How do you generate cash? Stuart Zadel takes you down to the fundamentals of nine wealth creation strategies in this video post. Watch now.
Well hi guys and welcome, this is Stuart, and welcome to this months video educational piece.
You know, there’s so much going on in the world these days, its getting quite exciting or quite scary in some ways for many people as well. Its very interesting whats going on, but some times I think we need to bring things back to basics . So this video is about bringing things back to basics and in fact how to just get started, if you’re just starting out.
YOU NEED TO GENERATE CASH
You see, not everyone on our database has been to our events; not everyone who has been to our events is on our database, is in the property market and moving or doing some other wealth strategy.
So lets go back to the basics because I believe there is a template that relates to generating wealth in any area of your life… and it all starts with the fundamental, number 1 thing, and I’m going to put that up here on the screen, and that is, you need to start by… Generate Cash.
That’s it. You need to generate cash. It is the start of creating all wealth I believe in whatever formula, whatever steps you see. I think you need to generate cash. Now, there will be a caveat on that because I’m going to give you some numbers as we go down here, and you might want to check out the last one which is quite interesting.
So, we’re going to start here by generating cash and I want to give you some ideas now on how you can get started. What do you need the cash for? You need the cash to acquire an asset, be it a property or shares; maybe you need the cash to get an education. It all comes down to starting by generating cash. So lets come up with a handful of reasons now that you can use to do this.
Now, if you’re quite advanced and you’ve been doing investing for a while, you might think this doesn’t apply to you. I disagree, because when you get to the end of the cycle, the point of having those assets is to ultimately do what… that’s right, generate cash and it brings you back to the start again.
Lets now talk about some of the ways you could generate cash.
1. YOUR INCOME OR YOUR JOB
For most people they tend to be wage earners or job owners. About 96% of the world’s population, I’ve seen the figures, actually create their money or income through exchanging their time. Time for effort or time for money.
The problem with that is what we call saturation, however its still a great way to start. It’s also the quickest way for most people to start. To exchange to days worth of time, labour or knowledge today, and get paid tomorrow, or the week, or the fortnight or the month… or whatever it might be for you.
So we’re going to start by increasing our income.
You should do whatever you can to increase your income right now… if that means you work earlier, stay later, do more responsibilities, and ask your boss for a pay rise. I think you should do it. The number of people that have opportunities of doing overtime that don’t take it is staggering… I have seen it all throughout my life. I would take it.
People don’t realise you can hold (not that we advocate this strategy) an investment property for $50 or $100 a week after appreciation if you’re smart. Just that extra $50 a week of overtime can make all the difference to you holding one property, which could potentially go up in value or if you add our strategies to it, could add massive value. So we need to come back to our income here and ask how can I increase my income here? Maybe you need to get another job ro a part-time job… some of you need to get a job, if you want to got his way and generate income this way. So there’s many ideas,
I’m sure you’ve got them yourself, but the first one comes from your income.
2. YOUR SAVINGS
You see most people do have an income of some sort. Some people even get benefits from the government or something and that’s totally possible as well, but what they do is they blow it all – they spend it all! So one of the things we must do is – it doesn’t matter how much money you earn, what matters is what you do with it – and how much of it do you keep? So, a portion of that, at least 10%, must be put into savings that you can use to generate a better future.
A famous book – the Richest Man In Babylon – it says ‘a part of what you earn is yours to keep,’ and you start with 10%’. Some people say, well how do I do that? You’d be amazed how you can do that. And then you can build it up to 20 and even 30%. Hey, the wealthy people i know – they invest 70% of what they earn and they live on 30% – they completely reverse the formulas it is. But number 2 is you want to look at savings – maybe you’ve got some, and if you haven’t you want to start it straight away.
3. MINIMISE TAX OBLIGATION
After all, every dollar that can stay in your pocket is better because it helps optimize your savings and in effect, increase your income. So we’re going to look at minimising your tax. How do you do that? You need to talk to a fantastic and qualified accountant I believe, but you also need to ask wealthy or successful people what they do as well, because trust me, they are out there looking to legally minimise their obligations as they move forward.
Now some of those ideas, say typically an accountant might talk to you about negative gearing and stuff it can be effective under certain circumstances, you want to be very cautious about that, but it is a way to minimise your tax. There are other ways you know that it can be done. One is maybe, instead of being an employee, maybe your business would hire you back as a consultant.
In effect, you would have your own business so to speak – the difference is they would have to pay you the full amount of whatever you negotiate and you’d need to take away the expenses and hold tax and super and all that sort of stuff you need to. But the benefit is that many of your work expenses that currently may not be deductible could then become deductible – you need to check that out with a qualified accountant. But certainly a very effective way is to start minimising your tax legally.
