Living below your means is the only way to long lasting wealth, but cutting expenses can only get you so far. At some point, earning a bit more money is just the ticket to a much merrier financial picture and best of all, some of these ideas are actually not that hard. Here are five such money making ideas that you can start doing today. (See also: Ways to Make Extra Cash)

listen

1. Offer Your Services to Your Neighbors

Even the least skilled person can offer services that are valuable to someone else. Are you a handyman? Do you own a lawnmower? Can you babysit? Any of these skills can bring income, and there’s no better way to start than telling your neighbors that you are available for hire. If you do a good job, bringing extra cash home might just become a regular event!

2. Rent Out Your Room

Whether you rent out one of your rooms for the long term or by the night, I’m sure you will welcome the income that it brings in every time someone writes you a check. With services like Airbnb.com, doing so is much easier than you think. List your property, and start enjoying the extra money that your space can generate! (See also: 7 Steps to Market Your Extra Space as a Vacation Rental)

3. Take Out a Mortgage, and Invest the Rest

This isn’t for the faint of heart, but with the favorable tax treatment of equities, the returns of a well diversified and tax efficient portfolio will have an extremely high probability of outpacing the interest you are paying for a mortgage, especially after you consider the tax consequences.

I caution you though that this is only for people who can tolerate short term volatility. For most people, I recommend paying off your mortgage early, let alone taking out a bigger mortgage than necessary. If you choose to go this route, you absolutely have to stay on track with your investments even if you might seem like a fool in the short term, so think carefully before you take this advice.

4. Line Up

You can sell your own stuff on eBay, but eventually, you’d run out of everything! However, if you are able to get in line on all those hot gadget releases and be one of the first few to purchase one before it’s sold out, you can almost guarantee yourself a tidy profit. All you have to do is line up ahead of time and buy the product, and when it is out of stock, you put it up for sale at a higher price than you paid for it.

Don’t get greedy though, because if the product happened to become readily available, you might have to sell what you lined up for at a lost.

5. Start a No/Low Cost Business

Remember all those services you offered to your neighbor? You can probably turn that into a side business without putting up a ton of capital once you figure out that your expertise are in demand. You can start out of your home and grow from there. Who knows? It might turn into a multimillion business one day, which could transform your finances!

listen to the anthem..

The challenges have included how to become a non-profit entity, how to deal with credit card companies withholding donations, choosing a bank that shares the movement’s philosophy and budgeting what to spend cash on.

The totals raised — more than $500,000 in New York and around $20,000 in Chicago, Richmond and other cities — have surprised everyone from the protesters to those overseeing their finances.

“I figured they would bring in maybe $10,000, maybe $20,000 and it would be no big deal. They were quickly bringing in that much and more a day,” said Chuck Kaufman, the Tucson-based national co-coordinator of Alliance for Global Justice, the movement’s fiscal sponsor.

“We were surprised and unprepared so it was a scramble to get our end of the system functioning at the volume the money was coming in.”

AFGJ is a non-profit group with roots in Nicaraguan solidarity activism of the 1970s that has since used its tax-exempt status to be a financial umbrella for other groups.

Occupy Wall Street pays 7 percent of its takings for AFGJ’s support — bookkeeping, tax returns and donation processing.

Although the Occupy Wall Street finance committee’s website lists 87 members, Kaufman said the core was about six people, including a lawyer, an accountant and a tattoo artist.

They deal with more than 400 donations coming in daily via credit card, averaging less than $50 each. Actually getting those donations has proved hard.

In the early days, before switching providers, the alliance took in some $250,000 in donations. Kaufman said credit card processors have held back $75,000 of that, claiming they expect an abnormally high level of disputes on the charges.

He expects the funds to be released in $25,000 increments every two weeks, once October credit card statements start going out.

None of the major credit card networks returned calls for comment on any unusual reserves being taken.

Since the movement switched to the online donation site WePay, another $196,000 has come in, which gets routed like the rest of the money to Occupy Wall Street’s bank account.

A survey of Occupy camps across the country reveals each protest is relying on local donations.

Protesters holding the purse strings in New York were keen to stress how expensive the city is and how hard it will be for the movement to sustain itself over the winter.

“People don’t understand that this is New York, we pay New York prices,” said Pete Dutro, one of the core members of the Occupy Wall Street finance committee.

“These occupations ain’t cheap,” said Dutro, a tattoo artist who was studying finance at New York University before putting his studies on hold to join the protest.

The movement is keeping its money at Amalgamated Bank, which was started in the 1920s by a garment-workers union and was until recently 100 percent union-owned.

That sole union ownership ended in September just as the protests were starting. Nine days after the demonstrations began, Amalgamated sold 40 percent of its stock to two of America’s best-known investors, Wilbur Ross and Ron Burkle.

Ross buys and merges distressed companies in industries such as steel, coal and auto parts. Burkle is best known for his investments in grocery companies and has good relations with unions. Both Ross and Burkle are billionaires.

An Amalgamated spokesman did not return calls for comment.

Representatives for Ross and Burkle did not return calls for comment.

Last Friday, the Occupy Wall Street finance committee made one of its first detailed reports, saying it had spent $55,000 to date, including $22,000 for food, medical care and laundry and $20,000 on communications systems.

Dutro, who has a background in operations management at Internet services companies, said the amount raised so far should be taken in context.

“People see like $500,000 and they say ‘Wow that’s a lot of money’ but the reality is it’s not that much money. You have a huge community — we’re bigger than most of the occupations — and we probably spent a lot more money,” he said.

While Occupy Wall Street has had attention over its money and whether it should share with movements in other cities, most camps say they are just fine on their own.

“People have come up and said they want to give us contributions from $5,000 to $15,000 but we’ve told them no,” Occupy Chicago’s Orion Swann said, adding the group has raised less than $20,000.

“Right now we are figuring out how to establish a legal identity so we’re holding off on accepting donations.”

a billionaire mortgage-seller who fooled millions; a high-rolling banker with a fatal weakness; a ferocious Wall Street predator; and the power behind the throne.

The crash of September 2008 brought the largest bankruptcies in world history, pushing more than 30 million people into unemployment and bringing many countries to the edge of insolvency. Wall Street turned back the clock to 1929

But how did it all go so wrong?

Lack of government regulation; easy lending in the US housing market meant anyone could qualify for a home loan with no government regulations in place.

Also, London was competing with New York as the banking capital of the world. Gordon Brown, the British finance minister at the time, introduced ‘light touch regulation’ – giving bankers a free hand in the marketplace.

All this, and with key players making the wrong financial decisions, saw the world’s biggest financial collapse

source .. aljazeera – http://english.aljazeera.net/programmes/meltdown/2011/09/2011914105518615434.html

• Forgive all of your issues with money.

1. All of our life, world, and experiences are the result of our thoughts.
2. We are 100% responsible for creating all aspects of our life, world, and experiences.
3. There is no such thing as a life, world and universe “out there.” Everything is merely a thought and extension of our own mind “in here.”

• Be grateful now.

• Act “as if.”

• Be free of debt.

1. Use a columnar writing pad with as many columns as you have debts.
2. Starting with the far left column, write a heading for your largest monthly debt expense (e.g., “house payment”).
3. Directly under that header write the dollar amount of this monthly expense. Highlight or circle this amount.
4. Directly under this monthly amount write the outstanding balance of this debt.
5. Repeat this process for all of your debts. Be sure to list them all, from left to right, from your largest monthly obligation to your smallest.
6. At the very top of the writing pad write this affirmation: “It is my desire to keep my promise regarding all of these financial obligations, and in some cases I will even do twice as much as is required.”
7. As you receive your monthly bills, take out this columnar pad and adjust the required minimum monthly amount, as it changes.
8. As you receive your monthly bills, pay exactly twice the amount starting with the column on the farthest right (i.e., the smallest amount). Pay twice the amount for all of the columns that you are able to, moving in order, from right to left, the smallest to the largest monthly amounts. (Financially, if you can only do one column, then only do that one column until you are able to do more.)
9. After making each payment, write the new outstanding balance for each column.

• Ask yourself “Why do I want more money?”

• Bless the success of others.

• Give to others.

Content:

1. Making money
2. Permanent inflation
3. Central banks need inflation
4. Caprices of the money stock
5. The war against Iraq
6. Oppression of the Third World
7. China’s weapon
8. Inflation and economic growth
9. Further growth or a sustainable society?

1. Making money

Exchanges, a primary need

People need each other’s products and services. They use money to exchange them among each other. Of course, it would be nice if money provided an honest medium of exchange. But this is not the case. Money loses value all the time.

Money does not belong to the state

Most people believe, that money is created by the state. However, most governments have little or no say in their country’s money supply. Bankers have taken over this power. They have turned this medium of exchange into a lucrative way of taxing the population by collecting interest. Bankers permanently collect interest on nearly all the money in the world.

Money is created by commercial banks

Commercial banks continually create money for loans. They do so simply by typing numbers into the bank accounts of borrowers, who then can spend it as if it were actual banknotes. Today the vast majority of all money only exists as numbers in bank accounts. By law, these numbers have the same value as banknotes and coins.

