"Neither a lender nor a borrower be." - William Shakespeare. This is advice that is a little over-simplified. If someone asks you gor a loan, examine what it is for. If the project looks like a winner and the person has a good track record, offer them a convertible loan. (No, this is not a loan for a sports car !).
A convertible loan is a properly legally binding loan agreement with repayment schedules and details all worked out and forming part of the agreement.
If the project is successful and profitable, you have the option to convert the debt (to you) into equity (shares) in the project and this will give you a share in the profits.
Two things to remember about convertible loans are that you should make sure that your equity is made up of VOTING shares, and that the loan is SECURED against their property, so that you will still get paid if anything goes wrong. This degree of due dilligence will sort out the wheat from the chaff.
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
Wednesday, July 20, 2011
Sunday, April 17, 2011
367. Education
Learn to distinguish between the types of education that are available to you. In order to get ahead in life you need education. Over a lifetime, a man can earn many millions more if he has a college degree than he would if he just dropped out of school. Yet if you graduate from college and o not have any financial education, you will soon be poor and even in debt. A high-paying job without the financial education needed to manage the high income will get you into debt deeper and faster than a low-paying job.
Monday, March 28, 2011
358. Leverage
The next most imprtant word (after "Cashflow") in the financial world is "Leverage." This is the reason some become rich while others do not. Leverage is power. Some learn to use it, others have it used against them and yet others fear it. Learn to use the power of leveraged debt in your favour. There are two types of debt : good and bad. Leveraged debt is good debt. Good debt is defined as debt that makes you rich, an example is debt incurred while trading options. Bad debt is defined as debt that makes you poor, an example is excessive consumer debt.
Rich Dad's CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom
Rich Dad's CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom
Monday, January 31, 2011
355. Cashflow
"Cashflow" is the most important word in the world of money. Cashflow - the flow of cash.
Cashflow can be positive - i.e. you have more cash coming in than going out. This is always a good thing. Negative cashflow is when you have more money going out than coming in. This is a bad thing, it leads to debt and misery. Neutral cashflow - the same amount coming in as going out (also known as red-lining) is also a bad thing. It is stagnation as the value is being eroded by inflation,
Cashflow can be positive - i.e. you have more cash coming in than going out. This is always a good thing. Negative cashflow is when you have more money going out than coming in. This is a bad thing, it leads to debt and misery. Neutral cashflow - the same amount coming in as going out (also known as red-lining) is also a bad thing. It is stagnation as the value is being eroded by inflation,
Saturday, January 29, 2011
345. Charity
Give to charity. Give wisely. Pick charities that are important to you and support them. A part of all you earn is yours to give away to charity. You should allocate your income as follows : -
Income %
€100
Full 100
Tax 30
Debt 30
Expenses 21
Savings 9
Charity 10
Investment 9
When you give to charity you should give 10%. This is one tenth. The meaning of the word "tithe" is to give 10%.
Give to your charities with an open heart. Give gladly. Do not resent your gift. Operating on this basis, be careful about where you choose to give. Everywhere there are people who have plans for your money. It is yours until you give it and only you have the right to plan for its use.
Everywhere there are "charities" that spend more on administration than on the causes they claim to support. You should be clear in your mind that this is nothing more than exploitation of the cause for the benefit of the organisers and is nothing short of fraud. Have nothing to do with these organisations.
Another form of exploitation is the phenomenon of "chuggers". This is a portmanteau word made up of the "ch" in charity and the "uggers" in muggers. It is the practice of mugging people on the street for charity. When you put money in a collection box you have no guarantee that the person holding it will ever return the money to the cause. Avoid them like the plague that they are.
When choosing a charity to support, do not be swayed by emotional appeals. Check out the bona fides of the charity and only give if the money is going to the cause and not the organisation. Demand to see their latest audited accounts before you give and only give if you are satisfied.
Build giving to charity into your budget. That way, at the start of each year you will know how much you intend to give and when you intend to give it and to which charity. Then you have made the decision once and for all and can forget about it until you are preparing your budget for next year. This is basically a mind-clearing sytem. Do not entertain appeals for anything else during the year (but keep the appeals on file for your next budget.) If you wish, you can budget for emergencies like floods, volcanoes etc. and keep money in a fund for that, earning interest.
Income %
€100
Full 100
Tax 30
Debt 30
Expenses 21
Savings 9
Charity 10
Investment 9
When you give to charity you should give 10%. This is one tenth. The meaning of the word "tithe" is to give 10%.
Give to your charities with an open heart. Give gladly. Do not resent your gift. Operating on this basis, be careful about where you choose to give. Everywhere there are people who have plans for your money. It is yours until you give it and only you have the right to plan for its use.
Everywhere there are "charities" that spend more on administration than on the causes they claim to support. You should be clear in your mind that this is nothing more than exploitation of the cause for the benefit of the organisers and is nothing short of fraud. Have nothing to do with these organisations.
Another form of exploitation is the phenomenon of "chuggers". This is a portmanteau word made up of the "ch" in charity and the "uggers" in muggers. It is the practice of mugging people on the street for charity. When you put money in a collection box you have no guarantee that the person holding it will ever return the money to the cause. Avoid them like the plague that they are.
When choosing a charity to support, do not be swayed by emotional appeals. Check out the bona fides of the charity and only give if the money is going to the cause and not the organisation. Demand to see their latest audited accounts before you give and only give if you are satisfied.
Build giving to charity into your budget. That way, at the start of each year you will know how much you intend to give and when you intend to give it and to which charity. Then you have made the decision once and for all and can forget about it until you are preparing your budget for next year. This is basically a mind-clearing sytem. Do not entertain appeals for anything else during the year (but keep the appeals on file for your next budget.) If you wish, you can budget for emergencies like floods, volcanoes etc. and keep money in a fund for that, earning interest.
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