Now, a couple of people that are already in the property market. Firstly I’m shocked – I ask at every event – how many of you own an investment property that do not have a professional depreciation schedule done on those properties. The government allows you to depreciate in many cases the value of the property, the fixtures and fittings. A lot of people don’t have one or they’ve had one done by the builder. It’s not the same – you need a professional one done… you are leaving money on the table and I recommend you go and do that and any other ways you can legally do that, I reckon you should do it.
4. ACCESS EQUITY
Now if you’re already in the property market or if you own your own personal home, the chances are you may have some equity in that property, especially depending on where you’ve been living and what’s been happening in recent years – certainly on the Eastern Seaboard of Australia particularly in Sydney and Melbourne. But, if you have equity that is a part that you free and clear own. Not the mortgage, the bit that’s left over and maybe you can draw down on that.
Some people don’t know that you don’t have to sell the house or the property to access that equity. You can go and get it re-valued, or even a property you’ve held for a while could be re-valued much higher than what you initially purchased it and there is equity there that you didn’t know about. You can draw that equity down and use that, spend it, invest it, do whatever you want with it (talking to your accountant of course).
Be smart about it, but many people have money there that they don’t even know because the market has risen in some areas or they thought they even had to sell the property to access it. So you want to access equity if you need the cash to egt started.
5. YOUR PARENT’S EQUITY
Parents… not done yet…. parents’ equity. So there you go, we are starting to get into some interesting areas here, but maybe it’s your parents’ equity that you can access. Often they will have a house or an investment property that has a lot of equity in it and they don’t want to do anything with it, or they’re not motivated to, or they’re at a different phase of their life – or whatever!
Maybe. I’ve seen many people help their children into the property market – and various strategies to access their parents equity. That’s another way you should check out. Might not be your parent, it can be a relative or a very trusted family friend. You might want to check into that.
6. YOUR SUPERANNUATION
Number 6 is your super – your superannuation. Technically, it’s your money you know? There’s some rules around it, but you might have a nice bundle of cash there that these days things are quite flexible, particularly with self managed super funds. Maybe you can do more with that super than is currently been done there.
A self managed super fund might be a thing for you – enable you to access that cash and then invest it as you want and create wealth within that super fund for you. That money is already in there and chances are you aren’t getting it out before the age defined benefits that you’re allowed. So maybe you can optimise that while it is in there.
7. OTHER PEOPLE’S MONEY
Alright, I think basically the one final one I want to add it. I’ve got a bit of room to squeeze it in here. The final one is what I call OPM – some people call it OPIUM, and certainly some of the markets around the world might be overdosing on this right not. Other peoples’ money – and here’s the big deal definer in fact for many people is that it doesn’t always have to be your money. It can be other peoples’ money.
Many property investors understand that to be a banks’ money, absolutely it could be a lending institution that they access and borrow against. That’s one way of doing. But it could be a trusted family friend, it could be a personal family friend, it could be family members, it could be anywhere else that you could think of that you could find someone else’s money where they want to partner with you, invest with you or do a deal with you to get an outcome.
Now, often, the chances are you then need a certain degree of knowledge to pull this off – not everyone is going to trust money with someone who has not demonstrated results. They know what they’re doing. That’s where you’ve got to get busy, do the work and apply yourself and prove yourself to be someone worth investing in.
9. SELLING YOUR STUFF
There’s one more I’ve actually missed here and I’ll do it up the side here. Number 8, I missed it, is you can sell stuff. You can turn stuff you already had back into cash. Now that could be a whole lot of stuff – maybe you’ve got things lying around the house you haven’t used for years. Maybe there are appliances, or old toys or golf sets or surf boards or whatever. You know I’ve seen a figure – Ebay estimates that around the average Australian household has over $2,200 worth of stuff that can be converted back into cash very very quickly through Ebay.
I could traditionally say garage sale but I guess Ebay is the way it is done these days, along with various online auction sites. Although don’t discount garage sales – people still love to view and touch and all that sort of stuff, and that could work as a very cost way for you to do it as well.
So maybe some people have— well do you know anyone who wants to look rich rather than be rich? Maybe you’re car could be downgraded? You need to free up cash and do whatever you need to do to get to step 1 and generate cash – maybe you could get a cheaper car? It’s totally possible. Many things you could think of and things you could sell or convert. Maybe you can go through your wardrobes, go through your garage, go through your house – anything that you don’t need, anything you don’t like, anything you don’t enjoy, maybe you should convert that back to cash.
So there you go – there’s 8 quick ideas of the very beginning of your wealth generation journey and that is to generate cash. Until next time, this is Stuart.