Each commercial bank is allowed to create new money this way. Behind the scene, hidden from the customers’ eyes, then starts the lucrative juggling act with other people’s money. In fact, the amounts that have been typed into the accounts are comparable to bad cheques. The bank itself does not have the money. When the borrower spends the typed amount by writing a cheque or a payment order, the bank will use other people’s money to pay for it. Unseen, this money is taken from the deposits and savings accounts from other customers. You can’t notice it. The numbers on your deposit and savings accounts remain unchanged. And by the time you want to dispose of your money again, there will be some loan that will be paid back to the bank, so you will never know about it. In many countries the minimum reserve banks must keep is fixed by law. (Often something like 10 percent.) Most of the times these reserves are then kept by the country’s central bank.

Because banks use other people’s money to back the new money they lend out, the amount of new money they can create, is limited. In practice around 90 percent of all money on deposit and savings accounts is used to back new money.

However, the money on deposit and savings accounts is also money that has been juggled out of the banker’s hat once. So, new “money created out of nothing” is backed by already existing “money created out of nothing”. But as long as nobody notices, the juggler gets applause. Let us have a look at the consequences.

The merry-go-round of loans

Loans have a hidden effect. When the borrower spends the money, the receiver will deposit it at his bank. This bank, thanks to this deposit, can issue new loans. These loans too, will be spent and become deposits at a following bank. And so on. Of course, at each new level a bank collects interest. It is a vast merry-go-round of money creation, which inflates the total amount of money in the country.

(“Debit, credit, banco!” shows the book-keeping of this trick.)

Each time when loans, issued by one bank, arrive as deposits at a following bank, a new round of loans can start. The scheme also applies, when the money of a loan is spent and comes back as a deposit at the same bank again.

If there were only one bank in the country, it would quickly become obvious, that this bank is continually creating new money by issuing loans, and picking up the created money again as deposits, issuing new loans again, picking up the money again, and so on.

So, the effect of the merry-go-round is that banks together create more loans and collect more interest all the time. It inflates the money stock by many times. But do we, or the banks, get richer from this?

Banks create more money, but they don’t magically create more goods to buy. When people have more money, but there is still the same quantity of stuff to buy, prices will simply go up. Each unit of money becomes worth less. That is called inflation.

So, when banks put more money into circulation, the value of each unit of money goes down. And that is also true for the interest they collect. When they issue 10 times more loans and inflate the money stock by 10 times, the interest they collect is worth 10 times less too.

Competition assures inflation

>Most countries have only one official currency, but multiple commercial banks issuing the money. And although these banks together do not get much richer from inflating the money-stock, they still do so. The only reason for this is the competition among them. Although competition sounds healthy, when we speak about normal enterprises, competition among banks means lending out as much money as possible and thus maximum inflation.

For each bank competition is just a battle to collect more interest and to increase its market share and benefits. The bank with the best results will grow quicker than the others and, in the long run, will be able to eat his competitors.

The gap between rich and poor

Not everyone can borrow the money he wants. When lending money, banks demand collateral they can seize if the borrower defaults on his payments. People with sufficient collateral can obtain loans and invest easily. Big corporations even pay less interest. The demand for collateral works as a continual widening of the gap between rich and poor.

For societies this is a permanent looming danger. As banks and not governments decide about loans, governments can only try to mask the social cracks, but will not be able to heal nor prevent them.

Loans for investment and consumption

An effect of loans all borrowers know too well, is that the principle amount has to be paid back with interest. The entrepreneur borrowing money for investments will have to generate extra income to pay this interest. Loans for investments are not only a cash-cow for bankers, but can also contribute to more economic activity. Making loans available for investments would be the useful role of the banks for society.

On the contrary, loans for consumer spending normally do not contribute to more consumption. It is true, that thanks to consumer credit, the purchase of an article takes place earlier. However, this advantage is offset by a longer period of decreased purchase power of the consumer. The consumer must not only earn the money for his purchase, but also for the interest. Therefore he will purchase less consumption goods with his wages. When the consumer pays the interest to the bank, only a part of this money will become wages of bank employees and only part of these wages will be spent on consumer goods. So, credit for consumer goods rather leads to a decrease in total purchases of consumer goods.

Where does the money go?

Once the borrower has spent the money of his loan, it becomes rather unpredictable how successive holders will use this money. One might acquire the borrowed money by selling a car to the borrower. The seller may then pay the money out as wages. The wage earner might then use the money to pay his rent. In fact, as soon as money enters into the big playground of transactions among people, it can serve for all purposes we use money for.

During the lifetime of loans, the money is transferred from bank to bank each time when account holders make payments to account holders of other banks. For this purpose the central bank keeps an account for each bank and executes these transfers.

Sometimes it is more practical to use banknotes and coins. At the bank or at an automated teller machine one can take money from his account. When it is spent, the receiver will bring it to his bank, make a deposit, and will see the amount appear on his account. Money can take the form of cash or numbers in bank accounts. For the payments, it does not matter which form it takes.

Where does money end?

Money ends when the borrower pays back the principle of the loan to the bank. At that moment the bank transfers money from the borrowers deposit account to the borrowers credit account. The credit account will show, that the borrower’s debt has been reduced. The money came into existence by putting numbers on the borrower’s account and vanishes by reducing these numbers.

The borrower also has to pay interest to the bank. The interest does not form part of the money the bank created for this borrower. The borrower must work and obtain it from other money in circulation. (Per definition, that other money forms part of the pool of all outstanding loans in the country at that moment.)

So, the lifetime of money ends, when loans end. And if all loans would be paid back, there would be no money left. Yet, for the moment, there are oceans of money and on all this money the banks collects interest.

Non-bankers versus bankers

In society money goes round. Money comes your way when you produce or do things that others want. Money rolls the other way, when you purchase things or make people work for you. Eventually you can save some money for later. Bankers do it differently. They simply and permanently take some money from others and spend it. It is based on the principle, that the money is theirs, since they created it. Thus bankers find it logical, that they are entitled to collect rent. Indeed, in some countries this levy is called “rente”. (In English “interest”.) And although everyone uses the money, the bank always takes this levy from the first user, the borrower. In a moment we will see how the banks make the other users pay too.

Banks cannot be considered as ordinary commercial enterprises. They have declared themselves owners of all money and they make the population pay to rent it.

Time-out

Nearly all money is temporary. Ending loans have to be replaced by new loans to keep money in circulation. Loans start at different moments and have different lifetimes. Often the borrower pays back a part of his loan each month. It means, that each amount in circulation has its own “time-out” date, which is the foreseen date the borrower has to pay it back.

The total amount of money in circulation determines how much money we dispose of for our transactions and, in the long run, it sets the overall price-level of products and services.

Transactions

During its lifetime money is a medium for transactions. A transaction takes place when two parties find it interesting. “A” finds the money he gets more interesting and “B” finds the second hand car he purchases more interesting. An exchange takes place. Now “A” has the money and “B” has the car and both feel satisfied.

Transactions may include a payment for added value. When a baker makes bread, he adds his work to the flour, milk and yeast. The work he does represents added value. When he sells the bread the transaction is not just an exchange of property, but includes payment for the added value.

By itself, the total amount of transactions in a country does neither give any indication about the added value, nor about the value of goods and services produced in a country.

2. Permanent inflation

Price inflation makes us lose value on the money we detain. It can fluctuate a lot over time. Many economic theories offer explanations about the causes. However, these theories rather explain increasing and lowering prices among products and services. They do not explain why inflation is permanent. The permanent inflation has a different cause. We’ll take a quick tour through different types of inflation. But, to start with, we will eliminate the confusion between the Consumer Price Index and price inflation.

Consumer Price Index and Price Inflation

Price inflation leads to dissatisfaction of the population. That is why a lot of countries use a Consumer Price Index, which shows more pleasant figures. [1], [2], [3] So, when politicians or officials use the word “inflation”, they most often mean the changes in the Consumer Price Index.

The index is based on a yearly price comparison of a basket of products, that an “average” household would need. The content of the basket varies from country to country and so do the rules to calculate the index. One country may include the cost of food, fuel and housing; another country may leave these costs out. [4], [5] Some countries publish the categories of products they have in the basket [6], but the exact products usually remain secret. Nevertheless, some statistics bureaus disclose some tricks they use to obtain flattering indexes. For instance, they change the content of the basket periodically. Products that rise in price too much are taken out and replaced by cheaper ones. Or, when the price of a product remains stable, but quality improves, they count the quality improvement as a price reduction. So, for the computer in the basket, the Dutch Central Bureau for Statistics (CBS) counts a 64 percent price reduction between 1998 and 2003! And down goes the index! [7]

So, the content of the basket is adjusted periodically. The justification is: “when prices rise, households adjust their purchases too.” And what does this policy means for the index? Well, since the defined household cannot spend more than it earns, the price-increase of the CPI-basket is automatically limited to the increase in earnings. The defined household cannot pay higher prices.

Unless indicated otherwise, in this article the expression “price inflation” refers to the real increase in prices in all transactions and not to some CPI. And in this article “inflation” means, in the first place, the increase of the money stock. More about that in a moment.

