Financial Education Course – Step #5, How to Build Wealth
This is going to be the last post of this Financial Literacy course. You’ve made it this far. So, let’s finish this out STRONG!
Here are some ideas:
- Passive income streams (i.e. real estate, renting out rooms as Airbnb)
- Investments in the markets (i.e. mutual funds, 401K)
- Real Estate Investment Trusts (REITs)
- Affiliate Businesses
How to Build Wealth Fast
So, how do you build wealth fast?
Honestly, nothing great comes fast. It’s a slow and steady race.
How do I do it? Well…
HALF MY PAYCHECK GOES TO MY INVESTMENTS (i.e. MUTUAL FUNDS)
It’s been like this for 3 years…
In another post, I will show you how I invested in depth for the last three years.
Financial Education Course – Step #6, Inflation – The Tax of Time
So when people talk about investing and getting less than 2% return on investment, you know immediately that they are amateurs because…
The average inflation rate is 2.8%
What is inflation?
Inflation is where as time passes, then the money you have now is not going to be worth as much.
A dollar put in today will cost more in the future.
A dollar today that can buy you a McDonalds cheeseburger, but in 25 years, that same dollar will only get you half a cheeseburger. That’s inflation. Things get more expensive.
Inflation Rate Formula
Using our Rule of 72 with the inflation rate, we get the following:
72 ÷ interest rate = Years to Double
72 ÷ 2.8% = 25.7 years
It takes 25.7 years for things to get twice as expensive.
How Inflation Works Example
So, in 25.7 years, a $1,000,000 house NOW would cost $2,000,000 IN 25.6 years.
So, the question to ask is…
How much would things cost when I retire in 25.7 years?
The price WON’T STAY THE SAME. It’s going to double.
If you had $100,000 and you lost 50%…
How much do you need to gain to get back to $100,000?
The answer is 100%
A lot of people think 50%, which is wrong. The correct answer is 100%. 50% would only make you $25,000.
If we started with $100K and lost 50%, we’re left with $50K. If we gained 50% from $50K, we will have $75K. If we gained 100%, then we will have $100K.
Financial Education Course – Step #6, How to avoid retirement taxes with Roth IRA or Permanent Life Insurance
Always go for Roth IRAs OR PERMANENT LIFE INSURANCE.
401K? I don’t even invest in that.
Different countries have different retirement plans. Of course, the 401K and Roth 401K is for USA only. TFSA is the Roth 401K for Canada.
However, both USA and Canada have permanent life insurance and both works in a similar way. People call it the rich man’s Roth 401K.
Why Roth 401 K and Permanent Life Insurance?
Well, for both tools, you pay the TAX OF TODAY instead of the TAX OF TOMORROW.
That is because in all likelihood, taxes are going to rise and you only get taxed once.
Roth IRA Example
Let’s say you have $100,000, if you tax that now and put it in a ROTH IRA that means only $100,000 is taxed. The earnings from the Roth IRA WILL NOT BE TAXED.
YOU PAY TODAY’S TAX RATE, NOT THE TAX RATE OF THE FUTURE.
Let’s say over 25 years, that $100,000 grew into $2,500,000. You don’t have to pay tax on it in the future because your initial $100,000 has been taxed. Completely different from 401K, which you’ll have to pay taxes on that whole $2,500,000 and that future tax rate could be higher.
Financial Education Course – Step #7, Protect Your Money
Several things you need to do…
- Get a will
- Make a trust
- So in case you die, your assets will go to where they need to go.
Both Aretha Franklin and Price died without a will or a trust. They had assets up to the millions of dollars that are now in probate, which means their families cannot touch those assets.
Honestly, I don’t know much about probate right now, but what I can say is that the money is locked in a fight in the courts until they can figure out what to do with it.
By the time they do, a bunch of money will have been spent on attorney fees.
So, don’t put your family in that position by getting a will or trust.
DON’T FORGET TO DO THAT!
CONCLUSION: How to Build Wealth, Inflation, Roth IRA, and Permanent Life Insurance
A quick recap on our last post, here’s what we talked about:
- How to build wealth with various ideas (i.e. real estate, affiliates, etc.)
- What is inflation?
- Losing money
- How to avoid taxes using a Roth 401K or Permanent Life Insurance
- …And how to protect your money
Thank you for joining us on this journey of financial literacy. You’re now WAY MORE PREPARED THAN 90% OF AMERICANS OUT THERE.
If you want to learn more, be sure to get my FREE eBook LEVERAGE that can be found here.
Continue sharing your way to success,