical practice after more than 10 years from Mr.Blue who started his own Business at the age of 22 only. And this decade of Time has made all the difference.

Dr.Jones waste spent  his time studying medical education and wasting spending his savings, his parents’ wealth and money he borrowed for medical education and living expenses. While on the other hand, Mr.Blue focused his time, money and energy to build his Business and becoming financially independent.

World’s most wealthiest people such as Bill Gates (Microsoft), Dhirubhai Ambani (Reliance), Larry Page (Google), Mark Zuckerberg (Facebook), Michael Dell (Dell Computers), Steve Jobs (Apple), Subhash Chandra (Zee telefilms) and Henry Ford (Ford Motors) are High school or College Drop outs. And that’s why they are one of the wealthiest people on this earth.

Remember, The more time you Waste Spend in the Education System, the Less Wealth you will accumulate in your life.

[Disclosure: Parents should not motivate their children to not to go to school after reading this article. This article is only for entertainment purpose. Studies show that 99 out of 100 newly started business fail within first year of it’s launch.]

Education Duration & Wealth Accumulation

The more time you spend in school & colleges to take higher education, the less wealth you will accumulate.

Well, I am not saying this but the studies done in USA say this. According to these Wealth experts & analysts who have studied and research the wealth pattern of wealthy people, The longer anyone stays in Schools & Colleges, the longer he postpones producing an income and building wealth. And the earlier one starts investing one’s income (No matter how small it is), the greater the opportunity to accumulate wealth in the long run.

Thus, if you want to become wealthy than you have to cut down your education time period. Than and only you can become wealthy. Take the Example of Bill Gates, Dhirubhai Ambani, Subhash Chandra, Larry Ellison (Oracle), Larry Page (Google) & Mark Zuckerberg (Facebook).

All of them are High School or College Drop outs and still every one of them have managed to build Billions of dollars of wealth.

This is because after dropping out from the education system, they have spend their time behind growing their own business and within a span of decade, their businesses grown to a multi-billion dollar empires. Now, just think that if they spent a decade in college to take higher educational degrees than would they have made the fortune?

Time is very precious element.

Remember, Lost money can be recovered but the lost time can never be recovered.

The more time you spend behind taking your education, the more you postpone your Investment plans and the more you reduce your chances of becoming wealthy. It is better to start early rather than earning a lot in the later life.

Investment Planning & Wealth Accumulation

Investment Planning & Wealth Accumulation

According to several studies done on wealthy people, it is observed that – There is a strong positive correlation between Investment Planning and Wealth Accumulation.

People who allocate more time for planning their Investments are much more richer than those who don’t allocate any time at all to plan their finances.

People who fail to accumulate significant wealth are those who have typically never ever spend a single hour behind planning their Investments, Financial Goals & Financial future. And unfortunately, most of the people in this world are like this.

Whenever I ask one of my friend that, Why he doesn’t allocate time for planning his Investments, he replies,

- Who Cares? I earn a Lot which covers all of my expenses. So I don’t need to plan my investments. I don’t want to waste my time.

This is one extreme. Now, let us see what my other friend says about this.

- Well, I have so much of work at my job place that I don’t get any free time to plan my investments.

Both of the above are the 2 extremes. People don’ understand the importance of Investment planning. They think that this is something that everyone should do in a Free time or if they get some waste time. But the fact is that, you actively have to extract few hours a week from your busy schedule to plan your Investments.

No matter how much you earn today. But if you never spend any time behind planning your investments than you will never become rich. So Start spending at least few hours a week to plan your Investments…!!!

Wealth 101: Allocate Time, Money & Energy

Wealth 101: Allocate Time, Money & Energy

If you want to become wealthy than you have to allocate 3 precious elements in such a manner that they combinely grow your wealth. Here are those 3 elements.

01) Time

02) Money &

03) Energy

Rich people are those who have perfectly allocated these 3 elements. Time comes the first. Allocating your time is more important than allocating only money. Most of the people have a false belief that, to become rich, they need money only. But it’s not true. To become rich, you need both money and time. In fact, time is more important than money.

I am talking about the time you spend behind planning your investments. Most of the people earn a lot. They work hard at their job places. They trade their time for money. And after doing a job, they become so much tired that they don’t have any time remaining for thinking about their financial planning and financial future.

So allocate your time first. Every week, allocate at least few hours for planning your Investments and managing money. Warren Buffet gives 60 hours a week behind planning and managing his wealth and that’s why he is world’s one of the richest person.

Those who regularly allocate their time, money and energy behind planning their investments will automatically grow richer than those who don’t focus these 3 elements to manage their wealth.

And that’s why I advise people not to do over time jobs to make some extra money. This is because after all, you are trading your valuable time in exchange of paycheck. Rather than that, spend this over time behind planning your investments and grow your money. This will pay you more returns in the future…!!!

What Does High Income Mean?

What Does High Income Mean?: Does High Income Mean High level of Wealth?

High Income means people who are earning the income which is far above than the average level of income of that nation. These people look rich and wealthy. But I call them High Income / Low Wealth Accumulator Group of people.

