Using Leverage to Acquire Wealth
Most people don’t utilize leverage to create wealth because they possibly may not know how. Most Americans and other people around the world work for wages and don’t mind holding down a regular hourly job, trying to make ends meet. After working a 9 to 5 job, these individuals will attempt to put money into savings, but do so via mutual funds or by using a bank account. This method of saving and investment is not productive since the little interest earned cannot make you wealthy. You need to learn how to acquire wealth by leveraging money, time and technology.
What Is Leveraging?
When you utilize leveraging to make money, it means that you get to do more with a lesser amount. With more leverage, you get to do quite a bit more. For instance, let’s say you had $10,000 and you invested it at a rate of 10% interest annually, you would make an extra $1,000 on your money. However, if you were to use $100,000 of another person’s to leverage your $10,000 at a rate of interest of 10%; you could end up earning $10,000 annually instead of $1,000. You would end up even better if you did not use any of your money. The return on investment would be greater.
To acquire wealth, you have to learn how to use leverage as a viable tool. In the financial world, you have access to three types of leverage, which you need to learn how to use to get wealthy. Yes, you can become rich with no leveraging or less leveraging. However, with less or no use of leverage, it will take you longer to get wealthy. Below are some ways that you can use leveraging to get rich.
Using Another Person’s Money
The first type of leveraging is using another person’s money as was mentioned above. For example, if you wanted to purchase a house, you would go to the bank and ask for a loan. This is not your money. The money belongs to the bank. In fact, the bank loans money from the funds that have been deposited by its thousands of customers. So the bank knows how to use leveraging to make money from the interest that the bank will charge you to borrow the loan to buy your house. In the case where you get the loan from the bank to buy your house and then turn around and rent the house as an investment property, you are using the concept of leveraging since your tenants are going to pay off the loan for you. The way to benefit from this method of leveraging is not paying the interest on the money that you are using, but let someone else do it for you (as in the case of the tenant).
You can also acquire wealth by leveraging another person’s time. Instead of working a 9 to 5 job, start a business where you hire employees and use their time to make money for yourself. In this case, you are leveraging their time to create wealth. If you hired 10 employees to work in your company, your leverage would be 10:1.
Technology is another way to use leverage to make money. Use of advanced technology, which includes the Internet, is another way to do business without the cost of operating from a physical location. Use your imagination on ways that you can use leverage to acquire wealth.