It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. – Richard Kiyosaki
Although we are moving towards a cashless society, there are occassions where I have had the fortune to find some loose bills in my jacket or briefcase. After a moment of joy for my new found wealth, I come to realize it was simply my money that I let slip away unknowingly.
Unfortunately, a lot of the typical financial advice does the same with our money.
In the pursuit of a large retirement ACCOUNT, we may lose sight of the bigger priority…a large retirement INCOME. We can end up incurring a lot of costs in pursuit of our financial goals which reduces our true net wealth. Some of the more common costs that will rob us of our wealth are taxes, lost opportunity costs, fees, and insurance premiums. Recapturing these costs put money back into your wallet to use throughout your lifetime.
Additionally, there are a number of risks we face to reaching our financial goals such as market rates and timing, deposits ending due to sickness or death, inflation, future tax rates, political rule changes, and fees. .
So what can you do to increase you net wealth and give you a chance to win at the game of finance?
For starters, focus more of your assets to building a strong financial foundation which will provide you liquidity and financial flexibility. Target saving at least 20% of your income to building this foundation which will include your emergency funds (at least 6 months of expenses covered) as well as your opporutnity funds for investments. You should target approximately 30-40% of your assets in this area.
Once you have your financial foundation solidifed, the second tier of investment consists of assets you control. One basic option is investing in yourself through personal development, certifications, training courses, or other forms of education to help you maximize your earning potential.
Other investment options in this category which offer the most control are real estate rental properties or other hard assets in addition to investing in your business which can provide passive income you don’t have to work for.
Most typical financial advice pushes us to give up total control and invest in the stock market and subjects us to the potential for significant losses and high volatility. These types of assets which we have very little control should be a much smaller component of our investments than they are today. The stock market is not the only place to invest.
By focusing on building your financial foundation using strategies and vehicles with guarantees, liquidity, solid returns, and ultimate control, you will be well on your way to the wealth you desire while eliminating the costs and risks that can steal it away.