How to get rich? Quietly!

Cast your mind back to when you were 25, earnings £250 a week, then on to 35 earning £500 a week. Maybe when you got to 45 you were earning £500 a day. Maybe not. But whatever it was, how much did you have left?

Probably about the same as now – not much. Because your expenses grew with your income. You needed that new car, better house, more clothes, holidays,..every rise in earnings came with a price tag. So that’s why lots of people with high earnings have no money. They aren’t rich – they just have high earnings. Which means that they have to earn at the level to stay still – stuck on the hamster wheel forever.

Let’s look at a couple, both working and earning well. Joint income of, let’s say, £90,000. If they were living off investments – 3% return? That’s capital of £3 million – invested, excluding the value of their house, which produces nothing. Hardly a lavish lifestyle, but to put £3m together needs a bit of luck and a following wind.

How to get rich then? Thanks to Bill Bonner and the Daily Reckoning (www.morefrombill.com) – he has the concept of financial escape velocity. This describes what has to happen to build up serious money. You might get lucky – you may live just where a developer needs to build and you get a ransom price or you might get some other lucky break, but it’s unlikely.

Or you might use compound interest. Sorry – it’s not an easy or quick solution, but it does work. Make a small investment, add to it, and keep doing it. Whatever it earns you reinvest in it. Compounding does the rest, over time. Later you may notice that your wealth has increased more than you thought – more than your expenses. Compounding is the first little trick.

Here’s the second. Don’t tell your family! Not because you don’t want to share it because you don’t trust them. Don’t tell them because you do trust them – to spend it. Don’t let a rise in your earnings attract a rise in their spending.

Compounding works in business too. I’m a firm believer in companies paying corporation tax. Not too much though! For two reasons – one is that then there will be some after tax reserves left in the company for the bad times, which stops the company going out of business, and secondly (you guessed) because of the benefits of compounding. If you take all the company’s earnings out, the company is at risk, and it won’t grow so fast. Let it grow and one day, you will find you’ve got to the point where your earnings are growing faster than your spending. Just don’t tell anybody.

Don’t worry about me knowing – I will already know, because that’s what we do!

Growth and Profits! Or Cash and Choices?

You don’t want those!

You want CASH and CHOICES! Growth and profits help the business to fulfil your personal objectives. You didn’t start the business so that you could have thousands of employees, and earn millions of pounds. You started is that you could have the freedom to do that kind of work you like, be your own boss, take holidays or pursue outside interests when you like, and have the cash available to do so, and even into your retirement.

But it’s not always how you end up, is it? Overworked, stressed, needing help but not knowing what, and struggling to get a week in Majorca let alone anything more exotic.

Most business advisory tools are used to drive growth in profits. But without a clear understanding of what YOU want, that only does half the job. You need to be clear about your goals, and by that I mean personal goals.

Driving growth and profits up is a means to an end, not an end in itself. It still needs to be done, and that’s what we do best here. But we are know why.

Because other key thing that we try and build in is choice. You can choose to take four weeks off or you can choose to work. Sometimes – most of the time these days – you can’t choose. You have to work. But if we can build in the choices then the work becomes easier, stress levels drop, and who knows – you make it for your four weeks off.

It’s essential to plan personal goals as well as business ones. Just doing the business ones is just doing half the job.