In my book Wealth Cycle Investing, on page 57, I talk about money rules and taking control. When you opt for direct participation in assets, you need to make decisions based on your personal criteria-your money rules. Your money rules are determined by your current situation and financial objectives, and they help you decide.
But let me give you some Investing Money Rules:
- Decide whether you want to be an active or passive investor.
- Are you looking for money now (cash flow) or money later (appreciation)?
- Decide what kind of return you want on your investment annually
- What are you liquidity needs? Do you need to keep cash on hand or readily accessible for your needs?
- What are your tax ramifications? How will your taxes will be created or minimized by your investing? Investments can create huge tax liabilities or create huge tax deductions.
- Finally, what are the risks and rewards associated with your investment? How do you measure these variables? Do you have the tendency is to discount the risk and over-rate the reward?
Here are some other Money Rules to help you
Cash Machine Money Rules:
- How much money will you invest in the business?
- Will you bring in JV partners for capital?
- Will you utilize partners for other reasons?
- If so, how much interest/ownership are you willing to give up?
- Will you borrow money for expansion and/or growth
- Will you borrow money for operations?
- Will you purchase assets in the business name?
Money Rules For Holding Assets:
- What kind of entities will you utilize?
- How will your entities be structured in relation to one another?
- How much equity are you willing to put at risk per entity?
- How many businesses/assets will you hold per entity?
- When will you start a new entity?
- Will you pay taxes per entity or flow income to a “mother ship” or to your personal tax return?
Money Rules For Family Spending:
- Will you combine your money and pay all bills out of the joint account?
- Will you have separate accounts for certain bills or for discretionary spending?
- How will you decide on large purchases?
- How much can you each spend without notifying the other person?
- How will you handle money with your children?
- What is your philosophy on debt?
Money Rules For Family & Money:
- Will you loan family members money? If so, how will you structure the payback terms?
- How will you document it?
- If you loan family money, how will you handle the situation if they are not able to repay it?
- Will you borrow money from family? If so, for what reasons?
- How will you repay it? What if you cannot repay it?