If you have some time to spare, read this post. I believe you guys will
like it!
"Keep all
your eggs in one basket, but watch that basket closely."
- Warren Buffett
- Warren Buffett
Most self-made millionaires don't rely on their salaries alone to build their wealth. |
This is one of
Warren Buffett's most famous quotes. It is also one of the worst pieces of
advice for anyone who is working on becoming rich.
My dad
inadvertently took this advice with his own financial empire, and in one night
lost everything when the main warehouse for his business burned down.
My dad's
business was valued at around $3 million, which is north of $20 million in
today's dollars. We lived in a very nice house in Todt Hill, one of the most
affluent neighborhoods on Staten Island, New York. When my dad's warehouse
burned to the ground, all of that wealth disappeared into thin air.
Our family
struggled financially for the next 15 years, trying to recover from that
nightmare; struggling almost daily to prevent foreclosure on our home.
My dad told me
later in life that he wished he had his eggs in more than one basket. That
would have been the smart thing to do, he told me.
In my five-year study of the daily habits of the rich and poor, I learned
that most self-made millionaires generated their income from many baskets:
·
65% had three streams of income
·
45% had four streams of income
·
29% had five or more streams of income
Having multiple
income streams makes a lot of sense. When one stream is negatively affected by
systematic economic downturns, of which you have no control, the other streams
can come to the rescue and help you survive the downturn, without seeing your
lifestyle dramatically affected.
Most people are
not rich. And coincidentally, most people have one stream of income — their
job. If you do not save and invest your savings in assets that generate
additional streams of income, and you lose your job, you could soon find you
and your family living with a relative.
Putting all of
your eggs in one basket is simply a recipe for financial disaster. If you put all
of your eggs in one basket and that basket breaks, what do you do?
How do you
create multiple streams of income?
1.
Save, save, save. Save 10-20% of your net income every year.
2.
Expand your means. Start a side business or side career that generates additional
income.
3.
Create multiple baskets. Invest your savings and additional income into investments that
generate passive income such as: residential rental properties, commercial
rental properties, TICS, triple net leases, seasonal rentals (beach areas, ski
resort areas, lake front areas), equity investments (stocks, bonds, mutual
funds), annuities, permanent life insurance, royalty-generating property
(timber, oil and gas), and boat rentals. If you can't do it on your own,
partner with others and keep building your portfolio of assets that generate
passive income.
As I mentioned,
three streams of income seems to be the magic number for the self-made
millionaires in my Rich Habits study, but the more income streams you can
create in life, the more secure will your financial house be.
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