The first step is adding up the amount of debt that you are servicing every month and creating a household budget that is realistic to pay it off. The second step would be to begin acquiring assets to improve your financial picture and the third step is getting into a position where your money is working for you. This may sound like climbing a mountain but if you achieve the correct mindset it is not that large of a mountain. In this article I will cover the second step which is all about building your assets. First you must understand what an asset is because I believe that some may be confused about this. According to Robert Kiyosaki in his book Rich Dad Poor Dad, which in my opinion is a must read, an asset is defined in simple terms as anything that makes you money. So stocks and bonds would be assets, real estate if it is rented is an asset, real estate that increases in value therefore allowing you to trade up is an asset, a business is an asset. Anything that you can buy for one price and sell for a higher price would be an asset. Your assets are the key to your financial freedom because they are working for you while you are sleeping, spending time with your family or working at your other job. Assets are like little financial helpers that ultimately help you achieve your goals.
Liabilities on the other hand slowly cause erosion in the foundation of your financial goals. They eat away first at your savings or home equity and ultimately in the form of credit cards that build up your debt. A liability is anything that increases your debts and causes you to pay for them monthly. Liabilities can completely de rail your financial plans and put you in a deep enough hole that you feel like you could never get out. You must avoid building liabilities as if they were an infectious disease. If you already have debt than read my first article and eliminate them as soon as possible.
Financial worth is basically the sum of adding up all of your assets based on their value, plus any cash assets you may have and then subtracting your liabilities which would be mortgages, credit cards, car loans, student loans etc. If your liabilities out number your assets than you have a negative financial worth but on the other hand if your assets out value your liabilities than your financial net worth is that number. I cannot emphasize enough how important it is to strive for tipping the scale heavily towards assets instead of liabilities, because this is the only way you will ever achieve financial security and freedom.
In conclusion you must eliminate your debt first. Once you have accomplished this you need to concentrate on building your assets. Your goal is to ultimately have your assets out weighing your liabilities. This creates a snowball effect because as you eliminate debt you now have more funds to put towards your assets. Grow your assets as if they were a garden. Fertilize it often with your freed up income created through debt elimination. Take profits to increase your assets either in the form of more stocks or bonds, more mutual funds, a more profitable piece of real estate or anything else that you come across that is an increase in income or profits. If you stick with this plan, which may take a few short years to accomplish, you will reach the final step. The final step is having your money work for you instead of you working for money. Here is when you decide if your assets can support your lifestyle or if you want to continue to work for awhile to build your financial worth further.
This may be the most important click you ever make in your life. http://www.winatbiz.com join us on this adventure, I promise you will never look back!
