A basic understanding of money is rarely acquired through today’s educational system. If one does not take business related classes, the subject of money is usually overlooked.
In order to become a prudent consumer or an investor, either in the stock market or in real estate, your financial skills need to be sharpened. Most of the financial problems we face are avoidable if we understand how money really works. The knowledge of accounting skills can be invaluable. Understanding percentages and interest rates is a must. Do you really understand the difference between and asset and a liability, or the power of compounding interest?
Credit can be your best friend when investing. Using “other people’s money” will provide you with capital that is necessary to make money. But, using credit for non-investment activities or consumer items can be devastating to your financial well being. For example, credit card debt can kill you if you carry a balance.
We have all known people who make approximately the same amount as others from their daily work activities, but some are able to manage the money better and have investments.
We also know that you can never, or rarely, become wealthy from our jobs or from working for income. Earning daily and monthly income from your job is the first step. We need to support ourselves; however, you must put money aside for investment purposes along the way. So that eventually your money is working for you.
Your ultimate goal is to build assets, which produce income and grow over time. Most of us work the first four months of the year for the government to pay taxes. Then pay taxes again when we purchase something. Then what ever is left over is needed to support ourselves. You must pay yourself first and save that portion until it becomes enough to invest in something that will grow, work for you, and ideally have some tax shelter. One of the most common problems customers have is how to get the initial down payment. Consistent, dedicated, saving initially is the answer.
Real Estate can be ideal for accumulating wealth. While you’re saving be sure to educate yourself as much as possible. The wealthy understand money and how it works, that’s how they have become wealthy.
The majority of wealthy people have made their money through real estate. Some may make money through some other vehicle, but investing in real estate is usually the end result and where the wealth is held.
Education and knowledge is power.
This article was originally written for and appears in the San Francisco Examiner. Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for 60 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.