Have you heard of the “three way struggle”?
It’s an important concept to understand before you start investing.
What is it?
Whether you work for yourself or someone else, your job generates cash flow.
But what most people do, is pay themselves last.
Once your tax comes out, and debt (like your mortgage) has been paid, the left over money is what funds your lifestyle.
What we need to do is manage the first two parts – tax and debt – more effectively, so there is more left over for your lifestyle.
We need to minimise our tax liabilities (legally, of course), so we pay less tax. And we need to focus on implementing better debt reduction solutions.
It’s not about working harder to earn more income. It’s about working smarter.
How do we do it?
We create passive vehicles for generating income, by focusing on building growth assets that will generate cash flow immediately. The goal is then to accumulate more of these assets over the longer term, via purchasing growth assets such as shares and property.
We can buy these assets both on a direct basis, through direct equity trading or direct property ownership, or through managed environments such as property trusts and managed investment funds.
As result, we can generate additional passive income in a tax effective manner. And this extra cash flow can then be used to increase the speed at which we can pay down our debt.
The strategy doesn’t reduce our lifestyle. It helps improve our lifestyle in the future. That may mean a special holiday, upgrading the car or house, or educating our children.
So if we can get a handle on the three way struggle –tax, debt and lifestyle – by managing tax more effectively and managing the reduction of debt via assets that generate their own tax effective cash flow, we can minimise tax and debt and focus on what’s important to us.
If you’d like to know more, please give me a call and we can have a chat over a coffee.