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"Wealth
Cycles" is a popular term these days. What exactly does it
mean?
Wealth
cycles is a means to financial wealth that recognizes that we all
experience cycles of prosperity and want. Wealth cycles are built
using some well-established wealth maker concepts, which are
shown below. You can start by making Dollars and Sense part of your
wealth team to help you develop your wealth cycle.
1.
Assemble your wealth team
Ask
trusted and knowledgeable people to become members of your wealth
team and help you build your wealth. Your wealth team members may
include friends, family (keep in mind that they should be
knowledgeable!) tax and investment professionals (like those at
Dollars and Sense) and tax and business attorneys. These wealth
makers will help you develop and stick to a financial plan in order
to realize your goals.
2.
Pay yourself first
How
much you would be worth if you had set aside a portion of your
earnings into a savings account from an early age? This takes
advantage of the immense power of compounding. If you have done this
from an early age, you are probably quite wealthy today. But it's
never too late to start - do it now.
3.
Use legal entities to protect your assets and minimize your tax
burden
There
are numerous legal entities that may be used to hold and protect
your wealth. When you create any of these entities, it is assigned
its own Employee Identification Number (EIN) number, which is
different from your social security number. Your legal entities are
also taxed separately from you personally. How you structure your
investments and the legal entities that you use can have enormous
tax and legal consequences.
Legal
business entities are advantageous because they can...
-
Protect
your personal assets
-
Protect
you from being held personally liable for legal obligations
-
Keep
your finance and financial dealings private and
-
Maximize
your tax savings
The
goal of asset protection is to minimize your risks and to help grow
and maintain your asset base. The right legal entity will provide
you with those benefits.
4.
Decide whether active or passive investing is best for you
Before
you decide on the investment strategies you plan to follow,
determine whether you want to be an active or passive investor.
Active investors get directly involved in the investment. They may
become general partners or take a role in the management of a
business or particular venture. In contrast, a passive investor
essentially only puts up money, sits back, lets others do the work
and wait for profits to roll in.
5.
Develop and commit to using your money rules
Establish
rules for using you credit cards, balancing your checkbooks, paying
off your lifestyle debt or paying yourself first. The rules
determine how we handle money, think about wealth and run our
finances.
Most
of us didn't set our own money rules, we simply inherited or adopted
them from others. Usually we integrated them without questioning
because they came to us from people we loved and respected and
because talking about money was taboo. If the concept of money rules
is new to you, you may not have the requisite knowledge to make some
of your rules non-negotiable at this time. However, you soon will if
you continue to educate yourself on each of the investment
strategies you're considering. If you stay focused on your goals and
are flexible, your money rules will clearly evolve.
In
summary, your wealth team helps you establish your wealth cycle and
puts you on the road to financial security. Let Dollars and Sense be
part of your wealth team that helps build your wealth
cycles! Call us for an appointment.
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