Cost-push theory

The cost-push theory says, that increasing costs are responsible for price inflation, like higher wages, increase in price of imported raw materials or increase of taxes on consumption. [8]

Demand-pull theory

The demand-pull theory says, price inflation appears when demand exceeds the offer. [9] Increased demand can be caused by export activities, tax reductions or growth of the money supply. Fluctuations in demand can also occur, when consumers save more money and, after some time, start spending it again.

Self-fulfilling expectations

The expectations for price inflation also affect real price inflation. Manufacturers and traders generally have pricelists, which are valid for six months or a year. They have to include a percentage for expected inflation. This immediately increases the prices, and thus contributes to the real inflation. The same goes for bankers. When they issue loans, they foresee that the interest they get in return over time will be lowered by inflation, thus they calculate an extra margin. Extra cost of interest contributes to the real inflation.

Increase of the money stock

If demand-pull and cost-push inflations would take place without expansion of the money-stock, some prices would rise and others would lower. However, we rather see some prices rise faster than others, but rarely prices that lower. This is because, over time, the money stock increases by more and more outstanding loans. This is called the monetary inflation.

Of course it affects the prices in transactions, however, never evenly. Practically, when more money becomes available, this extra money creates room for price increases in each successive transaction it goes through. We may presume, that when other inflationary factors are at work somewhere, for instance high demand, the extra money will lead to extra price increases there.

The monetary inflation is the cause of the permanent overall price increases we notice in the long run. It is the only inflation that counts over years and decades.

Inflation, in the first place, refers to inflating the money stock. This leads to the increase of average prices. Today we also use the word “inflation” for the increase of prices. Keep in mind, when the money stock grows and, simultaneously, productivity grows, it may happen, that the average prices don’t increase or increase less quickly. The available money is spread out among a greater number of products and services and this helps keep prices down.

3. Central banks need inflation

It may seem, that inflation keeps itself going rather naturally. When prices rise during the lifetime of loans, new loans must finance more expensive things and thus have to be higher. At any time the cause of inflation would be the inflation itself. However, it is not some  “perpetuum mobile” that is responsible for inflation, but a clear and openly admitted policy of central bankers [10], [11]. Inflation is a component of our banking system.

As exposed earlier, competition among commercial banks assures, that they will issue the maximum amount of loans. Hence, to higher or lower inflation the central bank only needs to loosen or tighten the issuance of loans.

The best known way of central banks to steer inflation is changing the interest rate. It is meant to influence potential borrowers. In the words of the Dutch Central Bank (DNB): “The interest works like the acceleration and the break pedal of the economy. By an increase of the interest rate, prices will lower, or at least rise less quickly. By a decrease in the interest rate prices will rise faster.” [12]

A way to explain it is, that when the interest rate becomes higher, people will borrow less. And when less ending loans are replaced by new loans, there will be less money in the country. Over time, you can buy more with each unit of money. Prices lower. But mind, what DNB added: “or at least rise less quickly.” Here the central bank has no intention to see the prices lower. In this case, apparently, the money stock is still allowed to grow, but just a bit slower.

When the central bank lowers the interest rate, the reason is straightforward: let there be more loans and let the speed of growth of the money stock increase. Of course, the interest rates also work on savings. When interest on savings is low, more people will prefer spending their money.

Central banks cannot steer the inflation on specific prices, like the prices of bread, bicycles or machines. They rather steer the monetary inflation, the increase of the total volume of loans. The extra money never spreads evenly through the economy. It rather increases the effects of other factors, like rising cost or rising demand.

When the economy cannot absorb the inflation anymore and the money does not spread sufficiently, bubbles occur. Then, bigger and bigger masses of money go round in for instance the stock markets or the real estate market, where money is earned by the forcing up of prices. Enterprises too are more and more often bought and sold as if they were financial toys.

Although central banks admit that inflation is part of their policy, they rather put forward economic reasons. They sound plausible most of the times and are richly provided with comments by economists and journalists. However, most of them forget, that, in the first place, central banks need inflation themselves.

Inflation: Central banks need income

Central banks have obtained the power to control the volume of the money stock, to set inflation and interest, and to dictate rules for financial institutions. With this power they can influence the economy. They have obtained laws to hold this power. If they would depend on others for their income, their power might quickly erode again. That is why they collect their own income. [14], [15]

Central banks get their income from monetary operations. A very lucrative source of income is borrowing money when the interest is low and lending it out when interest is high. As monetary operation the purpose is as follows. When interest at commercial banks lower too much, (low demand), the central bank borrows large volumes of money from the banks. This way there will be less money left in circulation. Therefore demand for loans will increase again and interest at commercial banks will go up again. In other times, when interest at commercial banks gets too high, the central bank lends out money to banks, so they can supply more loans to their customers and finally the interest lowers again. [16] The bigger the differences in interest between the borrowing and lending of money, the higher the benefits for the central bank.

To get income from these operations, inflation is essential. Without inflation, interest rates would stay rather low. [17] There would be hardly any difference between high and low interest. Related to this trade, central banks also expand their balance sheet. They buy more securities (lend out more money) than they sell.

Many central banks say, they want to keep inflation around 2 percent. With this they mean an increase of 2 percent of the Consumer Price Index of their country [11], not the real inflation of the money stock, which normally is a lot higher. [3]

Inflation: make the population pay for the use of money

Inflation is not only a necessity for central banks’ income, but also a means to exercise power over the users of money. By monetary inflation the population pays – even against its will – for the use of money. Banks collect interest from the borrowers. This way only the borrowers seem to pay for the created money. But let’s see how it works when there is inflation.

By inflation, the borrower has the advantage that his payments to the bank represent less worth over time. These payments concern interest and pay-back of the principal. The interest forms income for the bank. We may be sure, that the bank has foreseen the inflation and has counted a bit more interest in advance. So, for the interest, inflation does not deliver an advantage for the borrower. However, for the principle, this is different. The bank only needs its nominal amount to be paid back, for, with the payback, only the typed numbers, with which the loan started, have to be lowered to zero. The devaluation of the amounts to pay back for the principle certainly is an advantage for the borrower.

The borrower’s advantage on principle payments can be calculated separately for each instalment. And when we also calculate the inflation supported by the following users of the money created by this loan, the totals will appear to be roughly the same.

In this example the red line shows the total amount of transactions made with the money of the loan during the lifetime of the principle. The loss of value from inflation is dissimulated in the 60 transactions. When the inflation is 2 percent, this is  in average 0.167 % per transaction. The loss of value for the users of the money equals the advantage for the borrower.

Simply put: if the borrowers must pay 6 percent of interest (on the principle) and has 2 percent advantage from the inflation (on the principle), his advantage equals 2/6 of the interest. [18] The users of the money lose an equal amount from inflation. The banks don’t lose. They have foreseen the inflation and have count a bit more interest in advance.

In other words, this is what the inflation policy of central bankers does: shift a part of the interest burden from the borrowers to the users. This way the users pay interest for the use of the money!

Manipulating inflation and interest

With the authority to set inflation and interest the central bankers have the power. They can make us save more, invest more, consume more, speculate more and always work harder.

As shown above, inflation is interest the users of money have to pay. Inflation pushes the population to work harder and to compete to obtain some of the extra money put into circulation and make up for the loss of value of the money they detain.

Inflation also pushes people not to keep money in their pocket or under their mattress, but to spend it or else bring it to the banks for some interest. This way most of the money remains available for the banks.

When interest is high, people will save more. When interest is low, people will rather spend, borrow and invest more.

What we think interesting to do at a particular time, largely depends on what the central bank wants us to do.

4. Caprices of the money stock

As mentioned above, the stock of money society disposes of is the total amount of outstanding loans. By itself this is very strange. For what should be the relation between the outstanding loans and the need for money in society? What does the need of borrowers and their capacity to pay back have to do with the need of money of the rest of society? If you buy a house tomorrow, and, with your loan, bring into existence money for twenty years, that does not have anything to do with the need of the economy in ten or fifteen years, does it?

In fact, society disposes of a hazardous money stock, brought about by issued loans in the past, and the part that still has to be paid back. Each day parts are paid back and new loans are contracted. Because of the gigantic volume of the money stock the population hardly notices the variations. In theory, central banks could centralize all information about outstanding loans and know exactly how much money will be left from the loans tomorrow, in two days or in ten days. With monetary operations they could keep the money stock rather stable. However, as mentioned above, this is not the policy of central banks. They only make the money stock grow.

There are theories that say, that without inflation the economy could not be steered. One of the key arguments is, that when the money stock does not increase, wages cannot be lowered when needed by economic adversity. “The paid out wages would have to be lowered and employees would never accept that.” And “when the money stock increases, cuts in wages can be hidden by letting the wages rise less quickly than the inflation.” So, the proponents of this theory understand, that inflation is bamboozlement of the people and argue, that it cannot work otherwise. Yet, their theory does not hold true. For, with a stable money stock, some prices would rise, while others would lower. People’s acceptance of variations in wages would be very different from today’s situation, where, since decades, prices only rise. Besides, with a stabe money stock, it is even possible to maintain the paid out wages stable during economic adversity, if during economic prosperity the extra income is formed by shares in profits and tax-reductions.

