Types of debt and why they matter

Types of DebtIf you’re starting out with your financial education then a good starting point would be to understand the different types of debt and why they matter.

Personally I categorize debt as either good debt or bad debt.

Understanding the difference between the two is essential if you don’t want to remain poor all your life.

Do you carry some debt dear reader? If you do, you’re not alone.

Now you may think that debt is just part of life, and you may even believe that debt can’t be avoided?

Debt is certainly very hard to avoid, that much is true.

However don’t forget that personal debt is a burden on us because it has to be serviced and eventually repaid.

Yes, it may be a burden you can’t avoid but it’s no less stressful potentially for that technicality.

For emphasis let me repeat, in my opinion, there’s good debt and then there’s bad debt.

The obvious question is when is a debt considered bad debt? To put it another way, when is debt a bad idea?

Let’s consider some examples of debt.

TYpes of debt1. Secured Debt:

Buying a house is an example of a secured debt.

When buying a house, most people need a mortgage, which is of course a debt.

However, as long as you don’t overstretch yourself, mortgage debt is usually manageable for most people. And it’s rare that a lender will allow you to overstretch yourself these days.

With a mortgage the debt is secured against your property, so the risk for the lender is small.

If you fail to repay the mortgage loan, a lender simply repossesses the property and sells it to recover their money.

So because the associated risk to the lender is low, interest rates on secured debt are low too.

Coupled with long repayment periods, typically around 25 years, the monthly repayments on a mortgage are not significantly different from what you might pay if you were renting a property.

However by borrowing to purchase a property, that’s a good debt because eventually you’ll repay the debt and own the property, assuming you repay in full.

It’s a good debt because it results in the long-term acquisition of a valuable asset.

You need a roof over your head, of course, so buying with a mortgage makes good financial sense because at least you’ll own the property in the future.

And with luck, you’ll enjoy some capital appreciation on the value of the property too. That’s not guaranteed of course but historically that’s been the trend for those holding property assets for an extended period of time, certainly in the United Kingdom.

In summary, secured debt bears the lowest interest rates and leads to the acquisition of a valuable asset. So in my opinion that makes it a good debt.

2. Unsecured debt:

So when is debt a bad idea? The simple answer is when it’s an unsecured debt.

And what’s unsecured debt?

It’s a debt against which nothing valuable has been put up as security.

If the borrower fails to repay, the lender has nothing it can repossess to sell on to recover the balance outstanding. So for the lender that represents increased risk.

And because unsecured debt has no form of security then to compensate, the interest rate charged by the lender will be high, and sometimes very high.

The interest rate charged reflects the risk to the lender. The higher the risk the higher the interest rate applied.

Lenders recognize that there’s a risk that a proportion of their clients will fail to repay unsecured loans, so those who do make the repayment in full, have also paid a premium in order to protect the lender from any losses they might have incurred due to non-payment by others.

Now of course there will be occasions when unsecured debt is unavoidable.

For instance, young people just starting out might need some basic items of furniture for their homes. A bed would be a good example. You must have one and if you can’t afford it, then you might need to use a hire purchase arrangement. Handled with care then this shouldn’t be a huge problem.

So when is unsecured debt a really bad idea?

Put simply, when you start buying with unsecured credit that which you could live without. That gadget you couldn’t resist or those shoes that looked really nice in the store. Non-essentials you could have lived without until you had the money to pay for them.

You know the experience, I’m sure. You see something you can’t resist, out pops your flexible friend, and an impulse purchase is made before you’ve thought about whether it was a good idea or not.

The reckless use of credit cards, store cards, and payday loans can be a disaster because this type of debt is not secured against anything, so naturally the associated interest rates applied are very high.

Credit card or store card debt can bear an interest rate of up to around 30% or more.

In the UK, payday lenders have been known to charge interest rates equivalent to 3000%, 4000%, or even 5000%.

I find it hard to believe people fall for these loans but they do. I guess if your desperate sometimes then perhaps it’s a case of ‘needs must’.

3. The magic of compounding:

Why does this matter? The simple answer is the magic of compound interest.

The compounding effect of high rates of interest will quickly turn small sums borrowed into enormous sums owed.

For instance, if you borrow $1,000 at 3% interest, after five years you’ll owe $1,159, assuming nothing was repaid.

However if you borrow $1,000 at 35% interest then after five years you’ll owe $4,484, again that’s assuming nothing was repaid.

The difference is a massive $3,325. And more importantly, the value of your debt has also quadrupled.

So when interest rates are high, even if you make minimum payments, your debt can grow rapidly if you’re not careful.

And that’s when you can become enslaved by your debts.

And that’s why it matters. Ultimately this burden can become very stressful.

4. Manage your money or your money will manage you:

Far too many people borrow money in the form of unsecured debt to purchase discretionary items. That’s items they could live without, if push came to shove.

Wasting money is this way is a really bad move. Not just bad it’s seriously stupid.

