Creating Wealth

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Wealth is the most coveted thing in this country. People will do silly things and make a fool of themselves on national television for a chance at getting a piece of the action.

The truth is, that if we, as a people truly understood the difference between wealth and income, more of us would be wealthy. Those who are recipients of inheritances and lottery sweeps would put their money to work in order to ensure the winnings were a launching pad towards a wealthy future. Most lottery winners go through their money in a year. Some actually end up bankrupt. What a shame and a sham.

We all can remember the pleasure of watching prime time television where the stories revolve around wealthy families. They never have to worry about which cars they drive. If one goes caput, they just buy another one. Their choices are not limited by their pocket books. We all have a little bit of envy when it comes to the vision of such a lifestyle.

Becoming wealthy is not an easy road. There are no guarantees. However, there is a guarantee you will spend your life only looking at the wealthy rather than enjoying their lifestyle if you don't understand some basic principles. Wealth is not an accumulation of dollars in a bank account. We all know that banks can fail and hard times hit everyone.

Read that again. A large bank account at a given point in time does equal wealth. Listen further.

Let's give a few examples so you can get the idea of the difference between income, cash, and wealth. Income means that you are going to be receiving a constant cash flow from some source. It can either be from a job, a trust fund, or an investment.

Let's move on to the difference between income/cash and wealth. Let's say for instance your bank account is currently drained. However, you own a string of racehorses. You have several races coming u, and you also have some of your male horses out for mating. You have a setup where there will be an ongoing steady cash flow from several different areas. You are wealthy. You can have a depleted bank account in this case, for the moment of course, but still be wealthy. You own a resource that will, as long as you own it, continue to produce income.

We all know that Michael Jackson has had financial and legal problems galore for the past 10 years. This has been a taxing on his cash flow because of legal fees. However, he still owns resources that will produce income through several generations. One of his wisest investments was to buy a portion of the Beatle's copyrights. It has been cited as one of his most valuable properties..

We all can easily relate to what we know about Bill Gates. There are those who don't bode well with how he built his company. Many don't hold it as something worthy of note since he came from a wealthy family. Not withstanding, the resources he has created will be generating income for several generations. If he put his mind to it, he couldn't give it all away. His resources continue to create income.

Recordings of well-known songs, copies of books, manufacturers and large companies continue to produce as long as they stay a float. Companies die, but resources live if they are properly taken care of.

If we don't create incentives for newbies to start building wealth, we will find ourselves in a worsening position in the international market. A lot of this is to blame on ages on inflationary type of wages and benefits, which eventually put us in the position of no longer being able to compete for manufacturing work in the world market. It is no secret that most American firms now farm out part of their labor to parts of the world where workers live with much lower expectations.

Building wealth in our economy is no easy feat. Building wealth, which will be inherited by your grandkids is even more difficult. But, in essence, the fate of our aggregate economy rests on those with the guts to move forward and build what will be the foundation of this country during the next century. Without it, new wealth, we will find ourselves falling farther and farther behind in the world market. It just is.

What do wealthy people do besides travel, spend money and have a good time? Wealthy people provide jobs; produce goods and keep the economy going.

Don't misunderstand, now. I am not saying that every wealthy individual is going to do his/her best to ensure that their resources are used to their most profitable use so that folks can keep their job at the plant through the next generations.

Rich people come and go. The main point of this discussion is to look at the wealth and its place in our society. It will also teach you, give you a good idea, as to how you might get a lead on creating some wealth of your own.

One of the problems with this country is that we envy the wealthy. This envy and feeling of bitterness against those who have more than we do is taught to each new crop of kids. Have you heard of taking a class on how to create wealth? That's what should be happening.

A good example of someone earning a fortune in this age, by creating wealth, which will live past her time here on this earth is Oprah. Let's realize that others have earned more than Oprah and they are no longer on the national scene. She was either smart enough or had advisors who showed her how to put her money to use. She owns a production studio, a ranch, a magazine and other resources, whose existence creates an ongoing cash flow.

Even when Oprah dies, her resources will still be creating income. They, the resources, will still be employing hundreds. That is, of course, that no ill will of an economic downturns wipe out these enterprises from the face of the earth.

Investments on Wall Street fail. Investing in real estate can leave you with buildings whose value are less than the mortgages you still owe the bank. That is, of course, unless you bring in other investors to put the building to use earning/creating cash flow/a wealth generating resources.