Today’s money system does not start from a quantity of money that would fit the needs of the economy. Today’s system only assures, that banks collect interest over all existing money, that the competition among them causes maximum monetary inflation and that central banks secure their income and power. The stimulation of the economy consists of nothing else than a little more or a little less interest and inflation. For the rest the economy must deal with the money that happens to be there at a particular moment.

5. The war against Iraq

Money is expressed in currencies. Each country has an official currency. In the US it is the dollar. The dollar is also used a lot outside the US. Since 1973 the quantity of dollars outside the US increases faster all the time. Half of its imports are paid with dollars, for which the US does not deliver anything in return. Those dollars stay abroad indefinitely. This way the US buys each minute for 1.25 million dollars of goods and services from other countries, for which the other countries don’t get anything in return. The amounts are simply added to the foreign debt. This debt is so high now, the US can not redeem it any more. So the US is bankrupt. One of the main reasons why the whole world still wants dollars, is because almost all gas and oil on the globe has to be paid in dollars. This way, the US has also the advantage that it can always dispose freely of these gas and oil reserves. For the US can always create as many dollars as it wants to pay for it. So, to maintain world’s demand for dollars and to dispose freely of the gas and oil reserves, the US tries to make sure, that OPEC-countries keep selling their oil in dollars. However, Iraq, that disposes of the second largest oil reserves in the world, switched to the euro on 6 November 2000. [19] Although the US sought a way to re-establish its influence in Iraq for many years, the war became inevitable because of this switch to the euro. The dollar sank away and in July 2002 the situation got that serious, that the IMF warned that the dollar might collapse. [20] A few days later the plans for an attack were discussed at Downing Street. [21] One month later Cheney proclaimed it was sure now, that Iraq had weapons of mass destruction. [22] With this pretext the US invaded Iraq on March 19, 2003. The US switched back the oil trade into dollars on June 5, 2003. [23] So now, at least financially, the US disposes freely of the Iraqi oil reserves again. (And while from Bagdad journalists report about the war, from Basra the oil is exported in dollars.) Since spring 2003 Iran too switched to the euro and since 8 June 2006 Russia sells its gas and oil in roubles. (You can read more explanations and details in “Cost, abuse and danger of the dollar” [24] Note: behind the conflict of the US with Iran there is more than a currency-conflict. Behind the scenes it is also about the forming of a cartel on the world market of nuclear fuel. You can read more about this in “Raid on nuclear fuel market.” [25] )

6. Oppression of Third World countries

The advantage of free imports (1.25 million dollars per minute) only applies, when the dollars stay abroad permanently. If other countries would use them to buy goods and services from the US, then there is no advantage. But since 30 years the US imports more than it exports. As no other it masters the art of keeping the dollars abroad.

For instance, the World bank and the IMF supply loans in dollars to Third World countries since the 1960’s. The policy is to supply as many loans as possible, so these countries will never be able to pay them back. [26] This way they are eternally stuck with loans and growing interest charges. So, the so-called “help” to developing countries is nothing else than oppression. And the trumpeted debt relief by industrialised countries hardly presented 1 percent. [27]

7. China’s weapon

The Chinese government does not want free trade with dollars in its country. The dollars earned by Chinese exporters are exchanged against local money by the Chinese Central Bank. The Chinese Central Bank has an enormous stock of dollars. In March 2007 about 1,000 billion dollars. [28] In fact this constitutes a fairly effective weapon against eventual aggression from the US. When China wants, it can offer loads of dollars on the exchange markets and push the dollar rate down, or even make the dollar collapse at once. [29]

8. Inflation and economic growth

Our monetary system, ruled by banks, interest and inflation, already existed when we were born. It is part of our “natural” surrounding. That is why it is hard to see which influence it has on our life and on society. Everything we could say about it, can easily be judged as normal. We don’t know better. The effects of the system are everywhere, even in our way of thinking and in our convictions.

So we find it self-evident, that the economy can only be sound when it grows. The concept of “economic growth” has been canonized by economists, politicians and everyone who understands or assumes he understands society. In Western Europe and North America we strived with success for economic growth since the start of the industrial revolution. The system has proven itself.

It is not an accident, that our money-system is based on eternal inflation and our economy on eternal growth. Some clever bankers conceived the system this way at the beginning of the past century. [30] Interest and inflation would form a permanent income for the banks, as counterpart of simply juggling money out of their hats. The loans would lead to more economic activity. Governments and the population would come and beg for more loans. It fit perfectly in the developments of the industrial area. Mechanization, mining, extensive farming, colonial resources, scaling up, competition among nations, wars and reconstructions, the explosive growth of the populations, workers from abroad, women at work, the development of the services sector, the boom in computer technology, it all led to economic growth. Economic growth was synonym for prosperity. Today, in Western Europe, we still talk in terms of economic growth. By the flattening of the population growth this can now only be obtained by an ever increasing working pressure per employee. The roads of economic growth and prosperity part.

Inflation works like the carrot in front of the nose of the donkey. Everybody starts to run harder to obtain some of the extra money that has been put into circulation. And while running, nobody escapes from the payment for the use of money. Thanks to the inflation everybody participates in paying the interest to the banks. And if, by all of us running harder, we grow wealthier, we can almost be sure that the interest will be raised. In banking jargon it then says, that the economy is overheated and has to slow down. Until we must run harder again.

World wide expansion

Meanwhile the banks have made themselves conspicuous. With their juggling trick they conquered the world. Everywhere banks have taken the power over money and make the population pay interest and inflation. Every-where, except in China, central banks have obtained special laws, to set – independently from the will of the local government – the level of interest and inflation. After Western Europe and Northern America other countries are now developing their economy. For the banks this means new governments and populations, who want money from the hat.

In fact it does not make a lot of difference if central banks are private or state banks. Nearly everywhere they have obtained a special statute, that grants them a high level of independence from the local government. Together with the commercial banks, they determine how many loans are issued, how much money society disposes of and how much the population has to pay.

9. Further growth or a sustainable society?

The policy of most central banks is based on permanent growth of the money stock. In Western Europe and North America this growth of money accompanied the growth of the economy and the growth of the population. Meanwhile the world has changed a lot. The explosive expansion of the population and the expansion of economic activities have tremendously increased the pressure on the environment. Fertile areas have been taken over by humans. Forests have changed into farm land and cities. Many species have been exterminated. Most of the fish from oceans and seas has been plundered. By the fast growing world population the pollution of soils, water and air still increases. In many places there are food and drinking water shortages. The climate is changing. The prognoses indicate, that with the current trends the population of the world will continue to grow fast and will even still double. The lines in the graphic have been drawn as if this is possible…

Limits to growth

The earth does not grow along with the expansion of our economies and the populations. For the first time in human history we encounter the limits. Of course we have no idea what to do. Church and state always used to preach growth. Bankers too like growth. Limits to the world population? No one in power dares to burn his fingers on that subject.

Where is that limit? That depends on what we want as humanity. If we want to reach the highest possible quality of life – for our children and grandchildren -, we should not burden the earth more than strictly necessary. We should strive for a smaller population. That would also take away the principle reason for conflicts and wars.

Today’s policy is completely opposite to the needs of a peaceful and sustainable society. The money system plays a key role. Reforms are necessary. The longer we wait, the more difficult it will become in the future.

by Rudo de Ruijter,

Although there is a Chinese saying that goes “Money isn’t everything…” Let us be practical for a moment. Yes, money probably isn’t everything, but you could say that it is reasonably similar and close to oxygen, when the times come where you need money… you really need it. Thus I will share with you 3 simple steps which can help you to learn the secrets towards attracting money into your life.

Step one, Decide and Expect

Deciding on a particular amount that you expect to have by a certain deadline is the first step in learning how to attract money. But please be reasonable and follow the SMART rule for setting these types of goals or deadlines, for example don’t expect to have $1 billion in 6 months if you earn less than $50,000 per year. Start small and take small steps and goals such as earning an extra $15,000 more in the next 3 months. Once you achieve your target, you will feel more empowered to take on bigger goals, and you can slowly increase this amount over time. So what is the secret behind this? The secret is: Decide that you already have the money and it will come sooner or later and you don’t even have to worry about it. Sounds amazing?

It may sound amazing at first, but if you would take a closer look you would realize that how simple the logic and reasoning behind it actually is. If you think about it, it is actually a lot more easier to make money or manifest prosperity or abundance into your life the moment you decide to do it. Think about the last time where you had to raise a fixed amount of money in a certain time frame… Did you actually manage to do it? If you did, I am sure you would also agree that you had absolutely no idea how you were going to raise that amount of money… you just knew you had to and there was no other way. This is what we call expectation.

Step two, Get Obsessed with it

A lot of people are unable to learn how to attract money into their life up until now and are still totally clueless about it. The reason most of the time is because they are not obsessed enough with their goals. Note that I am not talking about developing an obsession with money… that would be different. What I am talking about is getting obsessed with a specific goal such as putting $20,000 into a savings account so that you can start your own business or buy a new apartment. No matter how much the amount is or the things that you can get behind it, the goal is always of more importance than the money needed to achieve it.