I recommend that you follow this simple rule: If you can live without it, never use debt to buy it.

Yes of course it’s nice to have the latest smartphone or the latest television or whatever but is it really worth the pressure of unnecessary debt?

When high rates of interest start pushing up the sum outstanding significantly, you have to ask yourself, will the burden of this unnecessary debt still seem worth it? I doubt it.

Wouldn’t it be better to wait until you’ve saved up the money to make the purchase instead?

Wouldn’t it also be cheaper in the long-term to save up and buy the product when you actually have the money? You’ll appreciate the item so much more too.

5. Debt is a form of slavery:

Being indebted is just a form of slavery. It’s as simple as that really. And, once again, that’s why it matters.

For as long as you owe money you can never be truly free.

If you’re debt-free then you’re stress-free too. Wouldn’t you prefer to be debt-free and stress-free?

Good debt will help you but bad debt will make your life a misery.

6. Conclusion:

Put simply, there are two types of debt, good and bad. Debt is either secured or unsecured. Interest rates on the former will be relatively low, whereas interest rates on the latter can be very high.

Interest rates matter because of the compounding effect.

Unsecured debt can be the road to the poor house, particularly if you use it to buy stuff you could live without with credit that bears interest rates that are very high.

The type of debt that’s bad will enslave you and it’ll become increasingly stressful.

If you only take one message away from this article then that’s it.

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15 Things Poor People Do That The Rich Don’t

Can we learn from the habits of poor people when it comes to money?

Yes, when considered against what the rich would not do.

It’s a fact that the choices people make will affect the life they experience.

Quite simply our lives are dictated by the choices we make whether we like it or not.

The video in this post makes some interesting observations about the choices made by people destined to remain poor relative to those who enjoy greater prosperity and the finer things in life.

Now you might feel that some of the observations made here are a little harsh on the less fortunate but actually in my experience the points being made are ‘bang on the money‘, if you’ll excuse the fashionable terminology dear reader.

I think you’d be wise to listen carefully and think about the underlying messages in the video and be honest with yourself.

Just think about it for a minute and I’m sure you’ll agree.

We enhance our value by increasing our knowledge and skills, rather than making sure we know who the latest fashionable celebrity is dating. Why would that matter to anyone?

Listen, learn, and make changes as necessary.

You don’t have to be poor but, if you are right now, then you need to start making some changes.

Nothing will change unless you do first.

Things Poor People Do That The Rich Don’t:

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The 4 steps to financial freedom

Steps to Financial FreedomFinancial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this. ~Dave Ramsey

Many people are searching for the steps to financial freedom. Search the internet and there will be references to seven, eight, nine, and even ten steps but I think only four steps really matter.

However before I discuss those steps, let us first think about the biggest cause of people remaining poor, namely the burden of debt.

Statistics suggest that most people these days are heavily in debt. And debt is a burden that enslaves us. Knowing we have debts can be stressful.

What is the underlying cause of such debt? That’s simple. Mostly it’s the overuse of credit cards with little or no thought to how this will affect our financial well-being.

Unsecured debt built up through the excessive use of credit cards is very expensive.

That means even a small sum outstanding on a credit card can quickly become a large debt due to the effect of compound interest if you only make the minimum payment each month.

Are you affected by debt dear reader? Are your finances out of control? Would you like to achieve financial freedom?

Steps to Financial Freedom:

Often I hear people say things like, if only I could increase my income I could pay off my debts.

In fact those same people, if they did increase their income, would probably just spend more. And financial freedom would still remain a distant dream.

If financial freedom is your aim then it’s essential that you take control of your finances. And the steps to financial freedom are as follows:-

1. Spend less than you earn:

It all starts with spending less than you earn. If you spend less than you earn you can work on becoming debt free and then start to build capital.

2. Pay yourself first:

You must always pay yourself first. What does that mean? It means that as soon as you get paid each month you take a minimum of 10% of what you earn and put it away somewhere safe immediately.

Never, ever wait until the end of the month to see what you’ve got left.

If you do that you’ll never save anything.

If you take 10% upfront it will just be another debit on your income like taxes and pension contributions. You’ll quickly get used to having only the remaining 90% to live on.

And what do you do with the 10% or whatever you’ve put away?

3. Eliminate credit card debt:

Initially if you have a credit card debt burden then it makes sense to use that money to deal with paying off your debt first because the interest you’ll pay on the debt is always greater than any interest you’ll get on savings.

To pay off your credit card debt it’s essential that you find a way to eliminate the interest element each month so that any payments you then make go against the outstanding balance.

And how is that done?

Well, when you take out a new credit card account it often comes with a period of zero interest, usually six months. These accounts also usually allow you to transfer in an outstanding debt from another credit card account.

So by moving from one card provider to another and transferring the debt across to the new account, you then have a period of six months to make payments against the outstanding balance without accumulating interest on the old debt.

