Author: Ed Wacaster
Source: ezinearticles.com
In today's economy we really have to begin to look at other ways to bring in more income. Most of the books I've read over the past two years suggest seven sources of income. The, income tax bracket, reason for this is somewhat self explanatory, but not for some. The reason we want seven sources of income is to survive when one source goes away. What's going to happen to you if you lose your job? For most people their job is the only source of income they have. When it goes away, so does their home, their cars, their spouse, their dog and that cute little birdie. The bird thingcould because of the cat, but mostly because you can't afford to feed it any more.
There are so many ways to earn an income now that do not include a job. So if you were thinking your family needed seven jobs, you can relax now. Each investment you have counts as an income source. Each rental property also counts, yet there is another way and it will find you, I promise. These books actually talk out loud about getting involved in MLM companies. They do not endorse any of them, but think about it for a moment; leveraging your time and money is pretty smart. I was a Sales Manager for a while and I got an over ride on every sale that happened in my store. I like that a lot. It was money I didn't have to work for, nor did I spend any of my time working for it either. So those kinds of companies are certainly on the table when it comes to developing another source of income. Again, I'm not going to endorse any company here, although I will admit that I drank the Kool-Aide on one of them and enjoy being part of the team I'm on. Again, trust me, these Multi-Level Marketing companies will find you, even before your kids can who want to borrow money. They're fast and they're organized!
I digress. Now to the subject at hand. An arbitrage is where you pay one interest rate for borrowing money, yet receive a bigger interest rate for investing. This is how banks make their money, or a good portion of it. They give you a whopping .5% for saving money in their bank. Then they charge you 19% on your credit card which they pay with your savings account. So here's the strategy: If you have a mortgage interest of 6% and you're in the 33% tax bracket, your effective interest rate is 4%, simple math isn't it. So when you give your money to your Financial Adviser, the goal is to get a minimum interest rate of 4%. And believe it or not, most Financial Professionals don't have much of a problem getting more than that.
So instead of accelerating your mortgage payment each month, take that money and give it to your Financial Professional and get it working for you. We acquire assets at a faster rate than we pay off debt. Thus, investing will increase your overall wealth quicker thanpaying downyour debt. And here's another angle to that: each dollar you put toward your mortgage over and above the minimal payment, is a dollar you cannot invest. Get this: according to Ric Edelman, if you could have invested one dollar, it can turn itself into $19,000 over forty years given a decent rate of return. So I did my own calculations to prove this. Starting with one dollar, and investing an additionalone dollar per month at 13.5% interest, you will have $19,222.02 at the end of 39 years. "Who in the world is getting 13.5% interest?" I hear you asking out loud, perhaps even too loud. Shhh, you'll wake the neighbors!!! Those kind of rates are available through your Financial Professional, but it does depend on your risk tolerance. But forget the $19,000 that was just an illustration, the big story here is that if you start saving money now, when your car breaks down you won't have to use your credit card. And using your credit card may be contributing to your current economic problems on a personal level. But that's a subject for another article coming soon.
Ed Wacaster, CMPS, has been in the Mortgage Industry for 6 years, and works for RPM Mortgage in Fair Oaks California. After a 20 year career in Mental Health, Ed changed careers to something less stressful and less likely to get him killed. Ed maintains although the Mortgage Industry can be trying at times, it is never "stressful," but can be quite frustrating at times. "No one gets killed in this industry, they just lose a buck or two," is Ed's true thought about the best job he's ever had.
He enjoys helping his clients get their finances in order as well as creating true wealth using the Mortgage Planning Strategies he teaches them. He also instructs them on the need to have more than one source of income.
Ed conducts public seminars to teach the public what he teaches to his clients privately. To be included in his e-mail blasts, send an e-mail to ewacaster@rpm-mtg.com Ed sends out a weekly Newsletter on Monday and also chimes in on what is happening with mortgage interest rates, the economy, how Washington affects our wallet and more. You can also send him an e-mail to ask questions about the articles submitted to this website using the same address.
