Posted by dlaing on September 11th, 2006 — Posted in Cashflow, Property
In this series of articles, I’m exploring how the principal of leverage is key to wealth generation. This is the 2nd article in the series - see the overview for the other articles.
In property investment, the lever is a morgage secured against the property, but paid for by the tennant. Few people stop to really consider the power of property leverage through morgage debt. In essance, you have a system where using your £15,000 you can buy an asset worth £100,000 using £85,000 worth of the bank’s money. The tennant’s rent coveres the cost of borrowing the money, and any related costs for maintaining the property. And you get to keep 100% of the property appreciation. Now that’s a good deal!
Let’s take some figures to illustrate the point. Imagine you had £15,000 to invest. If you put that into a high interest paying account paying 10% interest p/a, after a year you have £15,000 x 1.1 = £15,150 - you have earnt £150 - a return of 10% (£150 / £15,000).
Compare that to buying a property, with £15,000 of your money, and £85,000 of the banks money. If property appreciates by 10% p/a, after a year your property is worth £100,000 * 1.1 = £115,000 - you have earnt £15,000, a return of 100% (£15,000 / £15,000).
The principal of debt leverage has enabled you to get a 100% return; 10 times greater than your unleveraged investment in the bank. This just shows how powerful the principal of leverage is in property.
Its worth mentioning that property leverage is most powerful when you have a tennant paying off the mortgage. Whilst you do get leverage on the property you live in, you have trouble accessing the cash - you basically need to sell AND move to a cheaper house. Whilst you can remortgage to release some cash, you still have to service the increased payments; so at best this is just a cheap form of borrowing.
In the next article, we’ll have a look at Internet marketing - where you own an automated selling system, selling products with zero marginal cost to a niche audience of 20,000+
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Posted by dlaing on August 26th, 2006 — Posted in Marketing, Cashflow
The principal of leverage is central to all wealth creation.
Leverage, in this context, is the ability to do more with less. Its about using a strategy, technique or system as a lever to magnify our time, labour or cash so that we can do more with less. Only by implementing a leveraged income strategy can you ever earn as much as you want and have the time to enjoy it.
I agree with Warren Borje, that this means an annual income of £100,000, working for 8 months of the year. (See his Finance Power video; part of the LogicL online wealth creation library - www.logicl.net/levelup - for more details).
However, the majority of people earn their living using a zero leverage strategy - trading hours for cash. Can I achieved my wealth goal using this strategy? Lets see what the numbers say:
My goal is to work 8 months / year approx. 35 weeks. If I work 5 days a week, for 8 hours a day, I have 35*5*8=1400 hours / year. If I can earn £25/hour, then I will earn 1400*£25=£35,000. So, if I want to reach my goal of £100,000, then I need to earn £100,000/1400 = £71 / hour. Last time I checked, jobs or contracts offering £570/day were pretty difficult to land - especially when you want to take off 4 months of the year!
It seems pretty plain to me that trading hours for cash is not going to make me wealthly. If I want to achieve my wealth goal, then I need change my earning strategy to give me more levereage - enough leverage in fact, that I can earn £71 / hour.
So, what are the common wealth leverage strategies?
- Property leverage - where you own 15% of the asset, but earn 100% of the profits
- Internet marketing - where you own an automated selling system, selling products with zero marginal cost to a niche audience of 20,000+
- Network marketing - where you train 5 people to sell, who train 5 people, who train 5 people - which gives you an exponentially growing, word of mouth selling machine
- Options on Shares - were you sell options for cashflow, or buy options for right to buy a huge number of shares, and instantly sell them for a profit.
- IP, Patents & Trademarks - where I own the rights to a particular piece of intellectual property (a book, movie, song, design, algorithm), that other people pay me to use.
In my next set of blog posts I’ll explore each of these leverage strategies in more depth.
Leave a comment, or drop me a mail if you can think of any more leverage strategies.
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Posted by wlaing on July 29th, 2006 — Posted in Climate Change
Freedom is our number 1 value - freedom of speach, of beliefs, of business endevours. We want to live in a world where we are free to pursue any dream that we have.
But along with freedom, comes the responsibility to have consideration for, and to ensure the same freedoms of, others. We need to consider the effect that our actions have on those around us, and on the environment in which we live.
The world is moving rapidly towards a point where we will have effected the environment to such an extent, that we will not be able to reverse the dire consequences - of rising sea levels, ever growing deserts, higher temperatures, acidic seas, more major hurricanes, just to name a few.
But what can we, as individuals, do about this? First of all, we need educate ourselves about the facts. Then we can make informed decisions and perhaps begin to educate those around us too.
Al Gore has been delivering speaches around the globe on the facts and consequences of climate change. Do take a look at: http://video.google.com/videoplay?docid=-2565436963450479963&q=%22Al+Gore%22.
He is also releasing a movie entitled: "An Inconvenient Truth", which expands on and demonstrates these issues that we all need to think about and take action on (yet to be released in the UK). As part of the discussion around this movie and to further explore Al Gore’s research on climate change, he appeard at the Hay Literary festival a few weeks ago and The Guardian recorded an interview with him that was broadcast on Channel 4. Here is a link to this, extremely thought provoking, interview and panel discussion: http://video.google.com/videoplay?docid=-7243389866689882461&q=%22Al+Gore%22
Thanks to Claire and Jon at Human Engineering in Bristol, UK for showing us the "inconveniet truth".