Never, ever use this card to increase your debt. Use it only for reducing your debt.

At the end of the period of zero interest on your new card repeat the process if necessary. Once again, you move to another card account offering you a zero-interest period. By focusing only on the outstanding balance it will be paid off quicker.

Eliminating the burden of debt is the first step on the road to financial freedom.

Freedom from debt will give you peace of mind. And peace of mind is a good reason for spending less than you earn.

Once the debt is cleared, what next with the money you’ve paid yourself first.

4. Build capital:

Initially put your money into a savings account. Then, as that builds into a larger sum, you can start thinking about other forms of investment like stocks, bonds, and property.

Once you develop the habit of putting some of your money away each month it’s amazing how quickly it accumulates into a decent capital sum and you’ll be on the road to achieving financial freedom.

Conclusion:

Learn to live within your means.

If you live modestly and spend your money wisely, you can ensure that you have enough money when you really need it.

You can also build that nest egg for your retirement and give a little back to those less fortunate than yourself. And you’ll feel so much better about yourself too.

Conversely, gathering too much clutter through excessive spending on things you don’t really need can become stressful, as well as wasteful. The choice is yours.

Financial freedom is achievable and it will give you peace of mind.

You will sleep better knowing you’re debt-free.

The steps to financial freedom are really quite simple. Spend less than you earn; pay yourself first; eliminate expensive credit card debt; and start building capital.

Do this and one day your older self will be grateful you made the effort I can assure you.

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3 ways for getting rich

Getting richYou should never take money too seriously dear reader but, equally, you should never underestimate the importance of money either. Let’s face it, in the modern world, money is as essential to sustaining of life as oxygen. That’s a fact, whether we like it or not. So getting rich is a worthy topic for discussion.

By getting rich I mean achieving financial freedom. I think that should be everyone’s goal, if only so that they can enjoy their old age. In my opinion, there’s nothing wrong with getting rich providing money does not become your obsession. That is, you should have money in your head but not in your heart.

Now getting rich is easier said than done of course. It requires effort on your part and a lot of determination too.

Nevertheless getting rich is also easier than it might first appear to be.

So today I offer you three ways for getting rich which are available to anyone and everyone and they will all help you to achieve financial freedom.

1. Solve problems for people:

Working for someone else may make you a living but having your own business can make you a fortune. The only way most people can become seriously rich is by setting up a business of their own. It can be done and people do, very successfully, and it’s possible for you to do it too.

Essentially business is all about solving problems for people in exchange for money.

Businesses create products that solve problems for customers. The customer buys the product and the business makes money. Obviously you need to ensure that your revenues exceed your overheads but in essence business is that simple.

If you want to make money in business just look for problems to be solved and there you’ll find commercial opportunities.

One person’s problem is another person’s business opportunity.

However do make sure that every product you offer does actually solve a problem for your customers.

That means understanding the needs and wants of your target customers and always asking the question, “What problem will this product solve for my customers?”

2. Risk leads to reward:

If you want to make serious money you cannot avoid an element of risk. That’s a fact of business life.

Entrepreneurs have to be risk-takers by definition.

However that doesn’t mean you taking crazy risks. It means taking calculated risks by doing your homework; proper planning and market research; and using your business skills to weigh up the pros and cons of every opportunity.

Risk is simply the possibility of you getting an outcome you don’t want.

However it’s a fact that risk and reward go hand in hand. The greater the reward on offer the greater the risk you must take potentially to achieve it.

Obviously your attitude to risk is important here.

If a given risk makes you very uncomfortable then it’s probably not worth taking. It will just lead to too much stress for you. Some people have the ability to live with huge risks, whilst others cannot cope with that much pressure.

Either way it doesn’t matter. If you can’t cope with large risks don’t let it bother you. Just look for something with a lower risk and with which you can cope. Even small risks can lead to great riches.

Remember we all need a mix of certainty and uncertainty in our lives. Business requires you to live with the latter, at least to some degree.

3. The magic of compounding:

Once you’ve made some money it’s important you put it to work for you if getting rich is your aim.

And putting money to work is all about taking advantage of the magic of compounding.

Compound interest can have a powerful effect on your money.

For instance if you invest £1,000 at 2% for 10 years with annual interest reinvested and it will be worth £1,219 at maturity.

However if you invest that same £1,000 over the same period at 10% then you will get £2,594, assuming annual interest is re-invested. That’s over 100% difference over the 10 year period.

Over 20 years at 10% your £1,000 would have turned into £6,727, assuming annual interest had been reinvested.

So remember, the interest rate and the longevity of your investment both matter if you’re trying to build a capital sum.

So if getting rich is your aim then start by investing as early as you can, be disciplined and make regular contributions to build that nest egg.

Further Reading:

Obviously a single blog post can only scratch the surface of all you need to know about money.

So if you’re wise you’ll buy some books on the subject to get your financial education moving in the right direction.