We have lived a complex era since the late 1970s. We have seen long-standing and well-known corporations disappear off the face of the earth. And, that was if they were lucky. Many of those involved with corporations demise were dragged into court and charged with multiple white-collar crimes.

Others, escaped the courts, but were tried in the media. If we have the awful fate of seeing a company we create blow up, the first wish of any logical human is to run and hide. No one wants to see their errors dragged through either the courts or the newspapers.

We have also seen industries change almost over night. Examples are the banking industry, telecommunications and technology. Then there was also the airlines which have gone through several well publicized shifts. They are still going through them. Those nearing retirement lived through most of their lives never witnessing such upheavals. We know that the depression wrecked havoc on this country. These shifts and plummets in our country might have been dealt with easier if it had come all at once. We seen the end of one collapse; and before we can catch our collective breathes, another one rears its ugly head.

Because of these conditions, it is even more important to get a grip on what creating true and lasting wealth is all about. Those at the top of some of the biggest companies thought they knew, only to watch everything blew up in their face.

It is really a miracle that there has not been more white collar crime, more violence and suicide attributed to the craziness we have witnessed in the business world. Even those investors, who thought they had it in the bag, were thrown into shock when they watched the value of their real property go down the tubes and stay that way for a several years. Real property has always been sold as the best investment every known to mankind. No one could have ever envisioned, even with a great crystal ball, what happened to the real estate market, and not just once. Ugh and double ugh. Is there anything that we will ever be able to depend on again?

Do we dare put our faith in building anything when we know that unexpected changes in the market can come and blow us away?

It is no doubt that creating wealth is harder than any time in history. It doesn't mean that it can't or shouldn't be done. The craziness in the real estate in the late 70s and mid 80s let some to think there was never going to be anything, which could ever be relied on again. Demands for products sometimes ebb and flow.

We all know that the demand for energy never goes away. The demand for oil shifted with the advent of smaller cars before we consumed all known sources of this energy. The need for oil and its by-products has not waned since that time. Who had control of the resources outside of this country, however, has shifted. Changes in the demands for oil, in all its forms, is a constant in the economic news.

Nothing is as sure as change in the history of economics. We just happen to be living in a time where change is more a constant than probably ever before in the history of the market. It makes those who are active in the market nervous and jittery.

All this simply means that you have to be on your toes continually There are a few things in the market which are helpful when it comes to pending change. Two that come to mind are diversity and liquidity. You have to be quick on your feet and keep enough of your assets liquid to jump in at a moments notice when the economic / investment wind changes. Those who don't put this advice to practice are left out in the cold.

One of my sons has been in trouble since he was old enough to wander the streets. The other side of his coin is that he has an inherent natural talent for making money. I haven't got the slightest idea where he got it from, since it hasn't popped up with either me or his father.

When he was 14, he was recruited to be part of a candy selling team in our region. I never did figure out whether or not the guy in charge of this operation was legit or not. It doesn't matter. The part of the story to note is that he learned the first year and followed instruction. He was thrilled to have extra money and some freedom outside of the house.

The next summer, his father and I were smack dab in the middle of a legal separation. This means that I wasn't around to view the happenings first hand. But for Robert, working for someone else wouldn't do. The second summer he recruited his own crew and was bringing in about $1k a week after paying the guys who were working for him.

To create wealth, you need to have a factor of production that does not mandate you physically working. A team of workers, doing anything, is a factor of production. Robert got the idea immediately.

The idea I am trying to get across here adds another dimension to an axiom I learned from a stock broker years ago. He was one of my first public relations clients. He was fond of explaining to his clients what they had to do in life to ensure that would be earning money. You can either work for it; get it through charity; or have it work for you. We are going for one step past this concept. You need a resource that was purchased/earned by you to be working for you. This is the way investment real estate works. If you buy a building with ongoing tenants, they more than likely pay the mortgage and maybe more with their rent payments. So, this is an answer to the still doubting factor of how to cope with a nutty real estate market. It's simple, put your investment money into a property that brings in money monthly.

From time to time Oprah does shows on entrepreneurs. Believe me, all of these folks were beginners when they first got started. The only problem with these shows is that they never go that much into details. They give an illusion that all is required to having a million dollar a year cash flow is a good idea. We know that isn't true.

It takes time to build a customer base, no matter what your product. If you have a hobby, which brings constant complements from your friends and relatives, you just might be onto something. In this case the good will built up by the use of your products, mandating a demand for more, can be considered wealth. It used to be, back in the days when people had some good business sense, that the 'good will' attached to the business being sold did a great deal to add to the price. It could have been an ugly little store at the end of a strip mall. If it was a coffee house that had a line out the door during rush hours, the price was elevated. So, one of your goals is going to be to create good will attached to whatever product or service you market.

