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HOW TO BUILD WEALTH

Understanding Wealth

“Why do the rich keep getting richer?”

 

“Why do I not have any free money to invest in the new ICO every one is

talking about?”

 

“Why am I always skint, goddamn it?”

The fact of the matter is really wealthy individuals just think differently, they have a different belief system and apart from old money or an inherited trust fund it really is that simple. The following articles are aimed at the new and novice investor or someone who is looking to build their capital base the correct way – for investors who are looking to make their fortune in the crypto space but are currently under capitalised. I tend to see a lot of articles about the next big ICO to invest in but no information on how someone is to create and build capital (stake) to invest.

Money, Savings & Capital

The first step in becoming location independent and wealthy is to fully understand the true difference between money, savings & capital. If an Investor does not know the difference and does not have them clearly separated in their minds eye then it is near on impossible to become wealthy. The average investor may believe money, savings & capital all mean the same thing. “It’s all money right”?. Well, yes it is all money but all three have a very clear distinctions and practical use. If you give each an equal importance then it becomes very hard, almost impossible, to accumulate true wealth.

From a financial perspective the three terminologies of Money, Savings and Capital could not be further apart. They are in fact entirely different financial instruments from each other, and if thought of in the correct way can be of great benefit in helping you to increase your personal wealth. So much so in fact that you will see your personal wealth increase dramatically in a very short space of time once you view these three money types in the correct way outlined below. Okay, so lets begin with the correct mindset.

Money

Money is basically a persons cash flow; it’s the object they use to exchange for the goods or services that they require. Money on its own has no perpetual benefit to a person. It helps them put petrol in their car, buy daily food, clothes to wear and general household products. Money should really not excite you all that much, in fact, “Money is only the accounting of economic energy” – Alan Watts. We earn money from work that we do and we exchange it for the services and products that we need to live our day-to-day lives in reasonable comfort.

Savings

Savings are a lump sum of cash that you save to spend on a particular object or experience in the future- e.g. a new car or a family holiday. It’s what a person would use to fulfil their personal desires or to improve their current lifestyle. Savings are also there for those rainy days. Savings however are not wealth as savings on their own do not have a particular purpose to increase your net-worth by any means, they may however (and often do) increase your standard of living in the form of new consumer objects or a well needed holiday.

Savings can even provide you with the peace of mind that you have a money buffer if things take a turn for the worst – e.g. you lose your job or become ill and cannot work. On the flip side if you currently have savings that you were hoping to invest into buying some shares or to start trading with –  then that money isn’t savings, it’s capital. As soon as you give savings the purpose of increasing your net-worth via a financial vehicle then the savings become capital by default.

Capital

Capital is king, capital is what you should be excited about. Capital has the power to free you from your boss, from the job that you hate and to allow you to spend all the time in the world doing what ever it is that you enjoy doing, with whoever wish to do it with. Putting it bluntly, capital is a lump some of cash that you use for the sole purpose of creating and increasing wealth, which in-turn leads to a greater personal net-worth.

Capital is exciting – it makes things happen and is power in a real tangible form. Capital will change your life for the better and make most things easier. Capital is financial security. Capital is a sum of money that you have internally and mindfully ear marked to have a purpose; it has the one and only sole purpose of increasing your net-worth and that is capital’s only purpose. The only time you should use your Capital is when you are investing it to make more of it. If you have a desire for an object or an experience this should be funded from your savings not ever from your Capital.

Now that we view money, savings and capital as three completely separate entities. You should have three separate bank accounts set up in your name. The account that your wages come into should be your ‘Money Account’. This is your cash flow and is used for your day-to-day living as described at the beginning of this post, your direct debits for household bills etc. will come out of this account.

The second account should be your ‘Savings Account’; obviously this is where you place money to save for them important items that will improve your quality of life – new car, family holidays, goods, etc.

The third account should be your ‘Capital Account’ and this account is the most important of them all. Your ‘Capital Account’ is the one that should be treated as a one-way street, deposits are made and no withdrawals requested unless it is to invest into a financial vehicle with the sole intention and purpose to increase your capital.

Net Worth

Now that we view money, savings and capital as three completely separate entities. You should have three separate bank accounts set up in your name. The account that your wages come into should be your ‘Money Account’. This is your cash flow and is used for your day-to-day living as described at the beginning of this post, your direct debits for household bills etc. will come out of this account.

The second account should be your ‘Savings Account’; obviously this is where you place money to save for them important items that will improve your quality of life – new car, family holidays, goods, etc.

The third account should be your ‘Capital Account’ and this account is the most important of them all. Your ‘Capital Account’ is the one that should be treated as a one-way street, deposits are made and no withdrawals requested unless it is to invest into a financial vehicle with the sole intention and purpose to increase your capital.

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