Here are some books I can personally recommend, all of which I own my own personal copies:-

Think and Grow Rich by Napoleon Hill

Think and Grow Rich is a classic of the genre. Originally written in the 1930s but still around and still very popular. And it’s still around for a reason. It’s exceptional and definitely worth adding to your personal reference library.

The Richest Man in Babylon by George S. Clason

The Richest Man in Babylon is another classic of the genre. Simple but inspiring. You can read this book in a few hours but it will provide you with a series of powerful lessons for acquiring money, keeping money and making money. Again well worth adding to your personal reference library.

Rich Dad Poor Dad by Robert T. Kiyosaki

Rich Dad Poor Dad is an excellent starting point for anyone seeking to improve their financial knowledge and improve their financial future. This is modern compared to the previous two but it has also become a classic and is well worth the cover price.

One Hour Investor: The Beginner’s Guide to Investing in the Stock Market by Russell Ellroy

One Hour Investor: The Beginner’s Guide to Investing in the Stock Market is recently published and so it’s right up-to-date. If you want to learn about stocks, bonds, mutual funds, and much more, then this could be the book for you. Written in a very accessible style and aimed at the absolute beginner.

I have all of these books in my own personal library and I dip in and out of them frequently. You will be inspired by them all I am sure and I recommend you purchase your own copies.

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Creating a life plan: 17 ways the rich and poor think differently

Why is it that some people are wealthy and others not?

You might argue that the rich inherit money and therefore they’re just lucky. That may be true in some cases, perhaps.

Having wealthy parents certainly helps no doubt but there are plenty of examples of self-made millionaires and billionaires. And there are plenty of examples of people who lost all their wealth and then just created another fortune.

There are also plenty of examples of poor people who’ve enjoyed good fortune on a lottery only to squander their millions within a few short years.

This would suggest that the rich and poor have a different philosophy with respect to creating a life plan and money as a resource.

The video embedded here explores 17 ways in which rich people and poor people think differently. The video is interesting and informative and well-worth a few minutes of your time.

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5 questions that’ll help your buying decision process

Buying Decision ProcessHow can you be expected to save money when you don’t earn enough to make ends meet as it is? I’m guessing you may have asked yourself that question at least once dear reader? If you have, you’re not alone. It’s a common cry.

However, whilst some people may struggle financially, it’s also true that far too many people squander their money buying items they don’t need and probably will never use, often in an attempt to impress people they don’t even like.

For such people, their buying decision process is usually limited to whether they still have enough credit left on their credit cards.

Well, the mantra “Have Plastic; Will Purchase” is not a good one if saving money is one of your goals.

You can earn a decent income and yet a lack of money management skills and a poor buying decision process will result in you never achieving financial freedom. In fact poor money management skills will condemn you to a life of being poor.

So it’s essential that you learn to manage your money properly, if you want to avoid long-term poverty.

Avoid the ‘I’ve got to have it’ approach:

Now be honest with yourself, how often do you buy things you didn’t really need?

Stuff that you weren’t even looking for but it was there and it looked nice and you thought I’ve got to have it. Out pops your ‘flexible friend‘ and the item is yours. A brief period of gratification follows and then the item is largely forgotten.

How often do you buy things you never use?

Take a look in your wardrobe. I’ll bet there are a few items in there which still have the store tags on them? Never used and they’ve probably been there for quite some time I suspect? Would I be right?

I’ve got to have it‘ is a great way to waste all your money. With this approach you’ll enrich other people at your own expense. Now how could that possibly make sense?

Credit cards: Weapons of mass wealth destruction

How often do you buy things you can’t afford with money you haven’t got?

It’s true, credit cards can be a convenient means for making payments of course but they can also be weapons of mass wealth destruction. That’s a fact dear reader.

When it comes to the buying decision process most of us are driven more by a desire for gratification then any sensible approach to managing our money carefully.

Most of us are guilty of buying more than we need too. Many of us are guilty of buying items we seldom use, if at all.

If you’re like this dear reader then you’re not alone I can assure you. However that’s not a good thing.

The disciplined approach:

However with a bit more discipline you could hang on to more of your own money and then build capital which, eventually, will start generating an income all of its own through interest payments on deposits  and bonds and dividend payments and capital growth on stocks and shares.

Still we’re getting ahead of ourselves.

The underlying message I offer you today dear reader is that you should establish for yourself a buying decision process that will allow you to control your expenditure.

Essentially before you buy anything you need to ask yourself a series of tough questions to gauge whether the purchase really does make good sense.

And what are those questions?

The questions to ask before making any purchase:

There are in fact five questions you should ask yourself before making any purchase, as follows:-

    1. Do I really need it? Honestly?
    2. Will I really use it? Honestly?
    3. Can I really afford it? Honestly?
    4. If I didn’t have it would it really matter?
    5. Does it represent good value for money?