Because of the High level of Income, these people spend more and buy luxurious items to look rich. But unfortunately, high income doesn’t mean higher conversion of wealth. To realize high income, these people have to pay more in taxes and thus, they fail to accumulate more in wealth.

While Wealthy people realize very less in Income and more in Capital Gains to avoid tax. People believe that, High Income means rich. But it is not true. If you earn a lot but spend all of that income than you can never be wealthy.

A Wealth has to be accumulated. You can not become wealthy by spending more. You have to accumulate more Assets if you want to become wealthy. To become a wealthy, you have to realize less in taxes and more in Investments (Such as Capital Gains).

Rahul Gandhi Wealth

Rahul Gandhi Declares Assets worth Rs.2.25 Crore

Let us today discuss about the Assets of Rahul Gandhi. Rahul Gandhi, the scion of Nehru-Gandhi family and MP from Amethi Parliamentary constituency, has moveable and immovable assets worth around 2.25 crore, including two farm houses and shops in New Delhi.

His Indira Gandhi Farm House at Mehrauli, which was worth Rs 9.86 lakh as on March 31, 2008, is spread over an area of 4,692 acre. Rahul has an undemarcated share of 50% in the farm house.

Similarly, his another farm house Mauja-Hasanpur village of Faridabad district is spread over an area more than six acre with a value of Rs 28.22 lakh.

Among commercial properties, he owns two shops at Metropolitan Mall at Saket in New Delhi with a total cost of Rs 1.63 crore.

Rahul has cash Rs 70,000, besides Rs 7,744 deposited in SBI, 7.42 lakh in Citi Bank and another Rs 3.41 lakh in the HDFC Bank.

Though, he does not hold bonds, debentures and shares in companies, Rahul invested Rs 10.29 lakh in other financial instruments like NSS postal savings and LIC policies etc.

Gandhi paid Rs 5,32,596 as Sales Tax and a total of Rs 97,115 as Property Tax.

Asset Protection Divorce: Tiger Woods

Asset protection in divorce: Tiger Woods Divorce

Elin Nordegren asked for the Divorce from Tiger Woods and file a law suit against him. And not only this but she also asked for half of the fortune of Tiger Woods against the court. Tiger woods is a world famous golf player and he has made whooping $ 600 Million of wealth during his life time.

And today his wife is asking for half of this fortune from him as a divorce settlement.

This can happen to anyone in this world. But have you ever think that why many rich people are protected against such kind of lawsuits? This is because Rich people don’t own anything by their own name.

Yes, This is true. The Best way to protect your wealth against divorce is that, you don’t own anything in your name. And Rich people do this by using the corporate structure. They don’t own anything in their own name but they own everything in the mane of their companies & Businesses. And according to the law, the Company is a separate entity and one can not claim the assets of the company in case of divorce.

There are several asset protection strategies that rich people use and one of those strategies is the power of corporate structure. Corporate structure is designed to protect the wealth of the rich people. But unfortunately, most of the people around this world don’t know that how to use the corporate structure in their favour to protect their wealth.

Let us understand something about Marital Property -

Marital property consists of all income and assets acquired by either spouse during the marriage, even if an asset is in one spouse's name. This marital property is subject to division between divorcing spouses. Distinct property, such as property owned prior to the marriage, your inheritance, and gifts are excluded from marital property; these types of property remain non-marital property and are not divided at the time of divorce.

Individual property can lose its identity if mixed with marital property. For example, if you deposit your pay check into your premarital savings or investment account after marriage, then that account is considered marital property. The same may happen with inheritance property, like a joint account with your spouse. If you wish to have your partner's name on the deed and keep your entire equity or a particular portion of that equity, you should both sign an accord stating who possesses what piece of the property. Without an agreement, it will be treated as marital property and divided at the time of divorce.

I Hope this much Information is useful to you and will help you to structure your finances and protect your assets in any uneventful event.

People Earning More than 5 Crore Don’t Pay Tax

People Earning More than 5 Crore Don’t Pay Tax

There are 2 kind of people. One are High Income group of people. These are the people who earn a lot but can accumulate less in wealth. This is because they realize all of the Income and that’s why they have to pay lots of money in the tax. Doctors, Lawyers, Sports stars & IT Professionals fall under this category.

While the other kind of people are low income but high accumulator of wealth. This is because they realize less in income and more in Capital Gains (Unrealized Income). These are the true rich people. This is because they earn in the Capital Gains. And that’s why they don’t have to pay any Tax on their Capital Gains because it is unrealized Income.

Many rich people are earning literally more than 5 crore every year but even though they don’t pay anything in tax and that is also legally. This is because all of their Income is unrealized Income. These people earn everything in their Investments and that’s why they don’t have to pay anything in taxes.

While High Income group of people have to realize everything they earn and that’s why even though they earn just 1 crore every year, they have to pay 30 lakh tax. Because they realize everything they earn.

If you want to save tax than you have to earn in the Investments. This is the only key of protecting your wealth from the Tax.

