Principle 10 – Putting Your Money Into Motion

Principle 10 – Putting Your Money Into Motion

By Drew Miles

 Learn how to get your dollar to do more than one thing at the same time: generate multiple streams of passive income. Have more than one strategy for generating passive income because if that one source goes bad, you’re in a world of hurt.

How banks get rich and how to use their wealth-building tactics
Imagine you deposit $1,000 in the bank. For every $1,000 the bank receives, the Federal Reserve will lend the bank $10,000. What do they do with the extra money? Give out car loans, for example, at 10 percent interest, when the bank is paying six percent interest on the same amount it borrowed from the Federal Reserve. This is a small fraction of how banks make money. The car dealer accepts $10,000 for the car, deposits it at the bank, and the bank then receives $100,000 for every $10,000 deposited. That initial $1,000 investment has been leveraged well. This is how banks get rich and how you should be thinking in regards to wealth building. How can you leverage your money, take the profit and reinvest it over and over?

It’s not what you make, but what you do with what you make
A student came to me recently. He’s a professional who makes an annual salary of $400,000. He admitted he can make money but has nothing to show for it. Besides the equity in his home, he had no retirement, investments, savings and $150,000 in credit card debt. This is not uncommon. Because he spent every penny he was making, it was challenging for him to save any money each month. We started depositing a modest $100 each month into a savings account. We then found $10,000 in tax deductions for him using Pathfinder’s strategies. He immediately deposited his $10,000 annual bonus into the savings account and accepted a side job teaching (between $50,000 to $100,000 in addition to his annual salary) to put toward savings. When you uncover more money that’s discretionary income, commit it to savings (or retirement savings) so you can put the wealth building into motion.

*Risk capital is a small percentage of your savings that is committed to higher level investments. It’s wise to build this into your savings account, however you should never bet the $50,000, which took you 15 years to grow, on one deal. The risk is too high.
During my years of law school, I completed an internship with a New York Supreme Court Justice and second legal internship with a law firm and also began investing in real estate. Immediately upon graduating law school and passing the bar exam, I opened my own law practice. From 1988 to 2001, I practiced with my partner under the name Miles and Gillard, where I concentrated in the area of real estate and business law.

This article was added on: April 16, 2006.

About the Author:
During my years of law school, I completed an internship with a New York Supreme Court Justice and second legal internship with a law firm and also began investing in real estate. Immediately upon graduating law school and passing the bar exam, I opened my own law practice. From 1988 to 2001, I practiced with my partner under the name Miles and Gillard, where I concentrated in the area of real estate and business law. Visit http://www.irabusinesssystem.com.

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