0060 : Power & Money

Dr R N Singh

TATA STEEL INDIA

Power & Money
-----------------

1. power quote: "Knowledge is power."
- Francis Bacon
2. power quote: "Nearly all men can stand adversity, but if you want to test a man’s character, give him power."
- Abraham Lincoln
3. power quote: "Freedom is actually a bigger game than power. Power is about what you can control. Freedom is about what you can unleash."
- Harriet Rubin
4. power quote: "Our scientific power has outrun our spiritual power. We have guided missiles and misguided men."
- Martin Luther King, Jr
5. power quote: "The price of greatness is responsibility."
- Winston Churchill
6. power quote: "Mastering others is strength. Mastering yourself is true power."
- Tao Te Ching
7. power quote: "The same hammer that shatters the glass forges the steel."
- Russian proverb

Learning Money

There are many aspects to learning money: learning what money is, learning about financial systems, learning about economic theory, observing the cash flow in the world, learning to manage money, learning accounting, learning business management etc.

However, there are many people who know a lot about the theory of money, yet money still slips right through their fingers.

There are two more important aspects for learning money: self-discipline and responsibility. Self-discipline provides the attitude to convert losses into wins, while responsibility enables you set high enough goals for your wins to be sustainable.

If the only use of money you can concieve is to spend for personal, short term gratification, I urge you to learn more about any and all aspects of money

Passive Income

Passive income is income that you don't have to work for (not anymore).

For example, if you own a profitable business that someone else manages for you, the income you receive from that business is passive income. Receiving royalty for intellectual property (music, books) or renting out real estate are also common examples of passive income.

Active income is income that you have to continually work for - for example, a 9 to 5 job. In this case, you exchange your time for money at a fixed rate.

Of course, it is much more desireable to have passive income than active income. If you have enough passive income to cover your living costs - you can consider yourself retired.

Enjoy life - don't sell your time cheaply!

Saving Money

Usually a person who saves money has a degree of self-discipline and is lacking extensive financial smarts.

Of course, the self-discipline is necessary and commendable - but self-discipline alone won't make you rich, you have to use your brain as well.

The problem with saving money is largely the wrong attitude towards money. We like to think that we own money, that our money is value we possess. That is not quite true; the value of money comes from the flow of money and not the possession of money.

In other words, if you don't use money but just pile it up - it's the same as you had no money at all.

So if you want to be smart about saving money, invest it! Create money flows which will allow it to retain (and hopefully increase) value.

Money comes and goes; make sure it comes and goes the way you want it to

Borrow Money

Borrowing money can be a smart decision, a stupid decision, or a necessary decision.

When is it necessary to borrow money? If your family is starving, it is a very good idea to borrow money. There are emergencies in life when having a positive cashflow is a low priority: ensure your own health and well-being and of those you love.

When is it a stupid decision to borrow money? If you're itching to buy a new plasma TV that is out of your price range or are addicted to impulse shopping at the mall, borrowing money is pretty stupid. The worse thing than having no money is owing money.

When is it a smart decision to borrow money? If you come up with a business opportunity and the profit from the business pays of the loan, you are being smart.

Knowing when to borrow money is an important tool in your financial arsenal

How To Leverage

Leverage is usually the means of exchanging direct force for control.

Let's consider the clockwork of a mechanical watch as an example. The gear work of the watch (the leverage system) refines the force gained by the winding up mechanism, and punctuously parcels it out to be able to move the hands of the clock.

How to leverage? Observe the system. Understand the system. Find the strengths and the weaknesses. Find the key points. Understand the dependencies.

When you understand the system, apply the minimum necessary force at the key points to make the system work the way you want it to.

If there is no system, build one! If you have a big goal, break it down to small steps, and if you can, use a leverage system to move forward ten steps for you when you make one.

Using brainpower to leverage force is the advantage humans have. If you learn the general idea of how to leverage, you can apply it to all kinds of aspect of life

Financial Leverage

Financial leverage (or gearing) is a way to exchange financial safety for potential profit.

For example, let's say that you have $100 and are presented with an investment opportunity: for every $100 invested, you have 50% chance to gain 20$ profit and 50% chance to lose $10 over a day's time.

For $100, your maximum loss is $10. Since this will probably prove to be a profitable investment, you are willing to take more risk, and decide to borrow $900 from a friend to invest. (You can now invest 10 times $100.)

Now your maximum loss is $100 - you are taking more risk and making most use of the money you own. You use the money borrowed from a friend as a financial leverage, and increase your expected profit tenfold.

The investment works out as expected, you pay back the borrowed money, and walk away with $150 in your pocket....

Blogs

0060 : Power & Money

Dr R N Singh

Latest postings blogs by this author

More from Corruption blogs