Three Reasons the Rich Get Richer

Financial Planning shouldn't be hard. Unfortunately, the reason that people are not more successful with their money is that they are bombarded by financial services marketing. You are constantly being pushed to buy products from financial salespeople instead of simply copying strategies that the wealthy use to grow and protect their money.

In other words, successful financial planning must be "process-driven" instead of "product-driven".

So, what do the wealthiest 1% of the population do that the rest do not?

1. They Keep Score. If you want to manage your wealth, you need to be able to measure it. The rich are masters at getting what they want, and their number one objective is building a substantial net worth and multiple sources of income so they can shift their focus to higher-level pursuits, such as personal fulfillment, freedom and philanthropy. Wealthy people have a healthy obsession with getting what they want, which includes money. They know what their values are and know how to set goals that are achievable. Materialism is only part of their motivation; the strongest for most is the freedom to do what they want, when they want. Winners love to win, and the elation they experience after victory never gets old.

2. They Know the Rules of the Game. The wealthiest 1% of the population calculate the highest and best use of specific assets and then make a decision to buy or sell based on that calculation. Any financial decision you make must be considered thoroughly because of the impact that it has on your whole financial picture and how it may affect other assets you own. It is critical to understand asymmetric risk - minimizing your downside risk, while having a much greater upside potential. When trying to decide what financial products make sense to use in your financial plan, you just need to copy the characteristics that the wealthiest 1% of the population use in their plans and apply them to your own situation! Here are the characteristics:

• Systematic flow of money into the plan
• Superior returns on your money
• Availability of money when you need it
• Minimize taxes on accumulation of money
• Minimize taxes on distribution of money
• Easy distribution of your money
• Protection from loss due to death or disability
• Minimize potential losses of your money
• Flexibility to change your plan

3. They focus on money-making activities. Rich people focus most their attention on money-making activities they enjoy. More importantly, they understand how to use of leverage for success and wealth accumulation. Since people who successfully employ leverage accomplish exponentially more in the same amount of time than people who do not take advantage of this powerful tool, they tend to have more free time and not only greater financial resources, but more balanced and fulfilling lives. Leverage allows us to build more wealth than we could ever achieve alone by tapping on various other resources, and extend our potential "reach" beyond our personal resources (cash, time, experience etc.) via the "force multiplier" effect.

At the end of the day, one does not need to be among the richest people in America to live quite comfortably. However, to be more successful with your money, all you need to do is copy what the wealthiest people do with their money and you can be certain to have financial peace of mind.

Article Source: Here

Differences Between The Rich And The Poor

Have you ever wondered what the difference is between the rich and the poor? Why are some people wallowing in the abyss of poverty while some are swimming in the ocean of stupendous wealth?

Sometimes it may come across to you to say that some people are rich because they were born with a silver spoon in their mouth. Well, that is not conclusive because there are many people out there that were not born under any silver linen whatsoever, yet they are millionaires today. What happened? What made the difference? Now here is what i have realized.

The difference between the rich and the poor is the mindset. The rich and the poor think in different frequency. The poor do not have that kind of mindset that the rich individuals have. They approach the same issue from a different perspective and stance.

The rich seek out opportunities. The rich are always seeking for opportunity that will grow their wealth while the poor man wallows in self-pity and he is consumed with seeking for sympathy. He engages in the blame syndrome; blaming his relatives, friends, the government, even the rats in his house are not left out, as been responsible for his predicament. Instead of thinking how he could break out of the cocoon of his abject poverty he feeds it by consistently looking for a scapegoat. With such mindset you can't recognize opportunity for wealth when you see one.

The rich acts but the poor just passes along. When the rich sees an opportunity that will accelerate his wealth, he grabs it. Not the man with a poor mindset. He had a thousand and one reasons why what he sees is not an opportunity for getting rich and so his circle of poverty continues, as he will let go of that opportunity. Sorry to say this; it is like casting a gold before a swine, it will not value it.

The rich are ready to take risk and make sacrifices, either it is of time, effort, money etc. The poor mindset considers some risk as being outrageous. They lack the motivation to dare into the world of the unknown. They are satisfied with the world they have come to know. So they keep maintaining the same status throughout their lifetime.

