BUYING AN INCOME STREAM

The goal of the frugal is to be wealthy. Wealth is a relative term. When we think of wealth, we think of a billionaire. Most people do not live in this kind of world. This is for an exclusive few. Most of us have to do the best we can with our limited resources. We can, however, build up our net worth from a small amount into a relatively large amount. Frugality, by definition, will ensure such is the case.

There are many ways of building wealth. Some ways will allow for building wealth quicker than others. Most people will end up working for wages. There is nothing wrong with this method because it is doing productive work and productive work is always virtuous. By limiting expenses, the wage worker will be able to build his net worth. He can then take his surplus and put it into an investment that brings additional returns on top of his wages.

Building one’s wealth is a good thing because it only comes by serving the needs of others. Productive work benefits both the supplier and the purchaser. Both get what they need in meeting their needs. Also, it helps to build cooperation and relationships. Wealth increases in times of peace, not war. Peace is brought about when people are focused on serving their neighbor rather than being at war with his neighbor.

Equity is a good way to increase wealth. With each payment that is made, the buyer owns more of what he has purchased, whether it be a personal residence or a business. The more that you own, the more wealthy you are. Being an owner changes your perspective towards material wealth. You will take care of your property better than if you were a renter or an employee. Equity means that property will be better maintained than otherwise.

I have just purchased a business that pays me 20% commission on net weekly sales. I have taken out three loans that means that the purchase is 100% financed. The interest expense is a business deduction. What I am essentially buying is an income stream. This is the way that I view it. With each week, I will be reducing the amount of the loans as the principal and interest of two of the loans are deducted from my weekly check.

I have purchased an income stream of an established brand. People recognize the name of what I sell. Some of this businesses’ products are the market leader. For instance, Thomas Original English Muffins are the market standard. This means that I have an established sales base. When purchasing an income stream, it is important to look at the numbers. The debt must be serviced and also provide for an income. If the numbers work out, then one should think about purchasing an income stream.