If you answer ‘No’ to the first four questions, the fifth question is irrelevant. A negative on all or even most of the first four questions means, don’t buy the item. Simple!

And even if you do think you need it, never buy anything if you do not have the money to pay for the item right now. Never, ever incur debt for a discretionary purchase.

It’s better to do without than to run up debt on a credit card to pay for discretionary purchases.

The compounding effect from high credit card interest rates can quickly turn a small debt into a large one.

The ‘value for money’ question is only relevant when you can answer every other question in the affirmative.

Nevertheless, you should never buy something that’s not also good value for money. That is, you should never overpay for anything. Overpaying meaning the price is inconsistent with the value on offer.

Let the answers to the questions guide you:

To ensure your buying decision process is sound you must always ask these questions.

Let them be your purchasing guide and you’ll be in a better position to start saving money and watch it grow. Once it starts growing you’ll be on your way to building your own personal wealth.

Please share this post with your friends:

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© Roy Joseph Sutton and Mann Island Media Limited 2020. All Rights Reserved.

How to turn your yearly income into your monthly income

How to turn your yearly income into your monthly incomeAre you one of those people who feel you should be earning more than you do?

Would you like to know how to turn your yearly income into your monthly income?

To have enough money to enjoy the lifestyle you’d love?

You’d like a greater income but you don’t know how, right?

Perhaps you feel that big money never flows to people like you?

A natural assumption perhaps, but it’s wrong. With the right approach you too can have a lot more money than you have right now. Yes, you can become truly wealthy.

The question is where do you begin?

Well you can start by understanding the Law of Compensation. In the video included here the American, self-help guru Bob Proctor explains that income is earned according to the Law of Compensation.

The Law of Compensation:

Bob explains that the Law of Compensation states that the amount of money you earn will always be in exact ratio to the following three points, namely:-

  1. The NEED for what you do.
  2. Your ABILITY to do it.
  3. The DIFFICULTY there would be in REPLACING YOU.

Now you have no control over points 1 and 3, so you must concentrate on point number 2. You must be constantly honing your skills and become a master of whatever you do.

That said, becoming a master of what you do is only part of the solution.

To earn more you must decide on your strategy for earning money. In the video Bob Proctor explains that there are in fact only three strategies for earning money.

The Strategies for Earning Money:

So what are the three income earning strategies? Bob Proctor describes these are M1; M2; and M3. In more detail that means:-

M1: Trading your time for money:

Essentially this is paid employment and it is the way that 96% of people earn an income.

The problem is that, unless you’re a Wall Street banker, you’re unlikely to get rich this way. In fact it probably explains why you’re not rich right now.

M2: Invest Money to Earn Money:

Assuming you’re working for the man as a salaried employee, you can start saving, and gradually as your savings grow you can invest your money in stocks, bonds and property and over time your investments will start generating an income of their own.

That’s great but you need to know what you’re doing and, if you have nothing now, it will take some time before you can start generating anything approaching a useful extra income.

Of course should you have a large sum of money right now then this might be a solution but for most people it’s not really, which is why only around 3% of people make an income this way.

M3: Multiply your time with multiple sources of income:

How to turn your yearly income into your monthly incomeEstablishing multiple income streams is where you can start making serious money.

Even fewer people make an income this way, around 1%, but that has more to do with the fact that most people fail to recognize it’s potential.

Now let me make one thing clear, having multiple income streams does not mean working multiple jobs.

It means having income streams that will earn money for you even whilst you’re sleeping.

M3 is the income strategy that will help you earn far more than you earn now. Certainly it will if you do it right.

Bob Proctor offers the example of Network Marketing (also known as Multi-Level Marketing) whereby not only do you sell products but you also create your own network of sellers which means when they sell you get a part of the commission generated on those sales.

The best network marketers have made a lot of money this way but it’s not the only answer to generate multiple streams of income.

The internet offers multiple ways of getting rich online nowadays.

For instance you can use Amazon as a market place and sell products with fulfillment (delivery to customer) handled by Amazon.

You can also generate commissions through affiliate marketing with Amazon, as well as others like Clickbank and Commission Junction (CJ). These can be great ways to make money whilst you sleep.

Blogging and Vlogging are other ways of producing income streams too.

There are numerous ways for the ambitious and determined. In fact it’s never been easier for people prepared to put in the effort.

So listen to what Bob Proctor has to say and be inspired to take action now.

Further Reading:

In the video, Bob Proctor makes reference to Think and Grow Rich by Napoleon Hill.

Think and Grow Rich is a classic of the financial education genre.

Originally written in the 1930s but it’s still around today and still very popular.

And it’s still around for a reason. It’s exceptional and definitely worth adding to your personal reference library. I have my own copy and you can take a look at the book if you CLICK HERE.

Bob Proctor himself has also produced some excellent self-help books too and you can take a look them if you CLICK HERE.

