How citizen Get Rich With Leverage
Archimedes the Greek (usually given reputation for the discovery of the principle of the lever) once said, "Give me a lever and a place to stand, and I could move the world." He understood that a lever was a tool for multiplying your force beyond its natural limits. He also knew that the bigger the lever, the greater the growth in strength.
How citizen Get Rich With Leverage
Unfortunately for the uninformed, the lever can be someone else cliché, a two-edged sword. Used unwisely, the wrong kind of leverage not only can multiply your upside, it works with equal efficiency on the downside and can growth your risk.
Most citizen who think they understand leverage think it applies only to the use of borrowed money to buy stocks on margin (dangerous), or using a mortgage to buy a home or speculation real estate (safe). My own father is my Exhibit number One on the dangerous side of leverage, but his sad story doesn't invalidate my facility that if you want to be verily Rich, leverage is significant to your get-rich program.
Remember, a lever is only a way to multiply your strength, and there are three forms of leverage that count, and you should use all of them wisely. There is Money Leverage, citizen Leverage, and Time Leverage, and I defy you to show me a rich person who didn't use at least one of them. (I am ignoring movie stars who get million a photo and athletes who make millions of dollars a year for a few years. They don't count, because you aren't one of them.
No Leverage?
Most citizen have no leverage in their earning picture, and that is the probable reason you are not rich. Is there a divergence between a -an-hour McDonald's counter clerk and a 0-an-hour lawyer? Not as much as you think. In both cases, if they don't work, they don't get paid. Their wage is diminutive by how many hours they work. The wage of the median worker of an American enterprise is diminutive by the number of hours he can or will work. verily Rich citizen have no limits on what they can earn, even if they don't work.
And it's even worse than it looks; personal wage is taxed at the top tax rate imposed on any kind of personal income. If you depend on wage from your own labors only, you are like a salmon swimming upstream carrying a barbell on his back. One facet of the get-rich strategy is to be personally poor or in modest circumstances, manufacture the smallest number potential of extremely taxed personal income, while controlling enterprises that yield fat profits at much lower tax rates.
If you hire leverage wisely, you will work less and earn more. You will make money even if you can't work, because your money will work for you, your employees will work for you, your partners will work for you, and your money will do double-, triple- and-more duty for you.
Now let's look at the varied forms of leverage:
#1: Money Leverage: The old cliché says that it takes money to make money, and that's true, but it doesn't mean it has to be your money.
Everyone uses leverage when they take out a mortgage to buy a much nicer home than they could buy out of their savings. Rich real-estate investors couldn't get rich if they don't borrow money to buy properties. Banks are not just in the money business, they also design levers, and the government is your friend in this case. Unlike buying stocks on margin, no government division enforces real-estate margin-call rules against you. If real estate hits a soft spot (like recently) and the appraised value of your home falls below the balance owing on your mortgage, you don't have to put up more money to protect the lender. Make your payments, and it remains yours. This is because of productive lobbying by the real-estate industry.
#2: And how about rich businessmen like Bill Gates. He used lots of leverage, expanding his wage and the protection of his enterprise and the value of his assets. He raised a lot of investor money by selling some of his stock, and used that leverage to grow his company. His remaining corporate stock is the vast majority of his -billion wealth. That's leverage. When Ted Turner was asked how rich he was, he said, "I must be verily rich, I owe a lot of money."
There is good debt and bad debt. Buyer debt is always bad debt. enterprise debt is good debt if you use it properly. It is okay to borrow money to buy assets that yield sufficient cash flow to aid the debt, and then some. So let me illustrate on the rules for choosing whether a debt is a Good Debt or a Bad Debt.
Bad Debt
- Money borrowed to buy something that flits out of existence as soon as you use it, leaving only the debt -- like a vacation.
-Money borrowed to buy a money-eating alligator. It could be a vacation or a motor home, or even the bigger, good home you live in (which is the best seminar for buying a smaller home than your reputation score would qualify you for). If you redefine "asset" as something that produces positive cash flow, then your home is not an asset, as it is a negative-cash-flowing alligator.