If you are blessed enough to have cash to invest at an early age, here are some thoughts for you. If you are in an agricultural area, buy a small herd of cows. Cows produce products non-stop as long as they don't succumb to some kind outrageous disease. Have a feel for the racing world, buy a couple of horses that can not only run but be put out to stud on annual basis. Those horses represent your wealth.

Let's look back to the earlier days of farming in this country. It is known that many years the farmers had to go to the bank for loans in order to plant a crop for that year. Even though the farmer may have been short of cash, it didn't mean that it didn't possess wealth. That land, which had proven time and gain to be a source of growing a crop, which could then be turned out and sold, was and is wealth to this day.

Like gardening? Get together with some friends and start a community garden for profit.

If you have a creative nature, then come up with a product that will bring in royalties down the road. This country has always been ripe with inventors. The family of Thomas Edison was wealthy. Long after his death, checks for royalties should be nonstop.

Hollywood writers in the 70s got one flat payment no matter how many times their work was aired. In 1979 they went on strike for this very reason. Now writers are guaranteed revenues down the road, whether or not from reruns or movies, which later are released on video.

Professors get recognized in their field after writing a successful textbook. Textbooks, when placed in the junior colleges can create a cash flow, which lasts a lifetime. I know this from working with a professor of economics just as I was about to leave college. The last year he was working on his second edition. Most all of those in the academic world are pushed to publish. Nothing brings more notoriety than being published in the general press or having a textbook on the way. If this is headed for a subject, which is an ongoing required class, there will be a nonstop demand for the next 20 years or so. This is a source of wealth.

Finding some unique way to fill a market niche is a sure winner once you have found a good marketing campaign. We all know what distresses Americans as soon as there is a hint of cold weather on the way. We all hate to get colds. One of Oprah's shows had an ex teacher as a guest. She had come up with a product called Airborne. It is suppose to ward off colds after you are exposed. It neglected the details of how this woman had done the necessary research. The bottom line is that she found a nonstop need and found a product to fill a hole in the market. She is creating wealth, which will be carried onto the next generation. Can we imagine a world without colds; it would be nice. This product will continue to be demanded no matter what changes come into the market. Of course, there is the need to get it brand name recognition since we have been used to products, which have been familiar to us for years.

Wise decisions in buying investment land can also be the foundation for wealth creation. However, there is no one who can predict what land can turn into be a bonanza or a complete bust. Who in their right mind would have predicted that Las Vegas would developed the way it has.

There has been a change in how people go about financing projects they design and want to market. If not careful, one can fall into the trap of doing nothing but marketing their own destiny to meet at the bankruptcy court.

There have been so many examples of this craziness, I am not quite sure where to start. Most people who build wealth and profitable companies, at some time during their growth, need to use other people's money. There are jokes among wannabes about how it is wiser to find OPM (other people's money) before they go very far down the road. The concept of starting investments and companies while having none of your own money has brought tumultuous waves causing great havoc in our economy during the 90s with ripples bouncing against us until this day.

There was this horrific idea, which permeated the sense of would-be entrepreneurs that all you needed to get your business going was a good idea. Get the idea out to the public in a big enough campaign and you will be running a profitable business. Unfortunately, the use of the Internet gave growth to this idea. Once on the Net, anyone with an account can create a boilerplate web page. It didn't cost anything to join mailing lists to talk about your 'business'. When the popularity of the Web came around the mid or later 90s, things just got worse. I can't even imagine how many uneducated wannabe business owners I encountered during my many hours of online travel through the bulleting boards during the early days of Genie, AOL, Compuserve and dozens electronic bulletin boards services, better known as BBSes. It was during this time that my business advice was taken seriously because of the reputation of my business newsletter, which was published in every nook and cranny of those online services.

I have used one story of the ultimate of craziness of business ideas as posted on the entrepreneurs' bulletin board on American Online. This was probably about 1993.

The note read, 'during my lunch break, I came up with a great idea to start a business. Where do I go to get the money I will need?"

All of this was happening before the onset independent financing from anyone looking for a tax write-off. Publicly talking about venture capital and angels is relatively new on the business horizon. I am sure this has gone forever, but in private circles.

We still hear from time to time about business plans, but since the onset of the Web and more shared information, most think they can handles this by themselves. Many new businesses even start without any thought given to making plans.

