Acres of Diamonds

Acres of Diamonds is arguably one of the most famous books in the world. It details story after story of people overlooking riches in their own back yard, only to spend their time looking for success elsewhere.

The author, Russell Conwell, was asked to give a speech to the 10 year reunion of his Civil War troops. He gave this speech as a result. It was then requested over and over again throughout the years.

Russell Conwell personally gave this speech over 6,000 times, travelling from city to city. With the proceeds, he would pay for his room, board and train fare, then send the rest back to Temple University. These funds put nearly 2,000 students through college.

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Multiple streams of income

Have you ever considered that many of the world’s most successful people invest thousands of pounds, dollars or equivalent, plus countless hours on personal development and education? Did the success precede the investment or did the investment precede the success?

America’s foremost business philosopher, Jim Rohn advises that we should spend more time on developing ourselves than we do on developing our business or career.

The traditional model of studying hard in school, specialising and following a career has been espoused and followed, largely without question for the past few generations. As children we may have had dreams of being astronauts, sports stars, singers, artists and the like, yet we are persuaded to discount these dreams and talents as foolish childish fantasies and encouraged down the well trodden paths of conforming and security. But where do these paths actually lead? The promised land of milk and honey? I don’t think so, certainly not in the majority of cases and certainly not in these most uncertain of times.

We are encouraged by parents, teachers and other well meaning influences to stay in school and get the best education we can. This system serves to filter us into colleges, universities and hopefully well paid careers. We then earn, spend, earn a bit more and spend a bit more. After all, don’t we deserve a few of life’s luxuries? All that study, the long hours, hard work and delayed gratification? So that new notebook computer or widescreen TV is more a reward than an indulgence, more a necessity than a luxury. So too cars, we want the best we can afford, it’s more cost effective is it not to finance a new model rather than risk the associated repair costs or an older one. So it begins the earn-spend-borrow-repay lifestyle cycle which has ensnared so many of us in the western world.

Teaching children about money is an important topic and it is never to early to start.

Robert Allen, best-selling author, likens the lifestyle cycle in which many of us are trapped to walking up a downwards escalator. You have to keep walking just to keep still and if you should ever stop, the moving staircase will take you right back to where you started, i.e. the bottom. Or even worse, the basement.

I apologise for painting a bleak picture but maybe we all need a little reality check now and again. But what is the answer, how can we get ahead, switch off the escalator or ultimately turn it in our direction?

In the short term the answer is to spend less than you earn not very exciting but this alone will ensure that every two steps will result in only one step down. By frugally saving and investing relatively small amounts on a regular basis many people have achieved financial freedom and reached the top of their personal escalators.

Spend less and save more – it’s hardly going to get your pulse racing and have you tearing down to the bank to open a savings account especially with interest rates hovering around zero. But it’s a start, an intention, the beginning of a good habit.

To turn the tide in your favour you really need to think about generating additional or multiple streams of income. Think about it, how would you like to generate a steady, regular stream of money coming into your account every week? Not from an extra job or additional hours but simple proven systems that with a little initial effort will add up to a major impact on your life for now and the future. So are y9ou with me, are you excited by the potential here? Imagine a financially free future where you choose to work only when and where and crucially doing what you want to do. Maybe a chance to rediscover the childish fantasies or spend your time in the service of others or for a greater good. After all without the wasted energy and time of negotiating the downward moving staircase you are free to focus on the other goals and areas of your life.

So how then do we reach this desired state, this nirvana?

JD Rockefeller was quoted as saying “I have ways of making money that you know nothing of”.

Earlier I mentioned bestselling author, Robert Allen – his outstanding book ‘Multiple Streams of Income’ explains 12 simple proven methods to begin to turn the tide and the escalator in your favour. Without doubt it is one of the most impactful books I have read in the past decade and cannot recommend it highly enough.

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Robert Allen is giving away a host of free reports and a selection of FREE books click here

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Top Ten Tax Tips

10 easy ways to pay less tax

Britons pay more than £450bn tax each year. But by getting tax-efficient you can keep your contribution down. Don’t miss these top ten tax tips…

1. KNOW YOUR ALLOWANCES

Your personal allowance shows how much income you can receive from earnings, pensions and savings before paying tax. For the tax year which runs from 6 April 2007 to 5 April 2008, it is £5,225 for the under-65s, £7,550 for those aged 65 to 74 and £7,690 for those 75 plus.

The next £2,230 of income is taxed at 10%. Then the basic rate tax of 22% is charged on the next £32,370 (unless your income is from savings interest, in which case the rate is 20%). Income over £39,825 is taxed at the higher rate of 40%. Married couples where one partner was born before April 6, 1935 get a married couple’s allowance of £6,285 (the over-75s get £6,365), but this is restricted to the 10% rate of tax.

If you’ve earned less than your allowance in a tax year and been taxed, then contact your HM Revenue & Customs (HMRC) office to claim a rebate.

2. DECODING YOUR TAX CODE

People overpay millions of pounds in tax each year and much of this is because taxpayers are given the wrong tax code. So check that your coding notice makes sense and you have been put in the right category. To calculate your code, HMRC deducts the value of your benefits from your personal allowance.