Ponder about it, I don’t think anyone really wants money…what we really want is the things which we can use money to exchange for. I am sure you would not want to have stacks of thousand dollar notes in your house if it could not be used to buy anything. Thus focusing your efforts on just making money alone will never build a strong desire… focus instead on the reasons why you would want to attract money, manifest abundance or manifest prosperity and start a burning obsession for that reason.

Step 3, Start Working with What You Have

Obsessing over your goal is not enough. You can’t lie in bed whole day expecting money to come to you, what you need to do is to take action. It is of utmost importance for you to start working as diligently as you can to achieve your goal. Even if you feel that the plan or strategy you have now will not be enough to reach your goal, just keep your eyes fixed on your goal and eventually your subconscious mind will start giving your inspirations and ideas to you. When the time comes, it will be a lot more easier and effortless for you to shift this momentum that you have already established by working hard at first. Over time, you will find that having a clear expectation and a burning obsession helps a lot in discovering the buried opportunities which makes it possible for even the average man to learn how to attract money.

To increase your “luck factor”, there are two things you should do:

1. Prepare yourself for opportunities so that you can take advantage of them when they come.
2. Put yourself in a position that makes it easier for opportunities to come.

While both of them are important, I think the first one is more important. Why? Because what makes the difference is whether or not you can take advantage of the opportunities. What’s the use of getting a lot of opportunities if you can’t take advantage of them?

So, because the first point is more important, I will focus on it here.

Preparation Takes Time

There is one important characteristic of preparation that you must understand: it takes time. You can’t prepare for something big overnight. In fact, bigger opportunities require bigger preparation. Just think about the level of preparation it takes to go to the Olympics. Those who want to go to the Olympics must prepare themselves for years, often from an early age.

That’s why it’s important that you prepare for future opportunities. Don’t wait until they come before you start preparing for them. It would have been too late by then. Prepare yourself early and you will be ready by the time they come.

Three Ways to Prepare Yourself

Here are three ways to prepare yourself for future opportunities:

1. Be curious

Curiosity makes you eager to know more about the world out there. If you are curious, you won’t be satisfied with what you already know. You will want to know more. As a result, you will see more potential opportunities.

It’s like being in a building with windows. The more windows the building has, the more you can see what’s out there.

2. Educate yourself

When you find something interesting, start educating yourself about it. Don’t worry if you can’t do anything about it right now. Remember, you are preparing for the future.

In my case, there are a few things I’m interested in which I still can’t work on at the moment. So what I do is I educate myself about them.

For example, I have a dream that someday I might have a game studio. As I wrote in Eight Random Things About Me, I often wrote simple games when I learned computer programming. Who knows, perhaps I could have my own game studio someday. While that might still be years away, I start educating myself about it so that I would be ready when the opportunity came.

So educate yourself in whatever it is that you find interesting. Read blogs, subscribe to magazines, watch videos, read books. Build a “prepared mind” that luck favors.

3. Build an “opportunity fund”

Warren Buffet makes sure that Berkshire Hathaway has at least $10 billion in cash in reserves. Why? So that when the opportunity comes for an attractive deal, Berkshire can immediately act on it. If they didn’t have the money, the opportunity could be gone forever.

Similarly, you should prepare an “opportunity fund.” Prepare certain amount of money that you can use to take advantage of the opportunities that come your way. Don’t let opportunities slip by just because you don’t have the cash to act on it.

***

So that’s how you prepare yourself for future opportunities. Don’t wait until it’s too late. Prepare yourself early and years from now people will be amazed at how “lucky” you are.

The principles that build wealth haven’t changed for centuries. These 78 maxims, gleaned from Benjamin Franklin’s Way to Wealth, contain all the wisdom needed to amass a fortune. Unfortunately, it’s still going to take hard work, intelligence, and discipline.

Industry (1-39) – Energetic devotion to a task or an endeavor; diligence.

1. Early to bed, and early to rise, makes a man healthy, wealthy and wise
2. Diligence is the mother of good luck
3. God helps them that help themselves
4. Sloth, like rust, consumes faster than labor wears, while the used key is always bright
5. Dost thou love life, then do not squander time, for that’s the stuff life is made of
6. Lost time is never found again
7. He that riseth late, must trot all day, and shall scarce overtake his business at night
8. Drive thy business, let not that drive thee
9. Industry need not wish
10. He that lives upon hope will die fasting
11. There are no gains, without pains
12. Plough deep, while sluggards sleep, and you shall have corn to sell and to keep
13. One today is worth two tomorrows
14. Have you somewhat to do tomorrow, do it today
15. Be ashamed to catch yourself idle
16. Let not the sun look down and say, inglorious here he lies
17. He that hath a trade hath an estate
18. He that hath a calling hath an office of profit and honor
19. At the working man’s house hunger looks in, but dares not enter
20. For industry pays debts, while despair encreaseth them
21. Constant dropping wears away stones
22. By diligence and patience the mouse ate in two the cable
23. Little strokes fell great oaks
24. Employ thy time well if thou meanest to gain leisure
25. Since thou art not sure of a minute, throw not away an hour
26. A life of leisure and a life of laziness are two things. Do you imagine that sloth will afford you more comfort than labor?
27. Trouble springs from idleness, and grievous toil from needless ease.
28. Many without labor would live by their wits only, but they break for want of stock
29. Industry gives comfort, and plenty, and respect: fly pleasures, and they’ll follow you
30. Keep the shop, and thy shop will keep thee
31. If you would have your business done, go; if not, send
32. He that by the plough would thrive, Himself must either hold or drive.
33. The eye of a master will do more work than both his hands
34. Want of care does us more damage than want of knowledge
35. Not to oversee workmen is to leave them your purse open
36. In the affairs of this world men are saved not by faith, but by the want of it
37. Learning is to the studious, and riches to the careful, as well as power to the bold, and Heaven to the virtuous
38. If you would have a faithful servant, and one that you like, serve yourself
39. For want of a nail the shoe was lost; for want of a shoe the horse was lost, and for want of a horse the rider was lost

Frugality (40-78) – Prudent economy; that careful management of anything valuable which expends nothing unnecessarily, and applies what is used to a profitable purpose; thrift; — opposed to extravagance.

1. A man may, if he knows not how to save as he gets, keep his nose all his life to the grindstone, and die not worth a groat at last
2. Beware of little expenses; a small leak will sink a great ship
3. Buy what thou hast no need of, and before long thou shalt sell thy necessaries
4. A fat kitchen makes a lean will
5. Many estates are spent in the getting, Since women for tea forsook spinning and knitting, And men for punch forsook hewing and splitting.
6. Think of saving as well as of getting: the Indies have not made Spain rich, because her outgoes are greater than her incomes
7. Women and wine, game and deceit, Make the wealth small, and the wants great.
8. What maintains one vice, would bring up two children
9. Who dainties love, shall beggars prove
10. Fools make Feasts, and wise men eat them
11. Buy what thou hast no need of, and before long thou shalt sell thy necessaries
12. Wise men learn by others’ harms, fools scarcely by their own
13. Silks and satins, scarlet and velvets, put out the kitchen fire
14. A ploughman on his legs is higher than a gentleman on his knees
15. Always taking out of the meal-tub, and never putting in, soon comes to the bottom
16. When the well’s dry, they know the worth of water
17. If you would know the value of money, go and try to borrow some
18. He that goes a borrowing goes a sorrowing
19. Fond pride of dress, is sure a very curse; E’er fancy you consult, consult your purse.
20. Pride is as loud a beggar as want, and a great deal more saucy.
21. When you have bought one fine thing you must buy ten more, that your appearance maybe all of a piece
22. Tis easier to suppress the first desire than to satisfy all that follow it
23. Great estates may venture more, But little boats should keep near shore.
24. Pride that dines on vanity sups on contempt
25. Pride breakfasted with plenty, dined with poverty, and supped with infamy
26. But what madness must it be to run in debt for these superfluities!
27. When you run in debt; you give to another power over your liberty
28. The second vice is lying, the first is running in debt
29. Lying rides upon debt’s back
30. Poverty often deprives a man of all spirit and virtue: ’tis hard for an empty bag to stand upright
31. Creditors are a superstitious sect, great observers of set days and times
32. Those have a short Lent who owe money to be paid at Easter
33. The borrower is a slave to the lender, and the debtor to the creditor
34. Disdain the chain, preserve your freedom; and maintain your independency: be industrious and free; be frugal and free
35. For age and want, save while you may; No morning sun lasts a whole day
36. Gain may be temporary and uncertain, but ever while you live, expense is constant and certain
37. Tis easier to build two chimneys than to keep one in fuel
38. Rather go to bed supperless than rise in debt.
39. Get what you can, and what you get hold; ’Tis the stone that will turn all your lead into go

We all want to make money fast and we all want to be wealthy however, most people don’t achieve serious wealth.

