LIVING OFF DIVIDENDS & PASSIVE INCOME

Mexican telecomm Mogul Carlos Slim Helu added $19 billion to his fortune in 2006. His gain, placing him at No. 3 on the billionaire’s list with $49 billion, was the largest one-year gain in a decade.

While not all of us can increase our net worth by $19 billion in 1 year, we might be able to grow it by 38% (19 billion is about 38% of 49 billion).

If you’re $14,000 in debt and have $1,200 in your bank account. Your net worth is a negative $12,800. If you cut your debt to $10,000 and increase your savings to $2,100 your net worth is now a negative $7,900 which is means you increased your net worth by 38%!

Suppose you have $40,000 in the bank, no credit card debt and a rental property you bought with 10% down worth $200,000. (yes, its possible to buy houses cheaply in several parts of the country). Your net worth is $60,000. If you were lucky enough for your house to appreciate by 15% (according to a previous post on Real Estate Research, thats 50% less than the median appreciation in Salt Lake City in 2006), thats a $30,000 increase in its value! So now your net worth is $90,000 or a stunning50% more than it was last year!

What if you had 5 homes like that?

With sufficient leverage its possible to substantially increase your gains but leverage cuts both ways. In a down market where the market drops 10%, your 10% down payment would sudden evaporate and your net worth would now only be $40,000. Again a drop of 50%. Did you notice that it drops quicker than than it increases?

• Warren Buffett Now Works For Me! I finally purchased my first share of Berkshire Hathaway today. Yes, its only 1 share but at $4,700 per share you want to ease into this sort of investment! BRK has two classes of shares. The A-class share (BRK-A) which sell for $140,000 EACH and the B-class share. I obviously......
• How To Reduce A Trillion Dollar Deficit Stanford professor John Taylor had an alarming op-ed piece in the Financial Times on the Trillion Dollar deficits "I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis. To understand the size of the risk, take a......
• Canroy Update The Canadian Royalty Trusts [or Canroy's for short] sold off big today.[For a great post on Canroys, check out this post on Wealth Building Lessons.] People just dumped them. I lightened my load a little bit too. I sold about 15% of my Canroys and bought gold stocks instead. I......

• What is Debt Leverage? Leverage is a term that is often used synonymously with debt, and for this reason, it is important that people come to understand what debt leveraging actually means, and how it works in an ordinary financial transaction, such as buying a home for example. Let us suppose that you are......
• 15 vs 30 Year Mortgages - Longer is better! I read an interesting post that really got me thinking today. It was written by a great blogger nicknamed Money Hawk, if you have never read his blog I implore you to check it out HERE. He wrote a great post titled "Kick Financial Ass With a 15 Year Fixed......
• Darling blames the financial sector for the UK's delayed return to growth. Darling blames the financial sector for the UK's delayed return to growth. Chancellor of the Exchequer Alistair Darling has said in a recent interview that the U.K.’s economic recovery is being retarded by the country’s large financial services sector. “I am not surprised that it has taken time for......

[All content is copyright of Living Off Dividends & Passive Income]

Random Posts

• August 22, 2006 -- Book Review – Undercover Economist
• January 20, 2009 -- Super-Hero Investments
• August 30, 2006 -- The Joys Of Not Working
• January 5, 2008 -- Looking at CGMFX
• December 13, 2007 -- The Rule of 72, 114, and 144
• October 9, 2006 -- North Korea’s Nuclear Testing Causes Earthquake
• November 16, 2007 -- Still Haven’t Bought Any Gold?