Firstly, active income - income that we work hard for, income that we toil from 9 to 5, running in the rat race. To be successful in active income, get a good education or experience, be confident and get a job. The more highly demand a job is the higher your pay is. If the boss like you and the company profit, your income will increase. A boss will pay you a higher pay only if you were to earn more than what your salary worth (income per employee > Salary). This is universal law in business.
IF you are a businessman or stock operator, your profit will only come from margin multiply by volume. So, to be richer either you improve your margin or volume. Volume is like the sword of domicile, it can kill you or make you superb rich depending on whether it is a positive or negative margin.
Second passive income - whereby money works for us with a guaranteed percentage monthly or yearly. You will be asked what is passive income then, it is income in the form of what we get back from the asset we employed, we become the master and the landlord - the house landlord, the shop landlord, the stock investor with dividend or even the unit trust or FD investor. Why I say so, this is because anybody with surplus income is definitely an investor and anybody with excess expenditure is definitely a debtor. When we let money works for us, we should make sure that money's children, grandchildren, and grand grand-children also works for us. Let me illustrate it with some simple story.
Passive income is good with the concept of compounding. Let us say, we just arrive in Australia in the 1800s. There is no rabbit in Australia then. Do u know that rabbit is not a native in Australia? Say in 1800, we as the early fortune seeker introduce a pair of rabbit in Australia and the rate that rabbit multiply is 4 months twice. Can we guess how many rabbit there is in 10y, 50y or 100y? I will do a basic calculation with all the rabbit surviving or what we say in the financial sense the money is re-invested. So rabbit population in 10 y = 1 billion (1x2^30). In 10 years the rabbit population reaches 1 billion. What about 50 years, 100 years or now. See, why Australia is now overpopulated with rabbits by now.
Let us see some magic that exists in real life, compounding. In the real world, the way to compound your investment is through monthly reinvestment and the rate of compounding, let me show you the way. Let say we have 2 people Mr. Scrooge and me. Mr. Scrooge invests 5k per month in FD with a yearly return of 3%, while, I invest 1k per month with a yearly return of 7%. Can we see the difference that both of us have in 10y, 20y, 50y, or 100y? If we were to be able to be alive by then.
In Mr. Scrooge case, his money will double every 48 years (72*2/3); while mine will double every 20 years (72*2/7).
In the first 10 years, Mr. Scrooge will have 720k (5000 x 12 x 10 x 1.2), while I will have 180k (1000 x12 x 10 x 1.5). Not bad for both of us.
In 100 years time, Mr Scrooge will have 24m (5000 x 12 x 100 x 2@2), while i will have 38.4m (1000 x 12 x 100 x 2@5).
See, in 100 years I am richer than Mr. Scrooge, even though he invest 5x more than me monthly. This shows that it is not how much that you invest per month that matter but the monthly reinvestment and rate of compounding that matter in the long term. So, start investing consistently at an earlier age as possible.
But everyone want windfall profit or fast buck, don't we? Thats why people become punters, gamblers and investor. Those that seeks windfall profit is like a rabbit, while, those that do compounding is like a tortoise. In real life, rabbit or tortoise will win the ratrace? It is for you to ponder and choose your proper strategy to the cathedral of wealth. Are you a tortoise or a rabbit in real-life? Just for your info, have any of you seen tortoise walking backward?
Good luck in your strategy
Bon Voyage!
Sincerely,
Dr Lion
IF you are a businessman or stock operator, your profit will only come from margin multiply by volume. So, to be richer either you improve your margin or volume. Volume is like the sword of domicile, it can kill you or make you superb rich depending on whether it is a positive or negative margin.
Second passive income - whereby money works for us with a guaranteed percentage monthly or yearly. You will be asked what is passive income then, it is income in the form of what we get back from the asset we employed, we become the master and the landlord - the house landlord, the shop landlord, the stock investor with dividend or even the unit trust or FD investor. Why I say so, this is because anybody with surplus income is definitely an investor and anybody with excess expenditure is definitely a debtor. When we let money works for us, we should make sure that money's children, grandchildren, and grand grand-children also works for us. Let me illustrate it with some simple story.
Passive income is good with the concept of compounding. Let us say, we just arrive in Australia in the 1800s. There is no rabbit in Australia then. Do u know that rabbit is not a native in Australia? Say in 1800, we as the early fortune seeker introduce a pair of rabbit in Australia and the rate that rabbit multiply is 4 months twice. Can we guess how many rabbit there is in 10y, 50y or 100y? I will do a basic calculation with all the rabbit surviving or what we say in the financial sense the money is re-invested. So rabbit population in 10 y = 1 billion (1x2^30). In 10 years the rabbit population reaches 1 billion. What about 50 years, 100 years or now. See, why Australia is now overpopulated with rabbits by now.
Let us see some magic that exists in real life, compounding. In the real world, the way to compound your investment is through monthly reinvestment and the rate of compounding, let me show you the way. Let say we have 2 people Mr. Scrooge and me. Mr. Scrooge invests 5k per month in FD with a yearly return of 3%, while, I invest 1k per month with a yearly return of 7%. Can we see the difference that both of us have in 10y, 20y, 50y, or 100y? If we were to be able to be alive by then.
In Mr. Scrooge case, his money will double every 48 years (72*2/3); while mine will double every 20 years (72*2/7).
In the first 10 years, Mr. Scrooge will have 720k (5000 x 12 x 10 x 1.2), while I will have 180k (1000 x12 x 10 x 1.5). Not bad for both of us.
In 100 years time, Mr Scrooge will have 24m (5000 x 12 x 100 x 2@2), while i will have 38.4m (1000 x 12 x 100 x 2@5).
See, in 100 years I am richer than Mr. Scrooge, even though he invest 5x more than me monthly. This shows that it is not how much that you invest per month that matter but the monthly reinvestment and rate of compounding that matter in the long term. So, start investing consistently at an earlier age as possible.
But everyone want windfall profit or fast buck, don't we? Thats why people become punters, gamblers and investor. Those that seeks windfall profit is like a rabbit, while, those that do compounding is like a tortoise. In real life, rabbit or tortoise will win the ratrace? It is for you to ponder and choose your proper strategy to the cathedral of wealth. Are you a tortoise or a rabbit in real-life? Just for your info, have any of you seen tortoise walking backward?
Good luck in your strategy
Bon Voyage!
Sincerely,
Dr Lion
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