The reason is, they make simple mistakes that prevent them reaching their goal of building serious wealth and the fact is there easy avoid, so let’s look at them.

1. Someone else can make you rich

It’s tempting to believe this, but of course the reality of building wealth is:

You need to do it for yourself and not rely on anyone else.

Let’s face it, the people who say you can get rich with them charge you.

If they could do it for themselves they wouldn’t need you, they could shut up and do it for themselves, most will appeal to your greed, take their fees and you will end up disappointed.

2. You can build serious wealth overnight

We have all read stories of people who made huge sums overnight, but let’s be realistic:

Their minority and a small one at that!

That’s not to say you can’t build serious wealth quickly, however you need to be realistic and have a 5 – 10 year plan.

Many investors have turned $30 – $50,000 into a $1,000,000 or more in this sort of time frame by using the power of compound growth and a high return low risk investment to do it.

Would you be happy with that?

If you are, there is a way of building wealth this way (which we will return to later) but lets look at some other essential points first.

3. You have to work hard or be innovative to build wealth

No you don’t.

You need to work smart, NOT hard.

The vast majority of people work hard but not many of them build wealth.

People think building wealth is all about hard graft, making some new discovery, but this actually prevents them from making money – You don’t need to do this to build wealth.

Building wealth is all about compounding your money and making it work hard for you and there are lots of simple ways to do this.

4. If you want to build wealth play defence well

Any football team will tell you everything is based on defence.

If you can’t defend you won’t win, no matter how good your attack is and it’s the same in building wealth.

You want to make your money build steadily, watch compound growth kick in and accelerate your gains.

If you lose money, it’s a case of making up lost ground and catch up which takes time.

When you are trying to build wealth make sure you pick the best reward for the lowest risk you can get.

For example, would you prefer an investment that made you 300% annually with the chance of losing all your money, or the chance to make 100% with 10% loss potential?

Exactly – Now you see the point.

Now your wondering what is a good way to make money, that’s simple, you can understand it, its cheap, easy to do and can make a tidy sum with low risk?

The secret of the worlds wealthiest families

We don’t have time to cover it in this article but Howard Hughes made billions, Donald Trump still does, even comedian Bob Hope made millions and so do most of the richest investors in the world.

You may have never considered it before but it’s buying land.

A simple way to build wealth open to all

You don’t need to be rich (it’s far cheaper than property) and all you need is the right location and you can turn in triple digit annual gains in many locations with low risk.

There is no better way for Mr Average to build wealth quickly with such low risk.

If you have never considered this then take a look and you will surprised at the profits that can be made with such low risk.

Believe it or not, building wealth for a secure, early retirement is actually very simple – in theory. The equation for financial success is a function of just three easy-to-understand principles:

1: The amount of money you invest.

2: The growth rate of your money.

3: The amount of time it has to grow.

Unfortunately, few people succeed in building wealth because it has little to do with understanding simple principles – and everything to do with taking effective action. The challenge is not in knowledge, but in translating that knowledge into meaningful results. Why? Building wealth requires you to overcome the following two hurdles:

1: First, you must translate the wealth building principles into actionable rules that will take you to your goal.

2: Second, you must actually live according to those rules.

You probably already know the three principles for compounding and building wealth. Most people do; yet, few people actually live according to them. To know and not do is to not know at all. This is critical. Most people fail to succeed financially because the rules are easy to understand but surprisingly hard to live by. Living them is the key – and also the problem.

For that reason, don’t judge the quality of the following twelve tips by whether they “rock your boat” with originality and genius. That is not the point. After all, if building wealth for early retirement is as straightforward as I claim then this shouldn’t be rocket science. In fact, you probably already know most of what is in this article.

But before you yawn and hit the delete button you may want to consider whether or not you are living in congruence with each of the following wealth building tips. You may think you know this stuff already but if you aren’t “walking the talk” then it requires revisiting. Either you are living in integrity with what is taking you toward wealth and an early retirement, or you aren’t. It’s just that simple.

As you read this article ask yourself, “Are my daily retirement planning practices honoring each and every one of these financial truths?’ Judging by results will tell you what you really know, and an honest assessment should be a little uncomfortable for most readers.

Retirement Planning Tip #1: Have A Plan

The first mistake most people make is they have no written plan to build financial security. You can’t put the formula for financial success to work for you if you have no plan to accomplish it. It may be a simple process, but it won’t happen randomly. You must make it happen by taking action. A written plan with goals provides the road map and is a necessary first step.

Financial success is a choice. It results from the many small decisions you make each and every day. Without a plan and goals to achieve wealth your life is like a sailboat without a rudder: it just spins in circles without definite direction. Plans and goals provide the necessary context to focus each and every decision in your life with purpose.

Time spent writing goals and building a step-by-step plan to achieve those goals is an investment in your future. It reduces wasted effort, increases efficiency, produces amazing results, and best of all, it costs you nothing.

Every research study on goal setting and planning support the same conclusion: it’s a remarkably effective tool. For example, a 30 year study by Harvard Business School showed the 3% with written goals produced 10 times the results when compared to the 83% with no clearly defined goals. A 10 fold improvement is a life changing difference worth planning for.

To get results like that you must create written savings and cash flow goals, and you must formulate a plan complete with specific actions steps to achieve those goals. Your plan can use the investment vehicles of paper assets, business, real estate or any combination thereof.  There is no single right answer to wealth building despite what the latest guru of the day is telling you. The key point is to formulate a plan specific to your unique interests, skills, resources and abilities. No two people’s plans should be identical since each person’s situation is unique.

You want to formulate your plan based on three separate financial stages during life: aggressive accumulation during career, continued growth of assets during semi-retirement (see “How To Make The New Retirement Work For You” on this site), and spending down accumulated assets during final retirement when all earned income ceases. How you manage your income and assets will vary with each financial stage of life thus requiring a different plan.

The overall objective of your plan is to utilize your career and semi-retired years to build residual income in business, real estate, and/or paper assets so that your passive income exceeds your living expenses. When you reach that point you are infinitely wealthy as long as you continue to grow your income and assets in excess of inflation. You will always feel abundant and never outlive your income.

Achieving this goal may sound nice, but results like this only occur when you build a plan and take the necessary action steps to achieve the result. Are you doing that?

Now let’s look at what some of those action steps are…

Retirement Planning Tip #2: Lifestyle Lags Income

Most people prefer the trappings and illusion of wealth over the freedom of actual wealth. They want to look wealthy rather than be wealthy. If you aren’t certain of this truth then just look around you at how many people are in debt compared to how many people are wealthy. Most people choose lifestyle over financial freedom and violate the first principle in the wealth building equation – accumulate assets. They spend instead.

The problem is you will never become rich by spending money. You must control your spending so that your lifestyle lags your income because this will create available capital for your investment activities.

The life cycle of building wealth dictates the most important factor early in your wealth cycle is your rate of savings or asset accumulation. At some point in the wealth building process you cross a threshold where the return on your assets is more significant than how much you add to them. However, in the early stages you must build the assets so that you have something to grow. For most people that starting point is to save money.

Whether you own your business or work as an employee, you must think of each dollar as a little soldier on the battlefield of your wealth. Every time you spend that dollar on consumption instead of investment the soldier dies. However, when the soldier is invested he produces new soldiers and creates an ever growing army working for your financial security. The bigger your army the greater your financial security.

According to the “Millionaire Next Door” by Stanley and Danko, frugality and disciplined savings is the cornerstone of a financial plan. Self-made millionaires share a common value for thrift and discipline with their finances through budgeting, controlling expenses and saving a portion of their income. Judging by results, you would be wise to follow their lead.

Consumer debt is the antithesis of wealth and should be avoided. Consumer debt is enslavement to the system in the name of false prosperity. If financial freedom is your objective then your practice must be to earn interest and compound your assets – not pay interest and compound your debt. The only debt that is acceptable is to buy productive assets. A home mortgage, positive cash flow real estate, and certain business debt all qualify. Debt for consumption does not qualify.

The rule is simple for principle #1 in our wealth building formula – save money and build assets. The sooner you begin and the more you save each month the sooner you will retire early and wealthy.

Every day you are making choices between lifestyle now and wealth accumulation for tomorrow. You can either invest those soldiers for freedom tomorrow or slaughter them for goodies today. This rule is simple to understand, but hard to live. Are you walking the talk?

Retirement Planning Tip #3: Invest In Your Financial Education

The second principle in wealth accumulation is the rate at which your capital grows. This is largely a function of your financial intelligence. You must learn before you can earn. It is possible to profit from any market condition if you know what you are doing (although, admittedly, some market environments are easier than others).

Every investment in your financial intelligence will pay dividends for a lifetime. I recommend that clients regularly contribute to their financial intelligence by taking courses, reading and research so that their financial intelligence grows faster than their wealth.

This is critically important because financial intelligence cannot be developed overnight any more than wealth can be accumulated overnight. It takes time and disciplined effort. The earlier you learn your lessons the less they will cost you because you will be gaining experience on smaller investment decisions where mistakes can be offset by new savings. The longer you wait to learn these lessons the more they will cost you because of years of missed opportunities and mistakes made with big investment decisions later in life that can’t be offset by savings.

