n Part I of this article, we looked at “WHAT IS THE PSYCHOLOGY OF WEALTH?”
With the first 19 of the 48 laws of wealth, you learnt to develop the psychology to achieve the mind-set of a wealthy and successful person and attract great wealth into your life:
PART II: HOW DO YOU PLAN YOUR WEALTH?
This section of the laws of wealth is designed to help you plan for wealth. Wealthy and successful people leave nothing to chance, they plan meticulously. So must you.
Law 1: Define what wealth means to you: how do you perceive wealth?
Know your own representation of wealth. Do you want enough money banked for 5, 10, or 30 years? Property investments, for example, that grow by £x annually? Passive income from a business or investment? A specific salary? Pen it down as a guide to measure your progress.
Law 2: Money for what?!: Know exactly what you want money for.
What do you want money and wealth for? Material things? Charitable purposes? A revolution? Write this also down and use it as a goal, a checklist, a reminder, a reference and as a tool by which to measure your progress! And you can only do that with a yardstick.
Law 3: Ecology: make money in a clean way and avoid dirty tricks.
Make money legally because methods detrimental to people or the environment create negative energy. So avoid what seems like the shortcut or the easy option to getting wealth. Work rather to add value to people’s lives guided by safety, fairness, value and legality.
Law 4: See your journey before you: Where are you now and where do you want to be?
What you focus most on is what you attract into your life. If you want to be successful in any venture, see (rather, visualize) your journey before you. The steps to doing this are:
1. Where are you now?
What is your exact financial position to the last penny? Your monthly expenditures? Your budgets? Your cash flow? Your assets? Your liabilities (debt)? This total net worth will be your marker for your wealth and your progress.
2. Where do you want to be?
Do you want to become a millionaire? Have just financial independence? To be able to measure your success, quantify your end goal. So specify timescales, numbers and figures. The more real and tangible and specific you make it, the more the possibility of attracting it.
3. Have a plan
Right now what is your plan? To set up your own business? To invest in property? Only if you look for them will opportunities come to you. So charting your path to wealth will sharpen your awareness to the tools, the people and the challenges you must face succeed.
Law 5: Be Realistic: About what you can achieve and when you can achieve it.
Believe in your dreams but be realistic about your goals and your expectations of wealth. Wealth will come to you, but it will demand lots of patience, hard work, working longer hours and smarter than before. So set yourself realizable targets and fix believable timescales.
Law 6: Your wealth strategy: The road map that will lead you to money and wealth.
Don’t be a person without direction. Follow a strategy and update it when necessary so as to make it.
The first is understanding exactly where you are now:
1. Know how much you earn.
The crux of this is that don’t spend more than you earn.
2. Know really exactly how much you spend.
Determine exactly how much you spend on every area of your life. Include unforeseen expenses in your budget and keep it in another account. And always pay off your debts first.
3. Know your attitude to risk.
How much money can you comfortably ‘risk’ or speculate in your investment strategy?
4. Know your potential avenues to earn.
How many different ways can you think of to earn income, especially passive income?
5. Cash flow and capital growth.
Your cash flow will come from a salary or a dividend certain businesses, careers and investments will bring you. But assets such as property will give you capital growth. Both must be part of your strategy for great wealth.
The second step of your wealth strategy is to set a goal that you can review. As your income increases, raise the bottom 3 columns above but not column 2.
Adjust the figures as necessary based on monthly income:
Earned income: £1,500 [after tax and N.I] Total living allowance [spend including living, debt and contingency]: £975 [65%] Tithing [giving back]: £75 [5%] Total saved and never touched: £150 [10%] Total invested: £300 [20%]
Attitude to risk: 20% [total invested]. Although fairly safe, you can invest more if you are young, ambitious, and single. But if you are a little older and need stability, have children and commitments then add more of your earnings to your ‘total saved’ column.
Now decide where to donate your tithing, what high interest account to deposit your 10% in and what to invest your 20% in.
If you want to invest in property-recommended-hold your investment until it becomes large enough for that.
Develop your strategy as the years and wealth increase. Don’t change it at will. Give it the opportunity to work!
Review your strategy and your finances each year. Open and update it and do a financial check-up to see where you are. Compare this year’s strategy to last year’s to ensure you are making progress in the right direction.
Law 7: Worst case scenario: things more often than not turn out not as anticipated.
It is a fact of business and life that things will not turn out just right. Therefore work the worst case scenario into every business proposition or plan, investment decision or forecast: what if recession struck your business? What if you suddenly fell sick?
Your business plan forecasts profit from year 3; what are your plans if it doesn’t happen until 2 years later?
Work out your sensitivity analysis [projections of earnings/turnover] on low figures. Imagine what happens if you planned to turn over £1m in year 1 but actually get £50,000?
If you obtain an affiliate network website supposed to make you money in 1 month on autopilot, make it 2 months. Your affiliates may not work as hard as you and even careless.
If making an investment, especially over the long-term, factor in a good contingency to cover unexpected costs. So if you need £10,000 for marketing, budget £15,000 or best, £20,000.
Eagerly watch over your streams of revenue. That way you can back out of any threatening to dry up and move your investment elsewhere where it is safe.
Law 8: Know your exit strategy: when to back out of a business before it sinks you.
Business is full of “force majeure” (act of God). So go into any investment with a clear idea of how you can back out and liquidate efficiently and cost effectively when need be. What it all boils down to is diligence, planning, foresight. Don’t ignore your contingencies.