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Wealth CyclesBuilding your wealth cycles is about creating assets that give you a consistent cash flow that supports itself and you.
Your Wealth Cycle Foundationby Loral LangemeierThe four main steps in building a wealth cycles foundation are:
Paying Yourself First Paying yourself first is a money rule. Can you imagine how much you would be worth if, from an early age, you had been conditioned to pay yourself first by depositing a portion of your earnings in a wealth account? Even if you only put in $1 per week, today you would probably be sitting pretty. Legal Entities and Tax Implications In the United States, a number of legal structures, vehicles, or entities may be used to hold and protect your wealth. These structures are separate and distinct from the taxpayers who form and/or own them. When you create any of these entities, it is assigned its own Employee Identification Number (EIN) number, which is separate from your social security number. Your legal entities are also taxed separately from you personally. The legal protections and responsibilities differ for each of these vehicles, as do the tax implications. How you structure your investments and what legal entities you use, can have enormous tax and legal consequences. Legal business entities are advantageous because they can:
If you are operating a business and you want that business to be treated as your asset and/or you are continuing to grow that asset, the legal entity you select can:
The goal of asset protection is to minimize your risks and to help grow and maintain your asset base. The right legal entity will provide you with those benefits. Under our U.S. tax laws, different structures exist for employees and corporations. Employees are taxed on the amounts they earn. Usually, taxes are withheld from employees' paychecks. Under the corporate tax structure, corporations deduct appropriate business deductions and pay taxes on whatever is left. Talk with a tax professional to determine what deductions you may be entitled to. Active or Passive Investing Before you decide on the investment strategies you plan to follow for your wealth cycles, determine whether you want to be an active or passive investor. Active investors get directly involved in the investment. They may become general partners or take a role in the management of a business or particular venture. In contrast, a passive investor essentially only puts up money, sits back, lets others do the work, and waits for profits to roll in. Your Money Rules We all have money rules, everyone of us! They dictate how we use credit cards, balance our checkbooks, pay off our lifestyle debt, or pay ourselves first. They determine how we handle money, think about wealth, and run our finances. Most of us didn't set our own money rules, we simply inherited or adopted them from others. Usually we integrated them without questioning because they came to us from people we loved and respected and because talking about money was taboo. If the concept of money rules is new to you, you may not have the requisite knowledge to make some of your rules non-negotiable at this time. However, you soon will if you continue to educate yourself on each of the investment strategies you are considering. If you stay focused on your goals and are flexible, your money rules will clearly evolve. About the Author Loral Langemeier, M.A. CPPC, empowers her clients to build wealth cycles and achieve financial success. Combining her downtobusiness candor with the personal accountability she has emerged as one of the most exciting business and motivational speakers. Learn more with The Millionaire Maker's Guide to Wealth Cycles Investing.
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