There is nothing more financially dangerous than an investor making a million dollars worth of decisions with a thousand dollars worth of financial intelligence. When it comes to investing, a little knowledge can be a dangerous thing, and a lot of knowledge can be a profitable thing. Get a lot of knowledge.

By growing your financial intelligence every day and every week you are investing in your financial future. Are you living in integrity with this wealth building principle and regularly learning about investing and personal finance?

Retirement Planning Tip #4: Don’t Procrastinate – Start Today

The third variable in the wealth accumulation equation is the amount of time your wealth compounds and grows. If you wait just six years to get started and your assets grow at 12% annually you will have half as much money when you retire compared to starting today (assuming equal contributions over working lifetime). If you wait just twelve years you will have only a quarter as much. That’s a dramatic change in wealth for just a little procrastination.  Just getting this one idea into your bones early enough in life can change your financial future. It is that important.

The power of compounding is an invaluable wealth building tool because money grows geometrically instead of arithmetically – but only when you give it time to work. Procrastination kills time, and as a result it kills more plans for retirement security than all other culprits combined. It is wealth suicide on the installment plan. Every day you delay is another day where opportunity is thrown away.

Many people procrastinate because they feel uncomfortable and out of place making financial decisions. They feel ignorant or the subject seems dry and complicated with confusing technical jargon. Get over it! Nobody is born a financial genius. Everyone has to start somewhere so just get started and fumble through it. Make dumb mistakes because it is better than doing nothing at all. Every day you wait puts you at a greater disadvantage. The more time that passes before you start the harder the wealth building process will be for you.

According to the Schwab Center for Investment Research workers who begin saving for retirement in their 20′s can safely save between 10-15% of their income and achieve financial security. If you wait until your 30′s the percentage required rises to 15-25%. Ouch! If you wait until your 40′s the percentage is an astronomical 25-35%. If you’ve reached your 50′s or 60′s and haven’t yet started to save then the only viable strategies for financial security are non-traditional and outside of the normal “save and compound grow” formula. They require leverage, additional risk, and a totally different skill set. Clearly, the earlier you start the easier the process is to swallow.

The reality is anyone reading this article will have more than enough money pass through their hands during their lifetime to secure the retirement of their dreams, yet few will achieve success. It is sad. Are you letting the procrastination monster stop you from retiring early and wealthy? What are you going to do about it?

Intermission

Up to this point we have summarized the tried and proven wealth building formula for most self-made millionaires as follows:

(1) Spend less than you earn and save the difference.

(2) Build your financial intelligence while building your wealth so that you can make wiser, more profitable decisions to grow your assets.

(3) Start early because time is the most important factor in compounding wealth.

Notice how it is the opposite of get-rich-quick: it is the slow and steady path to wealth. Get-rich-quick uses various principles of leverage which increases the risk and lowers the probability of success. It is faster but less likely. The slow and steady method requires more discipline and time but the odds for success are extremely high if you actually do what it takes. It is a proven formula that just plain works – but only if you work it.

The way to work the “save and compound” strategy is to begin the process early enough in your career so that you have lots of time. If you get started late you will either have to save an impossibly large portion of your income or apply a leveraged strategy to make up for lost time.

Regardless of the path you choose, your wealth is always a function of the amount of investments multiplied by their rate of growth and the number of years they grow. The math is always the same regardless of the strategy. It is inviolable. Unfortunately, as I’ve said before, it is also difficult for most people to live.

That is why I am including the following 8 tips as a bonus. You only need the first four to succeed, but the next 8 will help you walk the talk and shorten the learning curve by avoiding some of the more obvious and common mistakes. These extra tips will help you live according to the principles. Remember, it is no good having a system to build wealth unless you put it to work for you. Let’s see if you are putting any of the following 8 bonus tips into practice yet…

Retirement Planning Tip #5: Put Your Wealth Building On Auto-Pilot

The easiest, least painful way to save your way to wealth is automatically. Arrange you finances so that every month certain actions take place that automatically grow your assets without any decisions or extra effort on your part. This creates an enforced discipline to keep you on track. Below are a few examples:

(1) Own Your Home: Purchasing your personal residence has several advantages. A portion of each monthly payment pays down debt which builds equity – automatically. Assuming you finance with a fixed interest rate, fully amortizing mortgage you can expect appreciation from inflation over time yet you will repay a fixed amount of debt with depreciating currency – again, automatically. Finally, you can set your mortgage payoff date to coincide with your expected retirement date thus lowering your cash flow needs when you retire.

(2) Rental Real Estate: If owning your own home is a great idea, then owning even more homes where someone else makes the payments for you is an even great idea – but be careful. Make sure the property has a safety margin of positive cash flow and make sure you’re willing to deal with the potential headaches of being a landlord. It isn’t necessarily right for everyone, but for some people it is a great automatic wealth building tool.

(3) Tax Deferred Retirement Plans: Maximize your contributions to your tax deferred retirement plans so that the money comes out of your paycheck automatically before you ever see it. This is a relatively pain-free way to save because you seldom miss what you never had. Additionally, if your employer offers a savings match program make sure to save enough to maximize this free money: it is the easiest savings you will ever put away. Additionally, these savings cost far less than you might think because Uncle Sam gives you a tax break to boot.

For example, let’s assume you earn $50,000 per year, and let’s also assume your company offers a 401(k) with 50 cents on the dollar matched savings up to 6% of your salary (a very common formula). If you contributed just $250 per month ($3,000 per year) you would get an additional $1,500 paid by the company – absolutely free. Assuming a combined federal and state tax bracket of 30% your take home pay would be reduced by a mere $175 per month, yet you would be receiving $375 per month in benefits – automatically. This is a no-brainer way to build assets.

(4) Automatic Savings Plans: Another disciplined approach to savings that reduces the temptation to spend your entire paycheck is the automatic savings plan. If your tendency is to spend whatever you have then these programs are a must. Again, the money is deducted from your pay before you ever see it making the whole process of saving a lot less painful. The key principle is the money is saved automatically. The only decision you have to make is to start the process – after that, it is on auto-pilot.

(5) Join An Investment Club: While group decisions are probably not the smartest way to invest, the social support, regular learning, and forced savings will assist putting your wealth building and financial intelligence on auto-pilot.

(6) Subscribe to Educational Investment Newsletters: The internet is a treasure trove of investment education, and much of it is free for the asking. Newsletter issues come regularly causing you to grow your financial intelligence over time – automatically. Consider the free investment newsletter from this web site as a good example of this strategy.

These are just six ways you can put the growth of your savings and financial intelligence on auto-pilot. Many more exist. John Lennon said it best when he sang “life is what happens when you are busy making other plans” – although I doubt he intended it to be used for building wealth for early retirement. You must make growing your wealth a habitual part of your daily life so that it happens automatically while the rest of your life runs its normal course. You must build your wealth for early retirement while making other plans.

You can either choose to arrange your life so that growing your wealth and financial intelligence is an automatic habit, or you can let time slip away and allow procrastination to win the day.

Retirement Planning Tip #6: Take Responsibility For All Your Investment Results

Unless you are a trust fund baby or win the lottery, the way you will become wealthy is by owning full responsibility for every aspect of your wealth. This causes you to get into action and correct and adjust your plans until you reach your goal. You must build your wealth like an entrepreneur builds a business. “If it’s got to be, then it is up to me.”

You are solely responsible for organizing your life so that wealth accumulation is a habit. Nobody else will do it for you. You are the one that determines the priority of your spending habits and whether your lifestyle lags your income or not. You are the one who determines whether you start today or procrastinate until tomorrow. When you take the right actions with consistency it will get you the desired result. Early retirement and financial security becomes a question of “when” – not “if”.

Similarly, you are also responsible for the investment growth you create whether you hire an investment advisor or make the investment decisions yourself, You can’t blame Alan Greenspan, your broker, market conditions, bad luck, or anything else. You made the decisions therefore the results are yours to own. That is how you learn from your mistakes and make better decisions the next time.

Some people feel intimidated by the idea they are fully responsible for their results, but in fact it is an empowering concept. It means that no matter what your results have been to date, you have the power to turn it around beginning right now. You are in charge. Nobody else is doing it to you, and nobody else will do it for you. You decide what your financial results will be by the actions you take every day.

Your financial bottom line is you make the decisions: you are responsible. You own the results. That is the only way to achieve true financial security.

Retirement Planning Tip #7: Commit What Is Necessary To Succeed

Successful retirement planning requires you to provide the necessary resources to reach the goal. Don’t set yourself up for failure by under-committing.

For example, you don’t want to build a retirement plan around owning and managing rental properties unless you want a part time job. Operating real estate requires effort and can be appropriate for some people and not for others depending on your values, interests and skills. Don’t commit to real estate as your path to wealth unless you are willing to commit to doing the work required to run a real estate portfolio properly – it isn’t a 100% passive investment. It is part business – part investment for as long as you own it.

