By staying in this profession for a long time and by communicating with people around, I have started to know that most of the people want to be financially free and create wealth etc. But by the end the of the day in between this wanting and getting it, most of the people end up with disappointment for not getting what they wanted. So they start to blame either the fund or the product and also themselves for not knowing or thinking about these things beforehand, for it could have been better .I might say that you are partially correct, why am I saying this come let’s try to make you understand .
Generally, small ,average or big service holder or small businessman or also some self entrepreneurs, these people get engaged amongst this problem ,so why only they? Because their amount of income is depended upon a linear equation .The equation is, RATE X TIME=INCOME. This matter needs a little understanding .RATE means the salary or income you have ,take for example the income of an individual is 1lakh rupees, and time to be provided for that is 10 hours, therefore the rate per hour is 1,00,000/10=10,000. Now let us assume that the person increases its rate by his/her qualification, quality or by changing his job again and again, and made it to 20 thousand or 30 thousand per hour .but the question is for how long can they do this ? Today experience is not deciding the rate, with experience the salary increases is right, it is increasing, because of the inflation ,the real rate is not increasing. Now who is deciding the rate ,employee or employer? Obviously Employer. When someone else is deciding your finance then is it possible to be financially free in this condition ? Yes it is also possible,I will tell you latter .
Now imagine if the rate of that income becomes zero for some reason, then whatever his time he has in his hand, his income will be zero. This line of equation is the only one big insecurity. Today, most companies are replacing a high rated employer with a comparatively low rate employer.Today most of the employer works on system base ,they are not experienced rather they look for creative skills, communicating skills ,negotiation skills etc. That means we can say that at a point that we can increase the rate but it has many limitations also. Above all, the employee here is not able to fix the rate of Linear Equation that means from this Linear Equation we cannot easily make unlimited income maybe.
Now in the Linear equation the other input is time. Nowadays,even the 8 hours working has also been obsolete because in the working area most of the time get involve in Passive than Active time, only to maintain present income. But time is limited for every person, in this equation it is 24hours. Now if the time for the person in this equation becomes Zero or given time is zero,then HIGH RATE X Zero TIME = Zero INCOME.
Now suppose if anybody has his income through rent, so then does he have an active income depend on active time? Now suppose if someone writes books, or sings songs or by doing any creative work gets royalty income , for them is this linear equation worth applying?
Any girls or boys who are making a mobile app, which has become popular, so now his income will be coming to her even if she isn’t working. Suppose someone has investment in shares of a good company, the dividend income of that person will automatically come, isn’t it ? now let us assume that someone has collected Rs 2 crore via processing in investments and suppose growth rate of that fund approximately 12% , now 10% of this 2 crore that the person has , that is , 20 lakhs can be taken as his INCOME, which means monthly the passive income is Rs.1,66,667 approx. for this the person doesn’t have to spent any active time and at the same time the asset of 2 crore is increasing .likewise, there are many people around us who are creating assets, and having their passive income .
So, here we get to know that , by staying in linear equation and having limited income and by avoiding instant gratification and using the judicial rule ,if we create any investment asset or by creating any creative asset only then we can make our passive income possible ,which is not depended upon the linear equation . In this equation we work for money and we have to do this by creating asset by which the money will work for me.(some are asset and some are not asset and to understand this you can take help from this book which is by Robert T Kisaki ,rich dad and poor dad).
Actually we are conditioned for instant linear gratification in linear equation in our childhood, “study hard so that you can get a good job ’’ likewise there are thousands of sentences in our sub conscious mind that are in conditioned in our brain. For this reason only we think that our house is our asset , our car is our asset and also our jeweler is our asset .the reason behind this is because in our so called linear society these things have been given recognition and gratification .So with this mindset one cannot control there expenditure . We have to keep in mind our spending habit determines our destiny –rich or poor .Because our lives will be framed according to our habits .Remember our mind is our greatest asset .
Individual staying in this linear equation has a much more bigger problem that is tax burden .Generally tax has to be given by every income earner whether less or more. but the individuals doing jobs or services are affected by this the most ,
See we had taxes in our ancient time as well, Akbar also took taxes from the people on the basis of the amount of windows they had in their houses, unbelievable isn’t it? But you should always remember that tax ,for any government or for any emperor, it is a big source of money .Same it is now as it was then .even then people wanted to somehow escape from paying taxes, even today people do the same before the servants of the emperor came for the taxes the people used to cover their windows with the mud and once they are gone they used to open the window again .