My main point is that making a plan is essential. Finding the money to launch your idea comes next. Typically, this will go easier for you if you either have some of your own money or are able to borrow from friends or relatives.

It is an error to think you can successfully start a business if you and/or your family is hurting for money to begin with. From time to time, businesses get launched almost by themselves. I have had it happened twice. (You can inherit clients from a previous job situation.)

You need a plan. This includes the organization of your business along with how you are going to finance this venture. Folks want to point fingers at those who are easily recognizable and question how they started initially. This usually includes both Bill Gates and Donald Trump. Bill Gates came from a wealthy family. The beginning of his partnership with Paul Allen was a project for school. When they experimented further and ended up selling DOS to IBM, he started putting the company's earnings into CDs. He hadn't thought further than that in the early years. Bill Gates was, and probably still is, one of the world's greatest bluffers the business world has ever seen.

(For those who are history business buffs, you will notice that I said that he sold DOS to IBM. I didn't say that he developed it. There are several stories floating around to this as to how he found the person who created and was subsequently able to buy it for a pittance. No one has ever said that his business dealings were ever completely above board. There are those who probably think that I am alluding to the case that was brought against him. That, to me, is other market entrants simply being jealous of someone who has the limelight. What it boiled down to was someone being too successful for his own good.)

Bill Gates earned his first company revenues during a time when he wasn't hungry for money and wasn't trying to offer a golden goose to the world under the auspices of an IPO. It is always better to a launch a business from a position of strength rather than worrying if you are ever going to be successful in ever getting anyone to pay an invoice. (Collection is one of the worst problems small businesses suffer,)

Donald Trump comes from a background of real estate folks. He has, at times, back in the 80s, found that he was over extended. Because of the good will he had generated through the years that he had been successful, he was able to get on the phone and sell the idea that, if given a chance, he would be able to bring back these building projects back from the brink of collapse. His steadfastness proved him to be true to his word. Still, the essence of his business requires bringing in other investors. From time to time, some of those projects are going to go over budget and suffer. These problems will always find their way into the front pages of the media because of the essence of what we know as Donald Trump.

Other people, who are starting out need to get a sense of reality of what is really involved in using other people's money and what disastrous events can slap you in the face if the market decides to hiccup in the middle of your project. Being successful at bringing other people's money into your venture tends to give new business owners an inflated ego. It can give a false sense of security. With that comes the tendency to take risks, one might otherwise think three times about.

The new businesses jumping on the Web is only a small part of this trend. This goes back farther than that. Zero down real estate is another of the horrific trend which has given people the idea that they can start a business without a budget. Creative financing when it came to buying real estate in California during the 80s, is just another example of this craziness which seems to be engulfing our aggregate economy.

However, with the use of other people's money, a logical business and marketing plan put into action, can help grow a profitable business.

Hesitating at being redundant, there is no such thing as a free lunch. You cannot build a profitable niche by delaying logical bookkeeping. Occasionally, the penalty for stupidity can be delayed. The example, which comes to mind, is Earthlink. I had been a customer as well as one of their contract workers. I also reported on them for the press. You could say that I knew just a few things about their company was organized. I probably know more about their flawed decisions than I should. I had inside sources in their public relations department. Then, one of my close friends went to work for them as a senior programmer. Last year, I decided to check on their annual report so that I could through a few stats into an essay I was writing. I printed out what I found to share with a friend who thinks he is going to operate his own business some day. (God help us.) His eyes went immediately to their gross revenues. He failed to look at the columns, which showed their earnings were still in the red. You can't buy yourself out of debt.

Occasionally, this has sometimes happened when the faltering company is owned by a conglomerate larger enough to obliterate the problem.

Earthlink has several times tried to follow the mergers and acquisitions option to add someone else's revenues to their balance sheets. Eventually, the founder of the company sold his portion and moved on to other ventures. It got to a point that those left behind refused to allow him to be interviewed as the company spokesperson. They were playing what they figured to be a successful game with mirrors and didn't want any other testimony, which could potentially muddy the waters.

The point to all of this is very simple. If during the course of your wealth generation journey you decide to use other people's money to help you down your road, keep logic in your business decisions.

Don't join into the frat boys' parties, which went on during the dotcom explosion. Their way of dealing with another round of investing was blowing hundreds of thousands on lavish parties. I still choke when I think about it. I think of those unfortunate enough to think that these golden boys would never fail to bring back the next required round of financing. They were left at their desks on a Friday afternoon in shock after hearing there was no way to cut their expected paychecks, since there was nothing left in the bank. This has happened many times and is probably still going on until this day.