Benefits can include such things as a company car and private medical insurance. Those who receive the married couple’s allowance will also see a deduction to take account of the fact that it is given only at the 10% rate. Pensioners’ coding notices will show a deduction for their state pension because, even though it is paid without tax being deducted, it still counts as taxable income

Higher-rate taxpayers will have extra deductions to include income e.g. savings interest and dividends from shares. If you receive the basic personal allowance of £5,225, your number will be 522.

You’ll also have a letter to signify what type of taxpayer you are:
L: You get the basic personal allowance.
P: You are 65 to 74 and get the full personal allowance.
Y: You are 75 or over and get the full personal allowance.
V: You are 65 to 74, eligible for the full personal allowance + the married couple’s allowance + basic rate tax.
K: You get no tax-free pay or owe money to HMRC.
T: HMRC needs further information, so cannot allocate another code.

3. AVOID SAVINGS TAX

Savings interest is taxed at 20%. Higher rate payers should declare any interest on a tax return and pay accordingly. If you or your children are not taxpayers, then fill in an R85 form at your bank or building society so your interest can be paid tax-free. This will boost your savings income at a stroke. If you only just earn above your personal allowance level (see above), then you should be paying savings tax only at 10%. Banks and building societies’ systems cannot cope with this so you will have 20% deducted at source.

You can reclaim the extra tax every April by asking the Revenue for an R40 form.

4. USE SPOUSE NOUS

If your spouse has any unused tax allowances or pays tax at a lower rate, make use of this. Higher-rate taxpayers must declare savings interest and income from dividends to HMRC and extra tax is deducted. But if a higher rate taxpayer gives their savings to their spouse then they would pay less tax, boosting the couple’s income. On £10,000 of savings, paying 6% before tax, a non-taxpayer would earn £600 a year, a basic-rate payer £480 and a higher-rate payer £360. So switching savings could save £240 tax.

Top tip: Don’t hold the money in joint names because HMRC will assume you each earn half the interest.

5. SAVE ON YOUR SAVINGS

Anyone aged 16 or over can invest up to £3,600 per tax year in a cash ISA. Top ISAs tend to pay more than taxed High Street accounts and the interest is tax-free. So £3,600 in an Isa paying 3% would give £108 interest a year. In a taxed account it would pay £21 less to a basic-rate taxpayer and £42 less to a higher-rate payer. Stock market ISAs are free of capital gains tax and free of income tax on corporate bond income. Higher-rate taxpayers also avoid extra tax on dividends.

You can save £4,000 this tax year into a stock market ISA if you also have a cash ISA. Otherwise you can invest up to £7,000. Other tax-free savings include a range from National Savings & Investments’ . Those needing income could consider certain insurance company bonds which allow you to take 5% a year income for 20 years without paying immediate extra tax. Also Friendly societies allow for tax free savings.

6. OFFSET YOUR MORTGAGE

Rather than paying tax on savings interest, some banks and building societies will allow you to set your savings against your mortgage. You won’t earn interest on your savings, but you will pay less on your mortgage. As a result, you’ll cut its term. On a rate of 5.95%, for example, if you offset £10,000 against a £100,000 mortgage then this is equivalent to earning 7.44% on that money if you’re a basic-rate taxpayer or 9.92% if you are a higher-rate taxpayer.
With interest rates at such a historically low rate however do your sums carefully to see how this may or may not be in your favour.

7. PICK UP A PENSION

Saving into a pension is a fantastic way of snatching money back from the taxman. For every £78 you save you’ll get £22 tax back, boosting your investment to £100. If you’re a higher rate taxpayer you can claim the extra 18% back, so every £100 investment will effectively cost you £60.

When you retire, you can take 25% of your savings as a tax-free lump sum, but you will be taxed on your pension income. A preferred option, if available, is the final salary scheme offered by some employers which bases your pension on the number of years you’ve worked and your salary when you leave.

Private pensions and employer backed contributory pensions rely on the stock market but offer the same tax perks.

8. BEWARE THE AGE TRAP

Pensioners rightly loathe the age allowance trap. This starts to remove pensioners’ higher tax allowances once their income breaches £20,900 a year (more than £5,000 below the average wage). Once triggered, £1 of pensioners’ allowances are taken for every £2 of income until their allowance falls to that of the under-65s. It gives them an effective tax rate of 33% on a portion of their income.

Those on the fringe of this trap may be able to avoid it by using tax-free savings such as cash ISAs and National Savings Certificates.

9. USE YOUR CAPITAL GAINS TAX ALLOWANCE

Everyone can make £9,200 a year capital gains without paying tax, but few of us make use of this. One option is to use equity bonds. Here you invest a lump sum for a set number of years and your return is based on any rise in the stock market.

Some guarantee your capital, others do not — and these latter ones can be very risky. Those issued by insurance companies usually regard your profit as a capital gain so you can make £9,200 without paying tax. But others treat it as income so you will lose income tax.

10. CLAIM GIFT AID

If you’re giving to charity regularly, use Gift Aid. This boosts the gift to the charity and allows higher-rate taxpayers to claim back some tax. Simply keep a record of any regular or one-off gifts made using Gift Aid and remember to include them on your tax form. For every £10 given, the charity gets an extra £2.80 and higher-rate taxpayers can claim back £2.30 tax relief.

Running a home based business? – See how much tax you can save by taking the FREE home business tax e-course CLICK HERE for details

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