If you were to
go around asking people what would make them
happier, you'd get answers like "a new car," "a bigger house,"
"a raise in pay," or "winning the lottery." Probably not one
in a hundred would say "a chance to help people," and yet
that is what brings about the most happiness of all.
This section will provide a short
overview of various income sources and expenses.
This may seem to elementary for most
people but read further, the information may be helpful.
Robert Kiyosaki (author of
Rich Dad Poor Dad) has broken down the
income of people into 4 basic areas. Most people are aware of these but
this "quadrant" approach may help visualize the income process easier.
1 : a coming in :
INFLUX <fluctuations in the nutrient income of a body of water>
2 : a gain or recurrent benefit usually measured in money that derives from
capital or labor; also : the amount of such gain received in a period of
time <has an income of $20,000 a year>
Some Basic Information:
This may sound strange but there are
only two problems with money:
|Having to little|
|Having to much|
Some people say money makes people
"bad." My experience (and others) is that money will tend to make you more
of what you already are. For example, if you are greedy and inconsiderate
then more money will tend to amplify those traits. However, if you are
kind and generous then more money will tend to amplify those values.
Many people recognize that money is
just a tool. You can do good with it or you can do bad. The choice
made by the person not the money. However, if you don't have money you
don't have any real choices.
There is a cliché in the real estate
business: Location, Location, Location!
A similar cliché is relevant in
business/investing: Leverage, Leverage, Leverage!
Without leverage (whether additional products, employees, stock, money etc) a business
will stop growing very rapidly.
LEVERAGE is what the
here provide for you and your family.
Below are a few examples of how
"Leverage" may be used:
|Individuals use leverage:
When you borrow money to by a house (or business, real estate etc.) you are
leveraging someone else's money (i.e. the borrowed portion). Other
examples of leverage are:|
|Write one book but you may sell
it a 1,000 + times|
|Make a movie but it may be
viewed many times in many theatres|
|This web site is an example of
|Businesses use leverage: When
you (or a business) hires employees you are leveraging the employees' time and
effort (DuPont® could not sell $40 Billion per year with just one person, the
company is leveraging the work of over 40,000 employees). This is true
whether a large or small business.|
|Franchises use leverage:
McDonalds® could not sell $30 Billion of food each year from one store.
Instead they open additional franchises (stores) to increase sales. (currently
there are about 27,000 franchises worldwide with each selling about $1 Million
per year). The corporation receives a small % of sales from each
Additionally successful businesses and
investors have Multiple Sources of Income (MSI). Why then do most
Employees and Self-employed people only have their "JOB" income?
Below are the 4 basic income methods
people use to generate income:
This is where you work for someone else and receive a paycheck
No real leverage
This is where you own a large business (or multiple businesses) that you may hire someone else to
manage and your presence at the business is not necessary for success, e.g.
Very good leverage
This where you are self employed or you effectively "OWN" your job, e.g. doctor, accountant, lawyer,
franchisee or small
business owner. Without your presence the business would not survive.
Very limited leverage (usually a few employees)
This is where you invest in other companies (business systems) and derive income from
mainly passive sources, e.g. business growth, stocks
Very good leverage
|This side comprises
about 96% of people
||This side comprises
about 4% of people
|This side controls
about 4% of the wealth
||This side controls
about 96% of the wealth
|This side has a
limited income potential
||This side has an
unlimited income potential
|This side generally
works for the other side
||This side generally
employs, or invests in the both sides
Which side do you want to be on?
One side is easier but more costly in
the long run (Left) and one side is harder but more rewarding in the long run
The only difference between the sides is "knowledge", consistent
effort, a simple effective plan, and a desire to "change"
your current situation.
Click here if you want to
change your Financial situation.
There are 3 basic Income Producing Strategies
used today. They are:
|Trading time for money. About 96% of
people are in this group (Left Side).
|This group includes Doctors, Lawyers,
Accountants, Managers, Clerical people etc. anyone with a
"JOB." Why? Because this group
works a certain number of hours and they get paid for
those hours. While the pay may be high or low - when
they run out of hours their income stops, i.e. very little
leverage. This group
also tends to have very little free time and flexibility.|
|Invest money to earn money. About 3% of
people are in this group (Right Side).
|To make a living
in this group generally requires a significant amount of
specialized training and money to get started and continue.
The risks may be high.
However, this group is usually Financially Secure!|
|Leverage time by multiplying their efforts
to create Multiple Sources of Income. About 1% of people
are in this group (Right Side).
|This group includes businesses with more
than one person, franchises, law firms, large businesses,
etc. Why? Because more people in a business usually means
more leverage for the owners. They effectively
"multiply" their efforts through the efforts of
others. Franchises are excellent
examples. For instance McDonalds® or
similar organizations. Why? The owners
multiply their efforts by establishing "outlets"
for their products which in-turn provides "Multiple
Sources of Income" to the company through sales but
mainly "royalty" payments, i.e. passive income (usually as a
percentage of sales). This group is usually Wealthy!|
the businesses presented here
follow this business structure. You will be able to
take advantage of significant business/investment leverage
1 archaic : the act or an instance of expending
2 a : something expended to
secure a benefit or bring about a result b : financial burden or
outlay : COST
<built the monument at their own expense> c : an item of
business outlay chargeable against revenue for a specific period
3 : a cause or occasion of expenditure
<an estate is a great expense>
Expenses can be grouped into 2 basic
areas: "Good" expenses and "Bad" expenses.
Good expenses are those that help you
obtain your short and long term financial goals.
Some expenses that may fall into the
Bad expenses are those that just
consume money and do not contribute to your overall financial success.
Some expenses that may fall into the
area are: (by the way everyone has expenses in this area and may have a short
term emotional benefit)
This is the first part of
the Income Statement mentioned earlier, i.e. Income and Expenses
(you may want to list a few of your income
sources and expenses).
The next part of the Income Statement will be Assets and Liabilities.