Thursday, April 9, 2015, AM | Leave Comment
The money you earn doesn’t make you wealthy. It’s what you do with that money that determines your eventual wealth. Protecting and maximizing the assets you have is the best way to build wealth.
Maximize retirement savings
Putting as much as possible away for retirement does two things that help maximize and protect your assets. It defers taxes on the money and it also protects it from many types of judgments.
When you invest money in 401(k)s, individual retirement accounts and other retirement vehicles, the money is protected from taxes up to government limits. Money in retirement accounts is also exempt from bankruptcy proceedings.
Any asset you have should be insured. This includes your house, cars, your business and luxury items. You also need health, life and disability insurance to ensure you won’t have to liquidate assets to pay bills in the event that an illness or injury disables you or causes you to lose a job.
Some debt is necessary. A mortgage to buy a home, a business loan to expand, a student loan to get a degree that can improve your financial future are all good examples of acceptable debt.
But debt for debt’s sake to finance luxury items or vacations can start to pile up, and the finance charges on the debt take away from money you could using to invest.
Be smart with your home
For most people, their home is one of their largest assets, so they need to do everything they can to maximize its potential return.
This includes making smart improvements that will improve value, refinancing the mortgage when it makes sense to reduce financing costs and not using the home as a piggy bank.
Keep assets separate
If you have your own business, it’s important to keep your business and personal assets separate so that business failures don’t put your personal wealth at risk.
A good way to do this is to set up a separate legal entity, such as a limited liability company, to shield your personal wealth.
If your spouse has a business, it might be a good idea to keep personal assets separate as well.
Pay your taxes
You can take advantage of all legal loopholes to pay as little tax as is required, but you should always pay whatever tax you legally owe.
Using questionable techniques or schemes to avoid taxes can put your assets at risk.
Protecting and maximizing your assets is mostly common sense. Doing these things will put you on the right track for a bright financial future.Facebook.com/doable.finance