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How to think about a Wealth Plan


What is a Wealth Plan? It is a simple, step by step formula for attaining wealth.
Ideally, the wealth plan would be so simple as to be boring - boring plans tend to produce excellent results - provided you can stick with the plan! Some people value excitement more than financial freedom. Those people often sabotage their simple, boring plans in favor of exciting, but risky ventures.

Examples of simple wealth plans:
* Buy $200 of gold every month for the next 30 years.
Not really a great plan, but very simple and easy to implement. After 30 years, you will have spent $72,000 buying gold. But the value of the gold will likely be much, much higher since over the 30 years, dollar will lose value because of inflation.

* Invest 10% of your pre-tax earnings in mutual funds every month until you retire. To make the plan safer, you could divide up the 10% as follows: 1/2 goes to US mutual funds, 1/4 goes to international mutual funds, 1/4 is split equally between bond mutual funds and gold mutual funds.

* Invest 10% of your pre-tax earnings in tax liens (local governments issues liens that can pay interest as high as 16% - 25%). If you live in a tax lien state like Arizona or Texas - it may be as easy as reading your local newspaper and noticing when the tax lien auction will be held. If you live out of state - you may have to fly in, ask a real estate agent to give you a tour of the area, and only then select which tax liens you will bid on.

* Buy 1 fourplex each year for the next 20 years. Each fourplex must generate positive cashflow. It could be as little as $50 per month, but it must be cashflow positive.

Each of the above plans is very simple, though obviously the fourplex plan requires a lot more knowledge and market research than simply buying gold every month.

Two examples of more complicated plans:
* Create a Limited Partnership, selling $25000 units to 20 people. Take the resulting $500,000 and invest $400,000 in Croatian beachfront real estate. Keep $100,000 for closing costs and cost of operating the properties for 4 years. In 4 years, sell for triple original acquisition price: $1.2 million. As the person who put the deal together, you get to keep 20% of the gains: $160,000 ( 1.2 million - $400,000 = $800,000 gain). Repeat 5 times in different regions of the world.
Clearly, this plan requires a lot more knowledge - and much more extensive team - you need a lawyer who understands securities law, a CPA, a real estate broker in the foreign country, a lawyer in foreign country, a CPA in foreign country; you need to understand real estate price trends - and you need to be right in your assessment of those trends!

* Buy a piece of agricultural land on the outskirts of town; convince the zoning board to re-zone the land as commercial - not an easy task. Once the land is zoned for commercial buildings, negotiate with McDonald's Corporation to purchase your land for a McDonald's store. Repeat 5 times.

Notice that one of the aspects of all plans - simple or complex - is repeatability. Once you find something that works - work it - time and time again. Donald Trump builds things - it may be a casino or a hotel - but it is a building - he knows how to build things. After building a hotel, he does not try to open a diamond mine, or to run an airline( actually, he tried that once, lost money, and went back to what he knows how to do - constructing buildings). We are back to our "boring" theme - do what you know, repeat - make it simple and boring - it will greatly increase probability of success.

The most important thing is to start now. Which plan are you more likely to put into practice tomorrow? As Jim Rhon says "Life accumulates - over the years, you can accumulate treasure, or you can accumulate regrets..." You could start with a very simple plan - as simple as depositing some money in a money market account, then as your knowledge and financial power increase, you could add additional investments to your plan. The important thing is to start!

All of the above plans are examples - for educational purposes only. We do not recommend that you follow any of them. We recommend that you study them, and then decide what financial vehicles you like, what interests you, what level of financial and time commitment you are willing to make to your wealth plan. Once you gather this information, talk to your financial advisors, CPAs, tax lawyers - consult with the professionals on your financial team - only then put together a plan that truly fits you, your personality, your knowledge, and your goals.

 

 


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