DISCLOSURE: This website is an Amazon affiliate. Should you click on any of the links included in the text above and you then make a purchase, you should be aware that this website will receive a small commission. These commissions serve only to cover the cost of maintaining this site. Your understanding is truly appreciated dear reader. Thank you.

Please share this post with your friends:

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Thank you.

Other articles you might find interesting:

© Roy Joseph Sutton and Mann Island Media Limited 2020. All Rights Reserved.

Here’s why you should consider becoming self-employed

Becoming Self-employedThere are many ways to make money dear reader and they all have their merits.

For instance if you get a job with a big corporation potentially you’ll earn a decent income and you’ll enjoy a few fringe benefits too.

And if you get a job in the public sector the pay may not be quite so good but the pension scheme is usually the best you’ll find anywhere. And of course, working for the Government is usually fairly secure employment too.

If you become a wage slave in any sector you can make a living, and sometimes that can even be a decent living too.

However unless you work on Wall Street or for an investment bank in the City of London, you’re unlikely to make a fortune. Unfortunately dear reader, that’s a fact.

So if your aim is to make serious money you should consider becoming self-employed.

We live in an age in which becoming self-employed has never been easier or cheaper. As a result of the Internet there are so many opportunities that were simply not available to previous generations.

And the best news is, you don’t even have to give up your day job, not initially anyway.

You can start your own business as a part-time venture and keep it that way until the income your business is generating for you is sufficient for you to live on.

You can even start one business to generate extra cash and as it makes money you can invest that cash into bigger and potentially more profitable opportunities. The possibilities are endless.

As an employee you’re trading your time for money and that’s fine.

However if your firm does well, you’re unlikely to benefit significantly from any extra profit they make. You might get a bonus but regardless of personal contribution, it’s more likely to be an incidental sum rather than life-changing money.

With your own business you can be making money whilst you’re sleeping.

In fact if you want to get seriously rich then you’ll have to start making money whilst you sleep.

Now dear reader I can hear you asking, but how do you make money whilst you sleep?

Let me give you some examples of online businesses that you could start with little or no money and start making money whilst you sleep:-

Selling Products Online:

Through the Internet potentially you can reach most of the people on the planet, wouldn’t you agree?

Think about that for a second.

If you create a website or an online store then billions of people around the world will have access to it. And those people can access it whilst you’re asleep.

So the potential is there for you to create something that can be generating money for you 24 hours a day 365 days every year.

Still not convinced? Let me give you some examples of businesses you could start to achieve this goal:-

Amazon:

If you’ve ever bought anything from Amazon you’ll probably have noticed that they are not always the actual seller of the item you’re seeking to purchase. Other suppliers sell their own products through Amazon via what is known as Amazon Marketplace.

And when third party suppliers sell products via Amazon they can also use a service known as Fulfilment by Amazon or FBA.

This means if you’re the seller, you simply deliver your stock of products to Amazon and they’ll handle all the logistics associated with product delivery to the buyer.

Fulfillment by Amazon:

If you want to sell products but you don’t want to handle your own packing, postage, and delivery then you can get Amazon to handle it all for you using the solution known as Fulfilment by Amazon.

You can do it yourself of course but the point is that you really don’t have to because there’s an easier way.

So you can just focus on finding products that will offer solutions to the problems your target customers may have and then you just let Amazon do the rest.

And remember this; those products don’t even have to be new.

They can be ‘second hand‘ or used items too.

As long as you can find a suitable niche in second-hand products then there’s money to be made there too.

Let me offer you an example.

Each year graduating students have textbooks to sell. Maybe you had that experience dear reader?

Essentially such students just want to get some cashback for those books they’re unlikely to read ever again.

The shrewd entrepreneurs recognize that there’ll be a ready market for those very textbooks at the start of the next academic year. New students are always looking for ways to obtain the course textbooks at a better price.

So entrepreneurs offer selling students a quick way to turn their textbooks into a little cash.

And then buying students will be sold those same textbooks at a rate which will save them money on the price for the same book had it been bought new.

Thus the entrepreneurial you can set up a website to attract booksellers and then through Amazon Marketplace the books you’ve bought cheaply can be sold at a profit.

And in that way you can create a profitable second-hand book business.

You could repeat the same trick with music such as vinyl records and CDs, as well as films on DVD. Second-hand smartphones, tablet computers, and other technology items offer another entrepreneurial possibility.

Alternatively you could source your own products, e.g. skincare products, cosmetics, household products, and so on and then you simply sell those via Amazon.

Plenty of people have created successful businesses with this approach I can assure you. 

Becoming Self-employedeBay:

When people sell stuff at a boot sale or a yard sale, they usually sell at very low prices simply because they price items for a very quick sale.

This is stuff they need to get rid of as quickly as possible for whatever reason. And in that there’s a potential opportunity for those with an entrepreneurial spirit.

You buy these items cheaply and you then resell them on eBay for profit.

