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Wealth Creation – How to Create Wealth Using Financial Intelligence
When it comes to wealth creation, everyone is looking for the easy way out. Well, I’m here to tell you that there isn’t just one. There is no such thing as money, however, there are ways we can work smarter as opposed to harder. I first came across the term financial intelligence during the stock market boom of the 1980s, when people were making large sums of money relatively easily and in a short period of time.
These people were trading the asset as if it were some kind of hot commodity, like the iPod today. They basically hit on a certain formula that allowed them to leverage the power of supply and demand and create wealth like never before. Honestly, it was like selling shovels in a gold mine and being the only shovel salesman in town. Hence the term financial intelligence.
Nowadays, if you want to create wealth you need to be a little bit more aware in terms of being able to find a lucrative venture. It seems that the art of it revolves around finding business systems with very low overhead and high profitability. It’s an old formula, first used by the world’s original coin inventors, but it never ceases to amaze me the number of people who miss it and can’t recognize it at face value.
The Internet is one such example, which, if you are savvy enough, offers a great opportunity for a business person to produce and distribute a product at virtually no cost. So the markup on profit is immense. The following example shows why. Take this hypothetical scenario.
The hourly rate is not calculated, but a person goes and spends three days, Monday through Wednesday, 16 hours each day writing an ebook on how to strip a BMW model 320i car engine. They then spend the next day editing, packaging (sourcing and supplying graphics) and supplying references, writing copyrights and disclaimers, and submitting their book to various Internet bookstores for sale. The book sells for $20.00 and they collect a 25% commission ($5.00) per sale. They sell 100 copies worldwide in the first week, 200 copies in the second week and 300 copies in the third week. After this they stop counting. The formula is something like this.
5 days @ 16 hours each = 80 hours
Cost of production = zero
Profit Week 1 = $500.00
Profit Week 2 = $1000.00
Profit Week 3 = $1500.00
Total Profit = $3000.00 – I’ve done it once, and once only, even if it took 80 hours to do it
80 hours = $37.50 per hour paid divided by benefits.
And it grows exponentially, as sales grow. Now, after a certain point, because there was no measurable cost factor involved, they couldn’t accurately measure the profit in percentage terms. This is financial intelligence at work.
This only becomes an unworkable model when we start putting ourselves on a measurable hourly rate. This is when, as the saying goes, time is money. But this is an illusion. I say this because, how does the amount of time a person works equate to a certain amount of money?
Using the eBook production and sales example above, for example, what if, in 12 months from the date of the first sale, the profit from that BMW book is $25,000.00. What if that person goes and says it took them 80 hours to get the book out, so they’re now worth $25,000 at $80 = $312.50 per hour.
What if they’ve written 10 more books by then? They have started selling one by one. How do they track and calculate their hourly rates?
They do not want to, and cannot, fall into the ‘time is money’ fallacy. It’s much better to recognize financial intelligence when a person sees it, to resist the urge to measure their worth by how much money they can make per hour, and just relax and go with the flow, and enjoy what you do. Life is too short, for them at least, to do otherwise. When it comes to how to create wealth, I think Financial Intelligence is probably the best resource and perspective. It lends itself to building simple and effective trading systems. It leads to the never-ending search for answers to create wealth easier and faster than ever.
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