How to make your first million 2

On paper

In my first ‘How to make your first Million’ blog, I said you need to understand the nature of money and that the paper stuff goes down in value. This is because they keep printing the stuff! That gold sovereign in the picture however, goes up in value. I know, I know, gold is going to drop in price any minute and I should sell and invest in shares! It dropped a little last week and then went up yet again, people said sell at $1,000 a ounce, $1,500 an ounce and we are on our way to $2,000 an ounce! When interest rates rise and they are higher than inflation, then I would think; maybe, that selling is a good idea.

They talk about millionaires being millionaires on paper. What does that mean? Imagine you earn a million a year, you would have to pay tax and in the UK, national insurance on top. In the USA, you would pay payroll tax rather than National Insurance tax. In both countries if you own a million dollar property and have the title deeds that is a million on paper; the paper being the title deeds. Property like gold tends to go up in value, if your property goes up in value by 5% in the next year, you’re worth 1,050,000 on paper. How much tax, have you paid? Not a penny and your money keeps getting reinvested until you sell the property. When you eventually sell the property; you have to pay capital gains tax but you don’t have to pay national insurance or payroll tax on what you make. In the UK if the property is your main residence and you’re selling your mansion; you don’t have to pay any tax! This is how the rich get richer and to make a million, you have to think like someone who is rich; not someone who is poor!

Yes, but…

If you said, yes, but…  You stand little chance of becoming a millionaire; try to think positive, not that I believe in positive thinking! You never achieve something unless you set out to achieve it, you don’t become a millionaire by accident, even lottery winners have to buy a ticket!

Slave to fashion?

Rich people offer poor people fashion; hoodies, tights as pants; they must laugh all the way to the bank. If you are a slave to fashion, you will never be rich. You don’t see the Queen of England buying new stuff all the time, she recognises quality and makes it last. Is the furniture in Buckingham Palace old fashioned or such that it will never go out of fashion? Will the crown jewels ever go out of fashion? Will a simple string of pearls ever not be fashionable? We can guarantee one thing and that is many of today’s iconic possessions like smart phones will be tomorrow’s junk.

Investments

I’ve been looking at two shares on the stock exchange in particular, one blue chip and high risk shares. The blue chip company share price has been bouncing around a little in the past few weeks losing and gaining, but not moving by more than 2% either up or down. The risky share price has been bouncing around by 10% and has halved in the last year. The blue chip seems a safe investment, but the risky one could double your money in a year! It would be wise to invest relatively safely in the blue chip; but invest a little in the risky share and hope for an economic upturn. You would have to  diversify and luck would play a part in whether the investment was good or not. If you did well and both shares went up in value, you could be much richer this time next year and it would be on paper; the tax man would not take a penny, except maybe out of dividends.

Procrastination

Procrastination is putting off to tomorrow what would should do today, or to next month, next year; never… Can you make a start today in your quest for that first million and do something thrifty or frugal? There are lots of blogs on my home page that might help.

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