It is unnecessary to say that after the disruption in the market during the last 15 years, the world as a whole is generally skeptically of new ideas. But if you are well prepared for caring for the basics of good business sense, no matter what the market, you have an edge.

However, it takes one wise enough to keep his/her ear to the ground to understand how to make a move at what might later turn out to be the right idea at the right time.

More than probably ever before in the history of the market, keeping your ear to the ground to find out what the different trends are is of utmost importance. Oddly enough, there are talk shows, which have decided that part of their mission is to highlight the latest trends and give airtime to those who have turned hobbies into million dollar businesses.

There are also thousands of online chat rooms and bulletin boards whose main purpose in life is talking about the latest fads. This includes everything from business to fashion and ways of finding a mate, which happens to be hot at the minute. All of these discussions and most of these topics, can prove to be fodder for hot business ideas.

Remember what I said, wealth is only produced if you own a part of a resource that will keep putting out into the next generations. Information comes and goes and changes overnight. If Microsoft hadn't been wise enough to tie their customers into needing constant updates on their software, they would have folded years ago. Bill Gates just happened to have enough foresight to realize that the operating systems of PCs would generate revenue on into the following century, long after his closest relatives are dead.

Think back ten years ago about how many word processing programs were floating around. Microsoft Word has become the industry standard, although Word Perfect is still hanging in there. Microsoft created an industry standard whose demand would not ebb in time. Use this as a key to any ideas you are buffeting about. Is you idea
something, which will stand the test of time. You will find out soon enough. The exchange of information on the Net is so easy that even children are doing it. Don't be, however, tempted to try a venture on the Net for which folks are used to getting for free. It is a waste of everyone's time.

I read a feature in a recent Sunday edition of the Los Angeles Times about a friendship chat board, which was taking off. Its target audience was college students and professors. It was working and the entrepreneur was already turning down offers to sell, because he felt that the board would increase in value. The revenue he is collecting is coming from advertisers, not users.

In our age of new gadgets, every buying season brings new trends, which usually don't hang around long. You need to recognize that fact and ensure your idea isn't going to fall victim to that trap.

The other issue in this techie age is to ensure that if you do use other folks money, you keep a balancing act in mind. Be sure to maintain a majority of the shares in your name. Anybody who waters down the stock too much is opening him/herself to a takeover. In order for your business to create wealth for you and your kids, it has to stay in your name. This means not opting out to the first suggestion of an IPO. Hold on to the reigns by yourself for awhile, if at all possible.

It's good to have icons to look up to. No one is infallible. Even the Donald and Bill Gates have had their days of misery. Think creatively and always, but always think diversity. The Donald loves real estate, but you can see from just watching his television show that he dabbles in other endeavors. Learn from the business icons whoget press, but be realistic and don't fall in to the same pitfalls they have along the way.

It has often been said that the best way to help get a new business moving is to share the work load with either a spouse or children. During the early years of my public relations company, I put both of my teenage daughters to work. Their summer work with me gained them an edge up when they both entered the regular workforce. They used the work they did for me as a part of their resumes.

I also hired out work, from time to time, to other colleagues or those who I met through professional organizations.

Not knowing where you will be able to recruit your first help can be a real stress factor on a company that is just getting off the ground.

Keep one thing in mind, however. You don't want to bring in anyone who can't grasp the same vision you now have of how to go about creating wealth.

Some folks, during the time they are moving forward in their wealth accumulation, get lost in the desire to accumulate 'grown up toys.' These are the first to get sold off during financial hard times. If you plan ahead, you can guarantee that your toys will hang around. If you get to the point of affording a private airplane for hopping around to meetings, put it to good use when you have no need for it. Hire a pilot, or subcontract one, who has enough contacts so that your plan can be bringing in revenue during your off hours.

Like the idea of having a boat some day? Boats are expensive when it comes to maintaining them. There will always be someone with a desire to plan a short cruise or tour around the marina. Make it a part of your business to keep whatever capital goods/toys you acquire along the way out there bringing in more revenue.

If you plan your life around the idea of owning and buying things, which can bring in income, you are well on your way to creating wealth which will last through several lifetimes.

Laura Bell is Freelance Writer and owner of The Bell Business Report offers common sense business advice and how-to info for running your business. It takes the everyday headlines apart, dealing with business news, and shows you how to put that information to work for you.

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