Plant the seed of wealth

 

The fundamentals towards having a residual income is through a discipline approach;  Saving ,Spending & Investing.(SSI).

With conscious spending ,it will ensure surplus of cash been  left over to deploy for investment.

With inflation raging at a low to high range from 2% ~ 5% onwards, our saving is being slowly eroded as our purchasing power keep lower  year after year.(Banks saving account interest rate is pathetically low).

To preserve and grow our wealth, investing is a must but come with careful planning of budget.

To start with , have a book stand ready to record  all the expense and earning and at the end of the month, review and determine which expense should be cut or forsake to have a better cash flow at month end. To do this ,great discipline is needed, it may be tough for a start ,once used to it, it will soon be a habit.

Ideally the money we earn should be more than enough to cover our expense and should have some decent cash left over for investment. The surplus shall formed the backbone of our wealth building process ,no matter how small it may look, every cents counts.

Example of a Mr A Expense :

Income:
Salary : $3000

Essential Spending:
Transport:$300
House loans:$1000
Utilities:$200
Food:$500

Non- Essential Spending:
Entertainment:$500
==================
Cash flow :+ $500

From the above example ,Mr A could save $500 per month ,and these surplus could use for investment when he managed to save after a year. Mr A could save more if he want to cut down his spending on entertainment

Renting out a flat or buying blue chips companies for high yield dividend is one of the many ways to earn passive income .

The portfolio should ideally target for long term horizon and be balanced in growth and defensive sector.

The rule of 72 is the most important number to calculate how many years it will takes to double our investment .

For example: we invest $10,000 in a Company which pay dividend yield of 6% pa for 5 yrs.
Assuming the returns after each year are reinvested and % yield remain the same.
Using rule of 72:
72 divide by 6 = 12 years.
it will take approx. 12 years to double our money from $10,000 to $20,000.

So it very important that we start saving/ investing as early as possible and most people can achieve it with discipline.