Start Early Finish Strong

BY WHITNEY HAMMOND, CFP, CLU PRINCIPAL, SOVEREIGN WEALTH MANAGEMENT Implementing wealth building strategies for business owners and executives for 25 years

Many of us when we are young, look at what others have. We wish for things, we covet what others have, to the point of disliking those “who have”, when we do not have. The colour Olive represents several characteristics in humans, one of them being jealousy. It can make us feel doubt, like we will never get to where we want to be in life financially. Wishing we can be like others is total self-defeat, feeling less than and playing small.

Do you know this feeling? I sure do. Maybe this would be the reason I started planting seeds at a young age. I wanted a new beginning, a new space, a new life. Was I running from something? Yes, my past and my current situation. I felt held hostage in my life.

If you feel like this or have felt like this, read on. It is possible to escape the chains of bondage that haunt our minds continuously.

Keeping up with the Joneses is a tough way to live in this world. It becomes all about measuring ourselves against others. We are chasing the horizon at that point.

So how do we get to where we want to be with family, finance, and freedom? Olive is also a colour of growth, it teaches us to plant seeds and grow. If we are not where we would like to be in life, let’s take charge, omit the blame, and start planting the seeds to get to where we want to be.

So how do we get where we want to be? 5 steps for massive growth:

Vision. It all begins with a vision of what we really want in our life.

Imagination is our biggest friend here. Remember when we were children, imagination was our greatest talent. There was no self-doubt, just all the big thoughts in the sky. When we dreamt, we dreamed big. It’s how our seeds were planted. We had so many thoughts, and…. some of them came true.

• I want to own a home; own a new car, a cottage, an RRSP and an opportunity investment account

• I want to own a well-oiled business that is extremely profitable with systems that allow it to flow continuously.

Visionaries dream ideas into fruition, it’s how great businesses are built, it’s how close-knit families evolve.

If you cannot see it, you cannot do it. See it in your mind first.

Plant the seeds.

Money is related to your morals and key values. Much of this can be BS=Belief System. Previous habits, past generational messages, and societal messages will need to be unlearned. Once we let go of our old ideas, here’s how it works:

There are 3 levels of money - how to earn it, how to keep it, how to save it. Let’s look at how to grow it and invest it:

• open a household account for bills and add the same amount each month (if married, each partner to put a specified deposit each month) then from this:

• open 3 bucket accounts: short term savings, opportunity bucket, retirement bucket

• Do not incur debt unless is it to invest in capital to earn a return (a car loan is allowable)

• Pay all income taxes, hold HST and income tax each month to remit, NEVER spend or borrow your tax/HST money. Many folks get into an endless cycle of paying debt.

Take time to understand this. Make this a focus in your everyday life:

• Do not overspend

• Pay into your buckets first

• Make the effort to learn

• Concentrate on filling those buckets

No woman or man should feel stifled or stuck over money in life. We all bring value to the table. There is always a way to manage your money until your visions come to fruition.

These are the seeds to plant to start filling your vision.

Make money while you’re sleeping

Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it”

It really is magical how quickly this works. The money inside of your opportunity bucket should be invested. There are choices, here are a few:

• Term certificates or GICs. These pay a stated amount of interest for an indicated period.

• Investing in publicly traded shares on the stock markets. These may pay dividends and create capital gains, which both have a discounted tax rate.

• Investing in professionally managed mutual funds which invest in a balance of stocks and corporate or government/provincial bonds.

• Real estate, whether it is your residence, or you have purchased to become a landlord with tenants or a vacation property.

Sooner than later, you have a snowball effect of your money and assets growing.

Leverage

Most of the wealthiest folks have leveraged (borrowed money) to make money. The easiest concept to grasp is borrowing money to buy your first home. This may be the most accepted “trick” that we ordinary folks do, we borrow money to buy our first home. The home increases in value, creating more equity (profits and retained value). The equity in our home creates our net worth.

• use OPM (other people’s money) to make you money.

• Why stop at one home, why not a 2nd home.

• Invest in a business or a stock on the stock market

• Borrow to expand in the existing business you own

Our homes can be refinanced to take profit to leverage to buy a 2nd home to set up as a rental. Remember that opportunity bucket, that money can be used to purchase a 2nd home. Use the rental income to carry the mortgage.

Leverage can be used to buy into good companies. It could be a private operating company, a share in a company listed on the stock market, or simply mutual funds. The interest will be tax deductible on this venture and only interest needs to be paid to carry these types of loans. Should interest rates remain fairly low, this gives time for the equity in the business grow, hoping to grow faster than the interest rate

Borrowing to invest can be risky and taking risks can bring higher rewards or can bring losses. Mitigate these risks prior to committing. For myself personally, I have done all of these, and more but always have repaid the debt (leverage) quickly.

No risk, no reward.

Keep your eye on your net worth

Build an excel spreadsheet and save it. Add a new tab every 6 mos. List your assets and subtract your liabilities (mortgage) and this will reveal your net worth.

• Tally your net worth every 6 months

What we focus on grows.