Ways to Become Richer

Easy ways to become richer involve making use of the following universal principles of wealth. For some, making use of these financial concepts is easier than others, but opportunity is sometimes made and anyone can create. These ways to become richer do work and can do so quite easily, but they do have to be used in the right way.

• Capitalize

The richest people on earth have all capitalized on one thing or another, or received their wealth from persons who did. Capitalizing for individuals means creating a financial opportunity through a circumstance or event. For example, Mac's neighborhood  is required to keep its grass below 6 inches in height and regularly pay companies to mow their lawns. Mad locates a grass seed supplier that has grass that grows at half the speed and sells the grass seeds to his neighbors earning him 25%  and saving his neighbors 25%.

• Leverage

Leverage is the use of money that is not your own for the purpose of capitalizing or maximizing a profitable decision. Credit cards are example of leverage, but do not capitalize on that leverage. In other words leverage must be combined with capitalizing in order to become a way of becoming richer. An example of leverage is a loan used to run a home business.

• Spot deals

Spotting deals is an easy way to become rich because it can take less time to spot a deal and make more money that it would to make the same amount of money in another more time consuming way. Deals are financial opportunities that afford the deal-maker a chance to make a profit. Sometimes risk is involved making use of deals, but this varies and good deals don't necessarily have to have a lot of risk to make a lot of money.

• Relocate

Due to differences in the cost of living worldwide an average amount of wealth in one country may be a lot of wealth in another. By relocating to a country or location with a lower cost of living, one in affect becomes richer because their money is able to accomplish more and purchase more products or services. Cost of living can be determined using exchange rates, consumer price indexes and price of labor.

• Exploit

Exploiting opportunities is a way to optimize capitalization, leverage, and deals. This involves getting the most out of a financial opportunity by  emphasizing the technique or method that allows that financial opportunity to become profitable. Examples of exploitation are a squirrel hiding acorns from a tree to save them, a business lobbying for economic policy that makes it more profitable to operate or an individual cycling crops to make the most out of soil.

Diversification of Stock Market Risk

Investment diversification is a type of risk management that used by investors and refers to the spreading of investment capital through multiple financial instruments and/or economic sectors. An example of diversification is stock ownership across a number of industries such as oil, utilities, biotechnology, retail etc. Diversification is similar to hedging in the sense that it is employed to lighten negative impacts from downturns on a specific financial instrument, economic condition/sector, and localized investments.

Many people diversify their money in different ways. For example, someone may put money into a house, have a savings account, own jewelry, use a money market account, hold certificates of deposit (CD's), and save through Individual Retirement Accounts (IRA's) or a pension fund. This is diversification in the sense if one or other of these investments falls through, there is another to relieve the overall risk to one's net worth. The hallmarks of diversification are listed below:

• Distributes money across an array of investments
• Shields investors from volatile fluctuations in prices
• Broader investment net may capture otherwise unrealized capital gains
• Allows riskier investments while simultaneously limiting exposure to associated risk

Diversifying through mutual funds

Diversifying risk is easy to do if one has tons of money to spread around. However, for those who don't have millions of dollars, mutual funds do. What's more, mutual funds often consider diversification an essential part of their investment strategy even if it is just within one economic sector.

For around the first 30 investments an investor or mutual fund makes, the level of risk declines significantly, especially if those investments are across different industries. However after a certain point, the lowering affect diversification has declines making the risk to number of investment ratio change less and less. A few ways diversification in the stock market takes place including through mutual funds are listed below:

1. Diversified Mutual Funds
2. Investment in international as well as domestic stocks
3. Time spread investments i.e. dollar cost averaging
4. Selection of stocks that span a number of economic sectors
5. Investment in large cap, mid cap as well as small cap stocks and pink sheets
6. Ownership of stocks, stock mutual funds and exchange traded funds
7. Diversification through investment in multiple stock exchanges.

Other Types of Investment Diversification

Diversification can be achieved in a number of ways and at varying levels of risk. One can diversify through the methods listed above or one can diversify using multiple financial instruments. Some examples of this type of diversification includes the following methods:

• Low Risk Diversification

1. Low risk mutual funds such as precious metals, utilities and bond funds
2. Treasury Bonds, Savings accounts, Australian Government Bonds
3. Investment through IRA's, Life Insurance Policies and Certificates of Deposit

• Medium risk diversification

1. Investment in index funds
2. Diversification through middle capitalization and large capitalization companies
3. Capital investment in Bonds, stocks and higher risk mutual funds

• High risk diversification

1. Investment across a range of small capitalization companies
2. Diversification through a number of risky exchanges such as foreign exchange, futures and growth sectors of the economy.

Risks Typically Associated with Non-Diversification:

When one does not diversify, one's net worth can decline dramatically. An example of this is the Tech bubble of the late 1990's and the Housing Bubble of the middle 2000's. If an investor had all their money in either of these industries after the bubble burst they could have lost a great deal of money.

An economic 'bubble' does not have to burst for an asset class or industrial sector to have a correction of 10-20% because there are many integrated market forces that drive prices of financial instruments outside of abnormal pricing. While diversification does not eliminate all one's investment risk, it can present some very safe options depending on how risky the investments are.

How one diversifies is also important because as with any investment strategy there are many different ways to diversify. Some methods are better than others. For example, if one diversifies in secure and Government backed financial instruments one's risk will be lower than if diversification takes place through high risk stocks across a number of industries. Also the choice of investments one chooses to diversify with can create a combination of risk and return that is ideal for an individual investor.

In summary, investment diversification limits but does not eliminate risk. The safer the investments that are diversified, the lower the overall risk will be. Diversification can be achieved through mutual fund investing as well as through investment in multiple asset classes and financial vehicles. The benefits of diversification are well known and considered a beneficial investment strategy.