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Posted by dlaing on July 21st, 2006 — Posted in Marketing
If you, like most Internet Marketers, find that your “automated business” is making you work 24/7, then you need to read Rich Schrefren’s Internet Manifesto.
This video of him explaining his methods is a truly riveting and life changing watch. Highly recommended
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Posted by dlaing on June 24th, 2006 — Posted in Self development
Last weekend we were at Inspired Seminar’s Millionaire Bootcamp. One of the speakers there, an NLP trainer named Andy Harrington, explained the intention-manifestation technique in a manner that finally made sense to me. Steve Pavlina is pretty big on this technique, but - although I greatly respect his other writings - his explaination of this subject has always seemed a little "hand wavy" and "mumbo jumbo" for me.
The technique in a nutshell (or my interpretation thereof), is that a major step to making something happen, is to believe it can happen. By holding the belief that something will happen; you increase the chances that it will actually happen. Sounds like "mumbo jumbo" to me! To quote the cliche - "Merely wishing does not make it so". Except, "wishing" is in fact the first essential step in making anything happen. And thanks to Andy, I now understand why.
Our brain takes in masses of information every second via our 5 senses. Far too much information for us to conciously process. As a coping mechanism, a series of filters are erected by our subconscious, that filter the information, and only allows things that might be relevant to bubble up to our conscious.
Consider, if you will, the bottom of your left foot. Feel the pressure on your sole, the temperature of your toes, and how tight your shoe feels. Now that your back to reading this, can you still feel your left foot? Are you experiencing a whole host of "left foot type" feelings that you weren’t experiencing a moment ago? Why are you suddenly experiencing those feelings now, when you weren’t a few minutes ago? Its not like anything about your left foot has changed! The reason is that the subconscious "left foot" filter has been temporarily removed, allowing those sensations to bubble up to your conscious.
Another example. Have you ever bought a car, a fantastic, shiny, new model? You drive out the showroom, thinking that you will be the envy of the town; as far as you can recall no-one else has such a shiny new model. You stop at the first set of traffic lights, and notice in the rear view mirror another car of the same model, just a few cars back. Conincidence, you think. You pull into the parking lot to do some shopping. There is another! As you drive down your road, you notice that two of the neighbours have the same model. By George, they suddenly seem to be everywhere! How can your new shiny model suddenly be everywhere, when there were none on the road this morning! What’s happened, is that now you are looking for your shiny new model. Those other cars were always there, its just that they were filtered out by your subconsious as part of the background noise until tht morning.
Finally, an example of a filter being put into place that we have all had. Have you ever worked a little later than normal and the air-conditioning of the building has been turned off/down? Suddenly it is deafeningly quiet. But were you noticing the noise of the air conditioning while you were working all day No! Your sub-conscious just knows that the air conditioning is irrelevant, so it has errected a filter to stop you noticing it.
This is powerful stuff! Let’s say that our goal is to become financially free, to generate a passive income large enough to cover our fixed expenses. At first consideration this seems like an impossible task. How can you get money for nothing! That’s just not how the world works! All these get rich scams are just that - scams! Holding those beliefs - having those mental filters; do you think it is ever possible that we might see an opportunity to generate passive income? Even if it was right under our nose? Not a chance; it would just be filtered out - ironically strengthening our belief that there are no such opportunity. But, if you change your beliefs; and start actively "wishing" or "intending" that you will earn a passive income, you’re in effect removing those filters. Suddenly you see your first opportunity. And then another. And another! They’re everywhere! Property, Internet, stock market, sports arbitrage. How could you have missed them before! They’re all there, right under your nose ready for you to take advantage of. There are even people who are itching to teach you how.
Amazing, isn’t it. But true.
So how is that left foot of yours doing?
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Posted by dlaing on May 13th, 2006 — Posted in Marketing
Choosing a brand for a new venture is often the first thing people think they need to do. In a way this is true, because a brand is in essence an expression of the new venture’s core values. Without knowing the core values, you have no guide or decision criteria when makeing the multitude of small decisions that must be made to get something off the ground.
Trouble is, getting your brand just right is incredibly difficult. All of the famous brands in everyday life have spend years and years evolving to get to where they are today. The Shell brand, for example, has evolved through 10 itterations in the last 100 years. The initial brand, in my opinion, was pretty abismal. It has taken then years, and countless clamshells to get it to the symbol we instantly recognise today.
Evolution, I believe, is the key ingredient here. Its highly unlikely you will get your brand just right on the first try. In fact, one could argue that what is just right for today, will be old fashioned by tomorrow. You need to get something that is good enough to begin with, and then get on with the more important task of creating your core offering, be it content, a product or a service. The design and focus of your brand will mature and evolve along with your venture.
Realising that the brand doesn’t need to be perfect makes our job easier, but not easy. A good place to start is to jot down the core values or attributes that drive the new venture.
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