Millionaires Live Below their Means

Millionaires Live Below their Means

Many people have a false belief that Millionaires are those who drive expensive cars, wear branded clothes & watches and do expensive shopping. This is because the media (News Papers & TV Channels) only cover the life style of glamorous people who spend lots of money.

Media never cover the life style of the true millionaires who live frugal. The real millionaires are those who live below their means, never take a debt and  always spend less than they earn. But unfortunately, this is not the glamorous life style and that’s why there is nothing exciting in it.

If someone is earning $ 4 Million a year and his accumulated wealth is just $ 1.2 Million than technically speaking he is a millionaire but he is not wealthy. The millionaires are those who live frugal and spend less than they earn.

While a True Millionaire is one who if stops working today than also can live for the rest of his life on his wealth without working. Being Frugal is a best Financial advise but unfortunately, there is nothing exciting and glamorous about living frugal and that’s why media never cover the life style of true millionaires who live frugal.

It is only the Financial Education, by which you can understand the value of Living below your means…!!!

Favourite Financial Products of Rich People

Favourite Financial Products to Buy by Rich People

Recently I have posted an Article: Financial Products for Wealthy

Many people want to become rich and that’s why they search the web for “Favourite Products of Rich People”. They think that rich invest in something different kind of financial products and that’s why they are rich. But this is not true.

And by taking the advantage of such kind of needs of people, Wealth Management Firms structure the complex looking financial products and target the upper middle class, High Income earning people. Such Kind of Financial products look like they offer more return than the traditional financial products.

But this is not true. Rich people became rich by following the same age old principles of building wealth. And still today they are following the same principles and that’s why they remain rich and become more richer than before.

Well, See. You have to understand that, Complex Financial products don’t offer you anything special. They are just designed in such a manner that they look complex and thus more efficient. And that’s why Middle class people divert their Income towards such kind of products hoping that these products will make them rich one day.

Remember, To Become Rich you have to follow the same age old principles of building wealth such as Regular Savings & Investing, Spend less than you earn, Getting out of Debt, Stay Away From new Debt & Focus on growing your Assets…etc..

There is nothing secret or rocket science in it. You have to be Disciplined if you want to be wealthy. So Now onwards, Don’t be impressed by Complex looking financial products and simply stay away from it.

Financial Products for Wealthy

Financial Products for Wealthy (HNIs)

I am a great fan of Mr.Dhirendra Kumar, CEO of Valueresearchonline.com. Recently I received his Article “The Problem of Wealth” in my mail box. The Article is amazing. It is about the Savings & Investment products that are targeted at Wealthier Individuals (Now a Days They are called HNIs – High Net Worth Individuals).

Here is a paragraph from the Article.

The basic idea behind investments designed for the wealthy is that they feed the idea that they must go beyond simple things that gives returns and safety. Investments that simply provide a certain level of returns and a correspondingly high or low level of safety are for the unwashed masses. The wealthy must have something special which others don’t have. Their must be someone who will cater to their unique personal situation and then formulate a strategy tailor-made for each individual’s unique needs and then manage that strategy.

 

Actually, in the context of investments, the only thing different about the wealthy is that they have more wealth and so other people have more of an incentive to try and take some of it for themselves (the wealth, I mean). Obviously, this is best done by creating products and services that are supposed to do something extra. Unfortunately, way too many wealthy people either never discover this, or discover this too late. Here’s how to deal with it. Pretend to be unwealthy (I guess that may be hard, but give it a try). Remove a few zeros from your net worth and then see what you would have been advised. So if you are worth Rs 10 crore and need to invest 50 lakh, pretend to whoever is advising you that you are worth Rs 10 lakh and that you need to invest Rs 50,000. And then, go ahead and do with the 50 lakh whatever you are being told to do with th e 50,000.

Go ahead and give it a shot. You’ll have a better chance of getting sane and sensible advice and of making the better choice. And who knows, maybe it’ll work for cars and clothes too.

Isn’t the above is a great advise from Dhirendra Kumar? I Love to read the articles from Mr.Dhirendra Kumar. He is really great. What Do you Think about such a nice piece of advise?

Borrowing Money To Acquire Assets

Borrowing Money to Acquire Assets: Good Debt

There are basically 2 types of debt. One is a good debt and the other is a bad debt. Any Asset producing debt is a good debt and any liability producing debt is a bad debt. Rich people always take a good debt to become richer while middle class people take a bad debt and struggle financially for the rest of their lives.

The Examples of Good Debt -

- Business Loan
- Educational Loans
- Real Estate Mortgage Loans
- Any other debt that will produce Asset at the end

The Examples of Bad Debt -

- Credit Cards (Worst)
- Car Loans
- Personal Loans
- Shopping EMIs
- Any other debt which does not produce any asset at the end

People who borrow money to acquire assets become rich and wealthy over the time. This is because when they repay all of their debt, they become the owner of the Asset which generates income for them even if they don’t work.

While people who borrow money to acquire liabilities can never become rich. Because liabilities such as car, mobiles, or any other thing depreciate in its price over the time and the owner of such liabilities get poorer.

So to become rich, always borrow money to acquire assets only and stay away from liabilities…!!!