Debt shrinks over time in a high inflationary society. The bond on a home 20 years ago seems trivial today and although a bond taken out today may feel enormous to you now, in 20 years time it will become rather small.  All this while your appreciating asset, (your home and investment properties) grows in value.

Good debt (using the banks money to buy appreciating assets, from “Rich Dad, Poor Dad”) is a great way to create or build wealth in a high inflationary society - and this is Good.

The 16 Billion spent on the World Cup soccer stadia will worth approximately R200,000 in 100 years time at the current real rate of inflation (not current CPI!).

By the way…

While many men have life, disability and severe illness cover, their wives are often overlooked and are not covered. If the mother of your children gets cancer or is in a serious motor car accident, the financial circumstances to your family can be devastating.

This happened to one of my colleagues two years ago. Their medical aid did not provide for all their needs and the circumstances surrounding this incident left them in financial ruin.

One of South Africa’s largest Life insurance companies has made it possible for you and your spouse to get R3,000,000 life, disability and severe illness cover for less than R100 per month* using their reward and discounting system.

Now before you rush off to someone else, please consider supporting me so that I can bring you more good financial advice – email me at clive@finlogic.org for more information.

I am a registered financial planner and investment advisor and I would make it my duty to look after your best interests.

* Age, Health and T&C’s apply

For example, if you have an asset worth R1 million that doubles in value at a rate equal to inflation over five years, your asset does not increase in value even though the price doubles. This is because of inflation. However, the difference between the new R2 million price and the original R1million price, should the asset be sold is a R 1million gain.

This means that even thought the asset did not really grow in value; you will still have to pay Capital Gains Tax on the R 1 million gain. You will be out of pocket by approximately R98,250. CGT is an inflation tax. The higher the inflation, the higher the revenue paid to the tax man.

Inflation is so misunderstood by the general public and yet to you, the financially literate it is a very powerful tool in helping to accelerate your effort to financial wellbeing. It’s like getting on those horizontal escalators at the airport which help you walk faster (or take fewer steps to travel the same distance) than those who walk along side it.

I have mentioned before that many think that the rate of inflation is too small and insignificant to worry about. Nothing is further from the truth. If you haven’t seen my video, go to www.ifinplan.com/introduction/ to see how inflation will rob you of half your income within 18 years.

No wonder the Unions are demanding high salary increases and why the government insists that they are asking for too much (as they say that CPI is at 4.6% and anything higher than this is extravagant). The wealth of the poor and middle class is slowly being eroded away by inflation and it is most harsh on the retired – in Zimbabwe, the pensioners who thought that they were OK when they entered retirement are now battling to buy a loaf of bread on one month’s pension allowance. This is what I call the Ugly. Next week we will look at the bad and the week after, the GREAT.

Don’t forget to invite or pass this onto your friends. They can join this blog by adding their email to the blog subscription box on the site – www.ifinplan.com

I have developed a fairly comprehensive piece of software that will quickly show you if you are on the right track regarding your financial planning. It shows you how to correct any shortfalls and highlights the important actions to take to build a healthy financial lifestyle. Let me know if you would like to use this software, at no charge to you, to better your financial strategy – clive@ifinplan.com – Remember a part of all I earn, is mine to keep.

On the “Turbocharge your Finances” course we will show you;

• How to establish a solid financial strategy and even become a millionaire within seven to ten years
• How to attract wealth instead of repel it by changing a few paradigms
• Three realities that are sabotaging your money and how to reduce the grip of these forces
• How to invent ways of earning additional income streams without giving up your job
• A practical tried and tested method of getting completely out of consumer debt
• How to reduce your expenses by 10-20% per month without compromising what’s important to you
• Why the most important piece of financial advice has been hidden from you
• How to use the principle of leverage to get ahead of the pack
• How to establish your own mini bank that serves your purposes
• Why it is important to have a financial mentor to help you get to where you want to be.

I will be giving you more information on how to watch the first Lesson at no charge in a week’s time.

Win a Samsung N150 Notebook* worth R5,000

I am interested in telling as many folk as I can about our on-line course, so, if you forward this email on to 5 or more of your friends (and put info@ifinplan.com in the Cc address line) We will keep track of your efforts and will announce the winner in our Newsletter at the end of September 2010.

* all emails you give us must be genuine personal emails to win. We will not sell or abuse the information you give us – we will send them one email, where we will invite then to  watch our first lesson. They can unsubscribe at anytime. The more people you refer and follow us, the greater the chance to win. Clive Bydawell is a registered Investment and Financial Advisor (contracted to Dijon Financial Services trading as Finlogic – an authorised financial services provider – FSP licence number 21739) The content  given in this presentation are for general information purposes only and is not intended to be advice as contemplated in the FAIS Act 37 of 2002. A more comprehensive individual financial planning analysis is available by appointment.

Well, I read someone who said that if you make a million dollars a year and you spend the same million dollars on your lifestyle, you are just a consumer – and, if you make a million dollars a year and you spend a million and one dollars, then you’re and idiot.

According to Kiyosaki and Lechter and as illustrated in their book “Rich Dad, Poor Dad”, wealth is measured as the number of days the income from your assets will sustain you, and financial independence is achieved when your monthly income from assets exceeds your monthly expenses.

The wise person takes 5 to 10% of their monthly income and builds (buys) assets which appreciate in value and produces a continuous and sustainable residual income.

Because;

1. I will effectively save R989,255 over 20 years at an average interest rate of 12%
2. I will also pay off my home in 15 instead of 20  years (statistically most move homes every 7 to 9 years)
3. I will get a tax free interest return on the R1,000 investment (cannot pay tax on a loan)
4. This is a tax friendly investment (R1,500,000 Capital Gains Tax deduction on your own residence in South Africa in 2010)
5. I will get a better bank interest rate (better than money market, government and corporate bonds)
6. My residential property should grow roughly at the rate of inflation and I should get good capital growth on my property (property is a great hedge against high inflation – Zimbabwe is a case in point)
7. The investment is low risk (property cycles rebound and it is not easy to steal it)
8. My personal interest in my property means it will be well looked after – I am my best tenant
9. I use the power of leveraging to get the best Return on my Investment (ROI) by using the banks money
10. The equity growth plus interest rate plus leverage advantage means this asset class will outperform 95% of other classes

Clive Bydawell is a registered Financial Advisor

One way that you can tell if you are potentially being targeted by scamsters is to check your own emotions. The emotions of fear and greed are great internal sensors that should set the alarm bells ringing.

When I am presented with an investment opportunity, I check to see if I am experiencing strong feelings of greed or fear. Am I being pressured into a decision because of the fear of losing out on the expiring opportunity? Or is the presenter appealing to my sense of greed. In both cases I should exercise caution. Ask people whom you trust and get a second or third opinion. The old adage stands – If it is too good to be true, then it probably is.

You can continue to choose to bear grudges and even seek revenge, or you can choose the higher path of forgiveness.

You can choose to love your neighbour, or you can choose to be indifferent.

You can choose to make your marriage work, or allow apathy to rob you of a wonderful life together.

You can choose to encourage your son, or allow your harsh choice of words to break his spirit.

You can choose to dream and make plans for your life, or you can allow yourself to serve someone else’s plans (this line from Brian Tracy)

You can choose to get out of debt and start building sustainable wealth, or you can continue to procrastinate and remain a prisoner in the rat race.

THE CHOICE IS ALWAYS AND ONLY YOURS