Similarly, you don’t want to build your retirement plan around passive investing in paper assets if you’re in your late 50′s, have zero assets, and are just getting started. Someone in that situation will require greater leverage and require active investment strategies to make up for the late start. A passive strategy can be great when time is on your side, and inappropriate when time is in short supply.

If you are relatively young (40′s or less) and plan to save and compound your way to wealth with paper assets the good news is that it is a mathematically viable strategy. The bad news is you must set realistic expectations because much of the apparent return on investment from paper assets is eroded by inflation. You must understand the long term real return characteristics of various asset classes and use realistic assumptions. Don’t set yourself up for failure by committing too little savings to your plan and expecting unrealistic return assumptions to bail you out.

In short, you must set yourself up to win by designing your retirement plan consistent with the time, money, and energy required for success, and you must be willing to commit those resources to the process. Every person’s situation is different and successful retirement planning must reflect that. One size does not fit all.

Is your wealth plan uniquely fitted to you?

Retirement Planning Tip #8: Make Your Money Hard To Reach

A pile of savings that is easy and pain free to reach is an easy solution to life’s troubles. Your car breaks and you use your savings to buy a new one. You get laid off and use your savings to carry you through until the perfect job arrives. Life throws you curve balls and savings without barriers to protect them are an easy target for solution.

That is why I love the government sponsored retirement plans with all the difficult rules and penalties you must overcome to access your money prior to retiring. These obstacles provide a measure of discipline for those who inherently lack this life skill. Even if you have the discipline of a celibate monk the rules and penalties provide a formidable barrier for your inevitable moments of human weakness.

The rule is simple: when you build a nest egg, don’t raid it. Never borrow money from it for current lifestyle and don’t spend a dime of it until after you retire. Just let it grow and grow until you are financially free. This is easy to understand but hard to live by.

That is why many smart investors place their retirement money in hard to access investments like real estate or government sponsored, tax deferred retirement plans. This reinforces discipline by making the money just difficult enough to reach that you don’t raid your nest egg when those inevitable “emergencies” arrive.

Additionally, hard-to-reach assets like real estate and retirement plans have another huge advantage – tax savings. Retirement plans allow you to compound your money while deferring or avoiding taxes altogether (depending on the plan and your circumstances), while real estate provides tax savings and deferral through depreciation deductions and 1031 exchanges.

Building wealth for retirement is not just about how much money you make, but about how much money you keep. That is why tax savings is an essential element of your plan. Conveniently, both real estate and government sponsored retirement plans offer both tax savings and barriers to access thus reinforcing discipline while enhancing savings. You would be wise to put these tools to your advantage … but are you?

Retirement Planning Tip #9: Risk Management Is Essential

The mathematics of compounding wealth prove that avoiding large losses is equally as important to the growth of your wealth as pursuing large gains. They are mathematical flip-sides to the same coin – growing money. For that reason smart investment strategy manages risk of loss and volatility risk using a variety of tools including diversification, careful asset selection, valuation, and a sell discipline to create a defensive investment plan.

While it is essential to practice defensive investing through risk management it does not mean you should avoid risk altogether by hiding out in Treasury Bills or other so-called “safe assets”. You must have an aggressive, offensive investment strategy to build wealth because your objective is to grow your assets faster than inflation erodes them so that you increase purchasing power. Hiding out in safe investments won’t achieve that goal. In other words, you must balance both your defensive and offensive investment strategies to pursue gains in excess of inflation without undue risk of loss. Are you doing that? Do you know how?

With that said, risk management principles apply equally well to your personal finances as they do to your portfolio finances. For example, the rule with insurance is to insure away all risks that you can’t afford to lose. The alternative is to put a lifetime of hard work, saving and investing at risk for one mistake, accident, or health problem that causes a loss large enough to financially destroy you … and that is not acceptable. Types of insurance to consider include homeowners, health, long-term care, automobile, disability, umbrella, and various other insurance products (Don’t worry, I don’t sell insurance. It is just something to consider).

Whether it is your investment portfolio or your personal finances, risk management is an essential principle. You must manage your investments so that you never lose more than is mathematically acceptable, and you must manage your personal financial risk so that you never lose more than you can afford.

Are you managing both of these risks successfully?

Retirement Planning Tip #10: Use Your Common Sense

Investing is really about business. You can avoid most of the speculative manias and frauds that can rob your retirement plan of valuable principle by following this simple rule: the price you pay for any investment must make economic sense consistent with the earning capacity of the underlying business that you invest in. In other words, valuation matters – it is a primary risk management tool.

What this means is when the NASDAQ stock index is selling for more than 200 times earnings as it did in 2000 you should not have your capital at risk in that market. No businessman in his right mind would ever pay 200 times the earnings capacity for a broad cross section of technology businesses, and you shouldn’t either. It’s bad business because the valuation built into the price is unsupportable.

Similarly, in 2005 when investment real estate in Southern California was selling for prices so high that the rental income couldn’t cover the mortgage payment even when you assumed no delinquency, no vacancy, no expenses, no insurance, no taxes, no maintenance, and the lowest interest rates in the last 40 years, then you have to step back and question the logic. It makes no business sense and is purely a speculative mania (this was first written two years before the eventual price collapse beginning in 2008).

Likewise, if an investment offers you above market yields then you should assume there is a very risky reason that they are forced to pay such high rates to attract capital. Always treat above market yields as a warning sign and perform extensive due diligence before committing retirement funds (please see our Investment Fraud Prevention section on this web site for the complete story).

Finally, it is just business common sense to only pay for investment services that put more money in your pocket than they take out. They must be value added. For example, a broker or money manager’s fees can only be justified when his insights and services add more profit than they cost when compared to a passive index investment strategy that could be easily implemented on your own. Again, it is just business common sense. You need to get what you pay for.

I have helped clients save many hundreds of thousands of dollars in mistakes by applying simple business common sense to their investing thus avoiding excessive fees, speculative manias and blatant frauds. Investing must make business sense.

Do the investments in your retirement plan pass the business-common-sense test?

Retirement Planning Tip #11: Basic Estate Planning

It is irresponsible to leave a burden for those you leave behind. The fact is you will die with 100% certainty. Your loved ones will be distraught over your passing, busy with their own lives, and will not want to clean up a messy financial legacy.

Get your affairs in order and make all the decisions about who gets what now. Depending on your particular circumstances this might include:

1. Powers of Attorney
2. Will
3. Living Trust
4. Life insurance
5. Much more depending on your circumstances and desires

Many people rationalize avoiding estate planning with thoughts like, “who cares about all that stuff – I’ll be dead anyway” or “It’s not that important.” I disagree completely. After all, what would happen if you were incapacitated but still living? What are the guidelines for moving you into a nursing home? What are the rules for pulling the plug on life support or administering controversial and expensive medicines during your final hours? How do you want to die? In short, there is a lot more to estate planning than just dividing up your assets. It affects your life so you should care – a lot.

Make sure to seek competent legal guidance for estate planning that will customize a program to fit your personal situation and needs. Quality and price will vary so seek referrals and interview several attorneys specializing in this field until you find someone you are comfortable with.

So have you set up your estate plan yet? Is it up to date?

Retirement Planning Tip #12: Get A Life

There’s more to retirement planning than just money. What about relationships? What about your health? What activities engage your interest?

Money is just a lubricant to life, but it is not life. Happy retirees have fulfilling lives with the health and money to enjoy them. Make sure you have plenty to live for when your work no longer fills your days, and make sure you take care of your health so that you have the energy and vitality to pursue whatever brings you joy.

Protect and enhance your health by investing daily in proper nutrition, regular exercise, and preventative health care to reduce the risk of catastrophic illness. Get adequate sleep, avoid stress, and counteract the stress you do incur with proper exercise and recreation. We never realize the value of our health until we lose it.

Also, invest time now in relationships that sustain and nurture you. Build the connections you desire with family, friends, and business associates because life without them would be empty. Avoid retiring simply to get away from your current job: it is far more fulfilling to retire toward a life that excites you than away from a life you dislike.

Remember, money is just the means – not the end. Family, friends, robust health, and motivating interests are the real tools of a fulfilling retirement while money is just the lubricant. Once you put in place all the financial tips above so that your financial retirement plan is in order then it is time to consider your life plan as well. One without the other is only half the picture. Both are essential to a fulfilling and happy retirement.

In Summary:

Financial planning for retirement is simple to understand and hard to live. That is why so few succeed at it. It all boils down to prudent, routine management of your investments and personal finances – not exactly rocket science. The principles are not complex.

The only question now is “are you walking the talk?” You may know most or even all of these principles, but how many are you actually living right now? That is the key question.

If your score based solely on results is less than you might have liked then you have just identified one value of financial coaching. Even though you know the “how-to’s” the reality is that incorporating them into a plan of action that actually gets accomplished is another matter entirely.

That is where Financial Mentor can help. We can help you bridge that gap between knowing something and following through with action that gets results. There is more to financial success than “how-to’s”. Financial coaching can literally make or break a secure and prosperous retirement for you and the people you love.

Let us know how we can help.

Also, please share your thoughts in the comments section below. What other ideas did we miss that you think are important? What did you think about the ideas we shared? Let us know your thoughts…