What Does a Financial Planner Do?

Financial planners help clients plan for future financial needs, grow net worth, minimize taxes, set up budgets and more. Depending on how wealthy one is, who one's financial planner is, and where one goes to find financial planning assistance can all affect what a financial planner does. Financial planners can include a wide range of professional, educational and experiential milieus that focus on different tiers of wealth, life stage financial planning, investment goals etc.

The advice received from different financial planners should be consistent in terms of some financial practices, but may also vary depending on what financial products the financial planner is promoting, the financial planner's experience and knowledge, and the unique objectives of the client-planner relationship.

The best financial planning services may include, but not be limited to all the following attributes, however this is not to say that all financial planners with such attributes may be the most suitable financial planners for all financial planning scenarios. This article will discuss financial planning in terms of 1) an example of what a financial planner does, 2) types of financial planners, 3) financial planning services, and 4) attributes to look for in a financial planning service.

Financial planning example

Sometimes a financial planner can help one not make a bad financial decision. For example, before cashing out a large sum of retirement funds to invest in a condominium, consider the tax consequences of withdrawing such a large sum of money on annual income. If the retirement funds withdrew are $250,000.00 and the retiree was in the 25% tax bracket the year before, that individuals income for the year could quite possibly rise into the 35% tax bracket making the tax on the retirement funds $25,000. Good financial planners can help with decisions like these to avoid unnecessary costs and consequences of financial decisions.

In addition to assisting with costs and consequences of financial decisions, a financial planner can help one achieve one's own financial goals. That is to say, the interest of the client should be more important than whatever financial products the financial planner may be trying to sell. Some financial planners may not sell any products and simply help one re-organize one's finances for improved cost savings, greater income retention, wealth creation, retirement planning etc. A few of the key areas a well-rounded financial planner may be able to help with are the following:

• Retirement Planning
• Wealth Building
• Budget planning
• Cost management
• Insurance needs
• Taxation issues

Types of financial planning

As noted above, many types of financial planners exist, each of which may have a different specialty. Knowing which planner is most useful for which situation can be helpful in case of specific financial concerns. Financial planners may or may not hold professional certifications and/or licenses depending on what their career objectives and requirements are. Many such financial certifications and licenses exist, a few of which are listed below as sourced from the Certified Financial Planner Board of Standards, Inc.

i) Certifications:

• Chartered Property Casualty Underwriter (CPCU)
• Chartered Retirement Planning Counselor (CRPC)
• Certified Pension Consultant (CPC)
• Chartered Mutual Fund Counselor (CMFC)

ii) Licensure:

• Certified Public Accountant (CPA)
• Licensed Realtor
• Securities Licensed
• Licensed Insurance Underwriter

Financial planning services

Not everyone needs or should need a financial planner as finances aren't always that complicated. If an individual or household has relatively few expenses, little or no debt and a steady income and are fiscally savvy, a financial planner may be of little or no assistance. However, the perspective of a financial planner may enhance or improve the know how of peers in the industry as well as financial professionals, and thus may be worth hearing out in specific aspects of financial planning.

To illustrate the above point, a mortgage broker can generally be thought to have a good sense of money, however a financial planner may know more about insurance products than the mortgage broker and if the mortgage broker is need of insurance, the advice of the financial planner may be beneficial or helpful. Other areas of specialized knowledge where financial planners may be of use are the following:

• Brokerage services
• Tax management techniques
• Investment planning
• Income dispersal strategies
• Estate planning
• Insurance assessment
• Life stage financial goals

Positive attributes of a financial planner's services

When deciding whether or not a financial planner is worth while a few things might be worth considering beforehand. Specifically, is the decision to make use of a financial planner's services a financially sound decision in the first place. Hiring a financial planner may be less cost effective than not hiring one and only if the benefits outweigh the costs should a financial planner be used financially speaking.

However, in some cases it may take a financial planner to know whether or not one actually needs a financial planner. The following tips may help in the decision of whether or not to choose a financial planner and things that might be worth thinking about after that decision is made.

• Consider commissions and products: Commissions and products may have the potential to affect a financial planners assessment of a financial situation and the financial tools they recommend. Financial planners that work for specific companies may be obligated to promote those products so inquiring if the products are actually helpful is a good idea.

• Costs: Determine hidden costs, surcharges, maintenance fees, commissions and any other fees associated with financial products recommended by a financial planner.

• Expertise: Financial planners with specific areas of expertise may be more helpful in certain situations than financial planners with a broad range of knowledge. For example, some financial situations, such as specific tax strategies may benefit more from in depth and sophisticated knowledge associated with tax accountants.

• Self-Reliance: Look first to one's own abilities and skills before deciding whether or not help is needed. Sometimes, all that is needed to solve a complicated financial situation can be solved with a few common sense principles, organization and forward thinking.

• Different Financial Planning Services: Choosing the right financial planner may be beneficial. One does not generally need a stock broker to help with debt management issues or an Insurance underwriter to solve tax problems. Sometimes a simple sliding-scale financial planner may be all that is required if that.

Financial planners should ideally be experienced, knowledgeable and skilled with money management concerns in addition to being aware of client's unique situations and communicate possible solutions for each situation. A financial planner should benefit clients more than they cost them, otherwise the cost of utilizing a financial planner is financially unsound.

Depending on who a financial planner works for, where they are located and what their area of expertise is can and does influence the type of advice, products and commissions associated with that advice. For this reason it is important to first identify one's own financial goals when making the decision of which financial planner is most worthwhile.

Sources:

1. http://www.fpanet.org/ http://www.cfp.net/downloads/RenewalCE1_06.pdf
2.http://www.cfp.net/