Have you ever wondered why businesses are called ventures? A business man takes risks. I am sure you know about venture capital: that is the money invested in a new company to help it develop, which may involve a lot of risk. But you will find those who have rich mindset take the risk all the same.

A man who does not take risks will end up paying for another man's risk. When you take the risk, others will pay you for it. That is what the rich man knows that Mr Poor mindset does not know.

You need to understand that being wealthy does not mean you lack nothing and being poor does not have to do with the fact that you lack the basic amenities of life. It has everything to do with the mentality you have.

If you are born poor that does not mean you cannot rise to become a millionaire. To achieve financial success you have to change your pattern of thinking. If a poor man thinks the way the rich does and do what they do, he will have the same result and even more.

Article Source: Here

How to Invest and Why You Need a Plan

What makes rich people rich? Looking at the spending pattern of various income groups in the U.S. makes it clear: Savings. The real difference between the rich and the poor is that the rich spend a larger share of their income on savings (pensions and insurance) and education.

Source: WSJ, Labour Department,

When building wealth, preserving wealth, and passing it to the next generation is the formula for financial success it is surprising that less than 20% of Americans do have a written plan when it comes to investing and even retirement [1].

The paradox in human behavior is that we are perfectly rational and capable of planning for a major event in our lives, but this is usually forgotten when it comes to investing. In fact, you will find that only a third of investors have a written plan guiding their investment strategy and retirement plans.

Why is a plan needed?
The investment world is a harsh jungle, a world of murky waters where the smartest and the most organized survive and become successful while the rest are gobbled up. A written plan short circuits our normal response to something as emotional as money. It prevents us from resorting to our gut feelings and emotions. Instead of following the herd mentality that may prompt you to make unwise investment decisions, a plan will force you to stick to a rational strategy that is underpinned by fundamental investment principles. Some of the difficult emotions that you will have to overcome while investing include:
1) The fear of failure
2) The tendency to continue with a certain approach just because you started it
3) Personal matters such as relationship issues at home

It is also important to point out the main reasons why investors fall prey to the market and lose their precious funds:
1) Omitted facts and figures mislead investors into investing in a structurally unsound company or financial instrument
2) Overconfidence makes some investors think that they are invincible and that they can always beat the market.
3) Everyone wants to be seen as a champion, the successful general capable of leading an army to victory. This can make you make investment decisions that are not based on rational thinking but rather the desire to impress your friends, co-workers or family members

By having an investment plan written down and actually following what it says, you will have dramatically increased your chances of winning and increasing the size of your nest egg or investment portfolio. The following are simple steps in creating a plan and avoiding the herd mentality and instinctual impulses that turn us into fools when investing:

1. Set up specific and realistic goals
For example, instead of saying you want to have enough money to retire comfortably, think about how much money you'll need. Your specific goal may be to save $500,000 by the time you're 65.

2. Calculate how much you need to save each month
If you need to save $500,000 by the time you're 65, how much will you need to save each month? Decide if that's a realistic amount for you to set aside each month. If not, you may need to adjust your goals.

3. Choose your investment strategy
If you're saving for long-term goals, you might choose more aggressive, higher-risk investments. If your goals are short term, you might choose lower-risk, conservative investments. Or you might want to take a more balanced approach.

4. Develop an investment policy statement
Create an investment policy statement to guide your investment decisions. If you have an adviser, your investment policy statement will outline the rules you want your adviser to follow for your portfolio. Your investment policy statement should:

Specify your investment goals and objectives,

Describe the strategies that will help you meet your objectives,

Describe your return expectations and time horizon,

Include detailed information about how much risk you're willing to take,

Include guidelines on the types of investments that make up your portfolio, and how accessible your money needs to be, and

Specify how your portfolio will be monitored, and when or why it should be rebalanced.

A smart investor with a written down plan and strategy has already won half the battle without making a single financial decision. By implementing the plan and adhering to laid down rules of operation, the smart investor will avoid the pitfalls caused by human emotion and behavior and end up winning big.

Article Source:Here