More importantly people sometimes sell valuable stuff at boot sales and yard sales for ridiculously low prices because they didn’t realize the real value of the item.

On the British television show Flog It, I saw a woman sell an antique vase at auction for £800 having originally bought it at a boot sale for just £1. Now that’s a very nice profit.

Yes such examples would be the exception but shrewd people can and do make money this way and eBay is a great vehicle for doing so.

Affiliate Marketing:

Essentially affiliate marketing is ‘commission only’ selling.

Linked with the idea of content marketing, what this means is that if you can direct traffic to a product seller’s website which results in a sale then you will get paid a commission for that sale.

The amount of commission can be as low as 4% from the Amazon Affiliate Program to as much as 75% from some items offered through programs like Clickbank and Commission Junction (or CJ).

How do you achieve this in practice?

Well despite its relatively low commission rates Amazon offers the easiest opportunity for the beginner. You sign up for the Amazon Affiliate Program and then identify a suitable niche that interests you.

Let’s say that niche is sports shoes for women. The niche does need to be focused and quite narrow. The category ‘Shoes’ would be a bit too wide. You need to think about categories for which people will be searching via Google and other search engines.

Once you decide on a niche, you then create your own website publishing say reviews of a variety of those sports shoes for women.

And remember; those reviews don’t have to be your own necessarily. They could be a summary of various reviews you’ve read elsewhere with an overall rating based on what others have been saying. In other words, you’ve done the hard work for readers by providing them with a comprehensive summary of all the reviews out there and then providing a convenient a link to Amazon so that they can easily make their purchase

Creating a review summary by curating input from other sources is perfectly legitimate as long as you acknowledge the different sources which form the basis of your article.

Why review sites are a good idea:

Review sites work with affiliate marketing because they capture buying intent and that’s important.

If someone searches for a review for an item on Google then the chances are they will buy if the reviews prove to be positive.

When producing your review articles the crucial action is to embed affiliate links within the text.

Getting readers to click on those links and taking them to Amazon is how you’ll make money. If they buy within 24 hours of clicking on a link then you will get paid a commission.

Amazon commissions vary from 4% to around 10% depending on the number and type of sales for which you are credited each month.

So in choosing a niche you must think about product value too. Generate low-value sales and you won’t make much. However sales for items with a bigger price tag can prove very lucrative.

That said generating some low-value sales can be a way of pushing subsequent bigger ticket sales into a higher commission rate. So don’t ignore them completely.

Content Marketing:

Essentially content marketing is the idea of publishing web content in order to provide the means for promoting products and services. Content marketing is closely linked with affiliate marketing but not exclusively so.

There are two types of content you can consider, as follows:-

(1) Written Content:

For instance, if you’re producing regular content and publishing it on your own blog then there’s the potential to generate an income through advertising.

Now selling advertising space on your blog or website is only possible if you have substantial amounts of traffic. If you’re just starting out you will not reach those levels for quite some time. However, what is known as pay per click (CPC) advertising could generate money for you right from the start.

Perhaps the best known CPC program is one offered by Google Adsense. You sign up for this program, then embed Google’s links in your blog and they will insert advertising on your blog that is relevant to your content.

Every time a reader clicks on an Adsense advertisement you will get paid and it’s not purchase-dependent. Readers only have to click for you to get paid.

The trick with Adsense is to have a very narrow focus for your blog.

Here’s an example. Let’s say your blog is about how to keep chickens and deal with blights like red mite. You’ll attract search engine generated traffic from people desperate to deal with the problem of red mite. Google will insert ads from companies offering products that will help with this problem and desperate people are likely to click on those ads to see what’s on offer. They click you get paid.

As long as your subject matter is focused and narrow, and ideally based on a highly searched keyword or phrase, then this can be a way to generate decent money. However the traffic levels to your blog will have an impact on how much money you can reasonably make.

(2) Video Content:

Another way to benefit from Google Adsense is to create your own YouTube channel, produce videos and again insert links from Google so that relevant pay per click advertising will appear on and around the video. Again if people click then you get paid.

Write eBooks:

Devices such as the iPad, the Kindle and other eReaders, provide you with the opportunity to self-publish your own eBooks and sell them through Amazon.

You may not be able to come up with the next Harry Potter work of fiction but there is good money to be made writing ‘How To’ books on just about any subject.

They don’t even need to be that long either.

As little as 50 pages or 8,000 – 10,000 words covering a topic of general interest can be enough to produce something that will sell for one dollar or one pound sterling. That might not seem like a lot but sell 1,000 of them and you’ve made a decent sum of money.

Write something on an evergreen topic and it could sell for years.

If you then write several eBooks like this, again on evergreen topics, that could become a decent income stream.

And what do I mean by evergreen?

These are topics for which people have always looked for solutions. That might be something like tips for good time management or how to lose weight, and so on.