Then most of the time the government used to take the excuse of the war and play with the emotions of the people and burden them with taxes .Then they used to forget to release them from the burden of the tax .To fight against Napoleon, Britain adds tax burden on the people in 1799.Even America puts the burden of tax on its people in the civil war in 1861.in the year 1913 United States US constitution amendment permanents the tax.
If I want to gather knowledge about the history of tax ,then come to know that Robin Hood used to take money from the rich people and distribute all the money to the common and needy people ,slowly turning into hero for them .then the government for stopping him and to become part of the heroism ,for the first time added pressure on the rich people of the society .And as the result of this the poor people were extremely happy and rich people were annoyed ,but the rich people always control the society ,economy and country. And as a result of this they created pressure above the government of the society, but till this time the government had already fallen in the trap of greed for tax. Government exempted tax from therich people by their pressure and intelligence, and this was adjusted by adding new taxes for the middle class people.
Firstly, the middle class people did revolution against this, but then according to the rich people the government emotionally influenced the middle class people .they said that the money from tax is used in developing our country, and government managed and made them understand their participation and told them that this was their golden opportunity to become patriot .Even now these sentiments are still effecting.
At the same time ,the English introduced the education system in the country which resulted in many jobs ,they needed this at that time .by adding taxes on their income the government enjoyed a good income .from here began the burden of taxes on linear income .the indirect tax plan was given by the government to the people of this linear equation to not set their share in the rich people ‘s wealth .government increased their income and to the exchange of this the rich people by using their intelligence somehow managed to decreases their taxes ,this tradition is still continuing (I’ll discuss more on this topic latter because speaking more about this topic will make this writing much bigger ).
Suppose, today you have your income through linear equation, you and your entire family has gone to a relatives wedding by a car, the money involved here is your expenditure to get there isn’t it? Now the owner of your company will have the same expenditure, but he will show this expenditure is for company’s P and L account, so they will get a discount on tax for business allowable expenditure .and this creates a major difference.
A linear equation person who belongs to 30% tax slab , he has to pay his own monthly salary for direct tax .after this comes silent tax ,which means indirect tax and this means tax on all the expenditure . Imagine that the rate of linear income which already depends upon the rich employer, and even the time is given by the rich employer, with this only the income is becoming limited, and top of this comes the government’s tax. after this, think about the condition of the logical and emotional middle and upper middle class people , their minds have been conditioned that way that their advice and pressurize their children to do the same .
If a linear equation person has some ancestral property and if that person can rent it and get income through this, then that becomes passive income where your income will not be depended on time .Problem will be here as well. Or if you have any creative or technical skill then use it as a source of passive income. Then only money works for you.
Otherwise you can start investing with a little patience by controlling your present unnecessary expenditure. Always keep in mind that investment is a science of money, making money ,it requires mindset ,because if you can’t beat passive income inflation and be tax effective ,then there can be no solution.
Suppose someone at the age of 30 is investing Rs.10, 000 per month, then at the age of 55 his approx income will be Rs.275.6 lakhs, And if someone starts at the age of 35, to invest Rs.10,000 per month, then at 55 age the approx value will be Rs132.7 lakhs.
Suppose someone at the age of 40 years ,starts to invest Rs. 10,000 monthly ,therefore when the person is 55years age the value of the investment will be approx Rs.61.65 lakhs.
The problem is that most of the people are conditioned to their minds child state and in such a way that they start taking longer time to think.It causes a lot of damage to the creation of passive income .
For example , a person starts investing from 30 years of age ,saves Rs.10,000 per month ,at the age of 55 it will be worth around 275.6 lakhs .If the same person delays about 6 months for starting the investment ,then his monthly investment of Rs.10,000 ,will become approx Rs.2.56 crore at the age of 55 years.Time loss in investment takes finance far behind . In 6 months delay he gave 10,000*6=60,000rupee less and therefore receives Rs2.75-Rs2.56=Rs.19 lakhs less .This is the reason I had said that MIND IS OUR GREATEST ASSET .