- Money borrowed to buy a ordinarily depreciating item, such as a car or boat. I'm talking about real depreciation here, meaning true loss of market value, not phantom depreciation, like the tax deductions you can take on an speculation property when it is verily appreciating.
Good Debt
I won't make a list, because there is only one kind of good debt - borrowed money that goes to work for you to build income-producing assets and produces sufficient cash-flow to pay the interest and systematically sacrifice the principal. Rich citizen always use debt as a enterprise tool.
More Money Leverage
Borrowed money is not the only kind of money leverage. When an entrepreneur sells some equity to finance the enterprise by selling some of his corporate stock in a incommunicable placement or going public, he is using money leverage, but that's always a financial calculation. If he can sell ten percent of his enterprise and thereby yield cash that will duplicate the sales and/or profits of his company, it's a good deal, and he would be a fool not to do it. He is then richer, because the value of his remaining stock becomes greater that it was when he owned 100% of the stock, and he has working cash to invest in his company. Such cash is a lever that increases his strength.
People Leverage
I have met businessmen who still work twelve to fifteen hours a day because they don't trust other citizen to do their job right. That probably reflects more on the entrepreneur more than it does on his staff. If they are competent, let them do their jobs; if they aren't, get rid of them, and hire those who are. Such entrepreneurs don't understand the principle of citizen Leverage. A smart entrepreneur will hire citizen to do all the things that they can do good than he or that wouldn't get done if he didn't have the time to do it, so he can spend all his working hours doing only the things that he can do good then they, plus providing the leadership and strategic direction for his enterprise that only he can provide.
People leverage is not only profitable, but the lack of it can sign the death warrant of a company. No one can do everything. If he tries, he will burn himself out, or drop a ball he didn't have time to secure, or will miss something that will slip straight through the cracks and ruin the company, or be so bogged down in information he can't stay up with developments in his industry and he will miss opportunities.
The Ceo Mentality
Businessmen who use citizen leverage by assembling a complementary team of real executives who know their stuff in their specialties and are allowed to use their skills, can become very rich in short order. A real Ceo (Chief administrative Officer) will tell his team what the enterprise objectives will be, set the policies and the battle plan, get their concurrence with the plan, then he will let them go to work within their guidelines and the budget he approved, while monitoring their doing very considered and helping them make course corrections as necessary. His monitoring tools are budgets and financial reports.
Then there was the failed presidency of Jimmy Carter. He was a fine Christian gentleman with a good heart, and was very bright. He could immerse himself in the smallest details of government and course as well as anyone, but he forgot that he had been hired by the electorate to be the Ceo of the biggest enterprise the world has ever known, and the big photo got away from him and created the worst mixture of high interest rates, inflation and unemployment in our history, and that sunk his presidency.
To his credit, he has been a pretty good ex-president, with his Habitat for Humanity program. He can hammer a nail with the best of them, as the media have never tired of showing us, but we hired him to be our Ceo, not our construction contractor. That's citizen Leverage.
I have been the founder and Ceo of one network marketing enterprise and the top seller of another. That's where I learned this Principle of citizen Leverage. If you built a team of distributors who were always construction their teams, you were manufacture money you didn't have to earn with your own labors. You had passive wage whether or not you worked yourself or made sales. I personally don't like doing multi-level marketing, but I believe in the principle of citizen leverage with a passion. It's an significant strategy you must use if you ever want to be rich and secure, especially if you want to earn more and work less.
Leverage in a Nutshell
Let's see if I can sum up the principle of leverage:
Leverage means manufacture money from the use of money contributed by others or loaned to you, and also manufacture money from the efforts of employees, partners, and enterprise associates. It means manufacture money you did not have to earn by the sweat of your own brow. While you are earning money by the sweat of your brow, you are also earning money by the sweat of their brows as they work hard to make you rich.
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