And even if you’re not an expert you can research the necessary information and pull it together for people. Essentially you will be doing the work for them.

Develop Apps:

If you can learn to write code, and you can learn to write code, then you can also learn how to develop apps. If you can develop a killer app and sell it through the App Store then you can make serious money.

You’d love to but you don’t know where to start, right?

Well there are endless videos and tutorials on YouTube and from these you can learn how to code and develop apps.

Yes there’s some work to be done upfront of course.

However a good app will generate money for years to come. Just think about apps like Candy Crush Saga.

Produce something which becomes a real fad and there’s serious money to be made.

11 things to bear in mind:

If becoming self-employed appeals to you and you fancy making money as an online entrepreneur then here are 11 things you should bear in mind:-

  1. Know your target customers.
  2. Know your target niche or niches
  3. Know your strengths and interests?
  4. Apply your strengths and interests to serve customers
  5. Recognize that different markets need different strategies.
  6. Make sure you’re capturing buying intent.
  7. Create an image that will appeal to your target audience.
  8. With a website, traffic matters.
  9. Search engine optimization (SEO) will bring traffic.
  10. Getting backlinks from other websites will help with SEO.
  11. Be determined, work hard, and learn as you go.

6 things you must do when you’re self-employed:

(1) Register with the tax authorities: Make money by all means but pay your taxes too. Upsetting the taxman is not a good idea dear reader wherever you live. In some countries tax regimes are more benign than in others but it’s always better to keep the tax authorities happy.

(2) Register for sales taxes and VAT: Again it’s all about paying your dues. If you do well financially then you have an obligation to share some of your wealth with the rest of society. Taxes are the price we pay to live in society and you can’t have a successful business without the society in which you live.

(3) Get a separate business bank account: Keep your business activities completely separate from your personal life. This is very important.

(4) Keep accurate and up-to-date records: You’ll need these in any dialogue with the tax authorities. You don’t want to end up paying more in tax than was necessary. Paying your dues is one thing; overpaying your dues is careless.

(5) Insure your business: When you’re in business, you’re required by law to have certain insurance policies in place. Exactly which policies you need depends on the nature of your business activities. Make sure you know your obligations and act accordingly.

(6) Keep it simple: In the early days you don’t want to be spending money you don’t have on things that are initially unnecessary. So keep everything as simple as possible for as long as possible.

Conclusion:

Self-employment can be an attractive proposition and for most people it is the only way you will ever make a fortune. It’s not easy of course but it can be done and you don’t have to ditch your day job to get started.

With an online business you can start small and build it up over time. And you can mix and match options. For instance you can start a website for making money with both Amazon affiliate marketing and Google Adsense.

A good review website can become quite profitable and once it’s generating revenues on ‘autopilot’ it can become an asset that you can sell for serious money. There are plenty of examples where such sites have sold for 6 and even 7 figure sums.

Don’t underestimate the challenges of course but it can be done and people do. Why not you? Think carefully about how best you can exploit the opportunities before you and then have a go.

Good luck and may you be the next Richard Branson.

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25 inspirational stories of people going from rags to riches

Inspirational StoriesInspirational stories can be so uplifting. They tell us that if other people can be successful then so can we.

Did you have a tough start in life?

Perhaps you feel that your difficult past will prevent you from enjoying a successful future?

Well a tough past doesn’t mean you’re doomed to a tough future.

The same goes for a mediocre past.

The past is the past of course and it can’t be changed. However it serves only as a series of lessons to be learned. Remember, it’s not a life sentence.

You can create any future you want, as long as you’re determined, focused and prepared to put in plenty of hard work. You won’t get anywhere without those ingredients. Nevertheless it can be done, though it will be all down to you.

The future is an endless stream of opportunities that you can choose to take or not.

Don’t just accept my word, look around for people who’ve actually done it. There are plenty of inspirational stories if you’ll just look for them. Today I offer you a video with 25 inspirational stories.

Inspirational Stories25 Inspirational Stories:

In the video included here there are 25 excellent examples of people who had a tough start in life but went on to enjoy considerable financial success.

These are all inspirational stories of people going from rags to riches. And if they can do it, why not you?

And remember this; you’re never too old.

Colonel Sanders started KFC at the grand old age of 65.

And Ray Kroc began building the business empire we now know as McDonald’s at 52.

Believe you can and you will.

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Warren Buffett’s Top 10 Rules For Success

Today I offer you Warren Buffett’s Top 10 Rules For Success dear reader.

If you want success then you would be wise to listen to people who have already achieved some success.

Identify what they did to achieve their success and copy it.

If it worked for them then it will probably work for you.

Now there are few people more successful in their chosen field than Warren Buffett.

So he offers you his ‘Top 10 Rules For Success’ in this video, embedded here. It’s definitely worth your time to listen him.

Here are his tips and I recommend them to you.

Warren Buffett’s Top 10 Rules For Success:

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