Kustom Design Group of Companies

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We need to make clear distinctions between wealth, riches and money.

Money is simply a medium of exchange for which one may trade goods or services. Money has no intrinsic value, but its value is determined daily by markets. A market is nothing more than the opinions of people.

We need to convert money into riches. This is the intermediate step between money and wealth; this stage is where money multiplies and accumulates. We must have purpose for our riches. This will lead us to purpose driven finance. Examples of riches are investments that produce a rate of return.

The biblical model says a good man leaves an inheritance to his children’s children. To leave an inheritance, we have to move money and riches into wealth. Wealth has intrinsic value. Money instead is subject to the weaknesses of the monetary system such as inflation and deflation. Examples of wealth are land, gold, business and relationships.

We have to free up money and generate passive income to start wealth accumulation.

The main places where we find money to free up:

Home Equity.
Before you free up money from your home, you should make sure that the investment that you are going to put the money into is as secure as your home is. This is the first thing that you should look at – is the investment guaranteed by the governments, banks, businesses or real estate? You have to feel comfortable with that guarantee as you feel with your home and land.

You also need to know how much equity you have:

Equity = Value of your home – Mortgage

There are 3 ways to free up money from home equity:

Simple second mortgage. This works for people that do not have good credit.

Line of Credit. With a line of credit, you pay interest only with no principle or you can pay as much principle as you’d like, anytime with no penalty.

Adjustable Mortgage. An adjustable mortgage is a mortgage with a locked in component and a line of credit component.

Business Equity.
If you are self employed or have a corporation with assets, you can leverage the assets and borrow against them to invest, providing more cash flow for your business.

What if you have money in retained earnings but you want to invest personally and you do not want to take the money out because your are worried about tax? Paying dividends could be really useful, more so if you have a spouse or children over 18. You can pay dividends tax-free personally if this is your only source of income.

RRSP

The good thing about an RRSP is that you obligate yourself to put money aside for retirement. The second benefit is that you are deferring tax to pay it later.

Most RRSP’s are invested in Mutual Funds and many people who have mutual funds are not happy about the returns. Most of the people invest in mutual funds blindly because they do not know what stocks or bonds the fund holds. We need retirement plans but they do not need to be registered with the government.

To free up money from the RRSP, you have to check first to see if the RRSP is locked or unlocked. If they are unlocked, you can use a meltdown strategy to minimize the taxes you pay to pull out your RRSP’s. If they are locked in RRSP, pension plan or LIRA, there is still a way to access the amount of your RRSP.

Once you free up the money, let’s put it to work and make it your slave!

There are only two ways to make money:

Active Income – you are working for your money

Passive Income – your money is working for you.

Make money your slave and become wealthy with purpose!