KLE 86: Eco-Friendly Capital
Q: When is Capital Eco-Friendly?
A: When it is green!
Capital is ‘green’ when it is:
a) Cash – e.g. the good ol’ American ‘green-back’, and
b) Recycled – when the Cash that you have available is reused.
First, why do most people fail financially? It’s usually because they:
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i) Correctly believe in the Power of Compounding, but
ii) Mistakenly believe that Time is the most critical element.
Of course, you now know better, because the formula for compounding includes BOTH Principal (a.k.a. Capital) as well as Time, but:
– Access to Time is limited – you have a finite amount, while
– Access to Capital is only limited by your imagination.
In fact, the whole principle behind compounding is to allow your capital to build itself over time.
And, the $7 Million Dollar Wealth Formula encourages you to do the same … only, now you give Capital a head start by finding ways to build it up really quickly, even before you start seriously compounding and you dramatically increase (or ‘leverage’) your available Capital by accessing additional Capital (e.g. 3F’s, Partners, and/or Debt Capital) wherever possible!
So, the second secret of real wealth-building (the first being to leverage your available Capital, by using Debt wherever possible, because it’s usually the cheapest form of additional capital) is to recycle your Available Capital whenever you can.
That means, that if you buy your first Franchise for $200,000 (say, using $100,000 or your money and $100,000 of The Bank’s money) and, make $54,000 net profit, then – after two years – you should have enough (even after paying tax, assuming that your second year’s profits are greater than the first) to buy another Franchise using two years of retained profits (say, $100,000) plus another $100,000 of The Bank’s money.
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Two (or four) years later, you should be able to double again, and again, until you reach your Number …
