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How to Create Extreme Wealth

How to Create Extreme Wealth

by | Dec 5, 2021 | Mindset, Your money

Recently, I had a revelation.

It happened when I overheard the motivational speaker Bob Proctor talk about the three money types.

He divides people into M1, M2 and M3.

He talks about those who make money by giving their time to get money, i.e., those with a paid job.

Those are M1.

Around 96 percent of the population fall into that category. It’s all the people who go to work to get a salary.

It’s the nurse, but it’s also the doctor, the lawyer, and the CEO.

Then he talks about those who have understood the principle of creating assets and who have invested in something. He calls them M2.

If you have started investing in stocks, you fall into M2, and congratulations – you’re part of an exclusive crowd of people who only make up 3 percent of the population, according to Bob Proctor.

But he goes a step further to a group that I hadn’t heard of before. The M3s are the true elite on the money front.

Who are they?

They’re the ones who set up many sources of income. They aren’t content with a salary from a job and stocks and shares.

We all know these types. I have a friend who has a normal, but well-paid job. That doesn’t stop her from starting a business, selling online courses, writing books, say yes to speaking at conferences. She rents out a property. And of course, she also has a few million in stocks and shares.

Do you know someone like that?

It’s like they’re running a program called “Where Else Can I Make Money?”

It dawned on me that I’ve been an advocate of the M2, when in fact I’m driving the small version of the M3 myself – without being aware of it.

Occasionally I get asked why I sell online courses and group coaching when I am financially independent from stock market investments.

I’ve brushed the question off with the thought that I’m doing it because it’s fun and because I want to share my knowledge and help people become financially independent.

Now I can see what I’ve done. I’ve set up several sources of income.

Now that I know that there is such a thing as M3 money types, I think it’s the way forward.

The idea of ​​M3 has shifted my perspectives and boundaries in a way where I can feel that my business and my life are about to accelerate.

I plan to develop as an M3 money type, and I also recommend that you do that.

“But how?” you may ask.

To be honest, you’re not going to jump directly from M1 to M3 by snapping your fingers.

You’ll probably go from M1 to M2 and slowly on to the M3, step by step.

If you are an M1 right now, the logical next step is to buy shares so that you can become an M2.

Becoming an M2 is a huge step and a clear improvement. It’s still my opinion that stocks are the best way to create a passive income. They’re superior to almost any other passive income.

How do you find sources of income other than stocks?

1. Expand Within Your Current Field

First, you need to see if you can come up with new sources of income within your current profession.

I’ll use my own former career as an example. As a journalist, I could have taken on chairing a conference or maybe freelance writing in my free time. If I had written a book, it would have created a passive income, increased my value on the market as I positioned myself as an expert, and it would have most likely also led to other gigs, such as speaking.

2. Brainstorm New Fields

Are there other areas where you can make money?

Sit down and brainstorm and draw a mind map.

What are your special talents? Where are your interests? Do you have any old dreams? What do you love to do? Could there be something there?

There is probably something simple you can do right away without a big business plan.

For example, if you love cars, could there be a hobby and source of income in buying old cars, repairing them, and selling them at a profit?

If you like writing, can you start blogging about an area you love?

If you have a following on one of the social media platforms, could you start monetizing it?

Is there anything you can rent out for a period of time? Your summer home maybe?

For each idea you write down, turn it into a mind map, i.e., you circle the main idea, and then draw lines out to other circles where you write multiple sources of income.

In the beginning, your M3 projects might be small hobby-size projects, but over time you might get a real business idea that can grow into something bigger.

My blog Money and Freedom began just like that.

3. Calculate the Profitability of Your Time

When you get these new ideas on how to make money, evaluate how much time goes into it.

Some ideas are better money machines than others.

For example, if you love knitting and consider selling hand-knit socks at a Christmas market, you have to consider the hourly rate.

Let’s say you can sell them for 15 dollars and they take 15 hours to knit. That amounts to an hourly rate of less than 1 dollar when the yarn is deducted – not a particularly good use of your time. It’s not the socks that will lead to “extreme” prosperity.

4. Sort Your Ideas Into Passive and Active Streams

You also need to divide your ideas into active and passive income.

Active income is when you have to constantly supply your labor, while passive income is something you set up once which can be sold over and over again.

To use the knitting example, the knitted socks is an active income stream because you have to spend time knitting before you can sell a pair of socks.

But if you create an online knitting course, it’s considered passive income because you only have to set it up once and then you can sell the same course over and over again.

It’s important that you set up passive sources of income. These are the ones you need to prioritize.

Your First Step

An obvious place to start would be to buy stocks in public companies if you have not yet started investing.

After all, jumping from a pure M1 to an M2 means that you are moving from 96 percent of the population to the exclusive club of the 3 percenters.

When you get other sources of income set up, it’s important that you do not use all the money on consumption.

Let all (or most of) your new income stream be reinvested in new money machines. Those money machines could obviously be stocks and shares.

A great place to start learning about stocks is by reading my e-book Free Yourself. You can download it here.

How to Reduce Taxes on Stocks 2021

How to Reduce Taxes on Stocks 2021

by | Nov 28, 2021 | Your money

Taxes can eat up a big chunk of your capital gains, and they really affect the long-term effect of compounding. 

The good news is that there are steps you can take to minimize the taxes you pay on stock gains. The tax regulations are different from country to country, and I’m trying to generalize, but most of the examples that I use are from the US tax system.

Let’s get cracking. Here are a few things you can do.  

1. Maximize Your Contribution to Accounts that Offer Tax Advantages

In most countries, there are some kind of savings accounts that give you tax advantages.

These could be 401(k) plans where you can contribute a part of your paycheck before taxes, thereby reducing the amount you have to pay taxes on (if you are self-employed, the equivalent is a SEP IRA).

This could also be a Roth IRA that lets you contribute money you already paid taxes on, where your money can grow tax-free. In other words, putting money into an Roth IRA doesn’t reduce your taxable income the year you make the contribution, but you get a tax benefit on the back end.

The UK equivalent would be an ISA account.

These types of accounts have a different name in every country, so you should research your options and take advantage of them. You might want to call an accountant or call your local tax authorities to learn what accounts that offer tax advantages are available to you. 

2. Invest Long-Term

If you don’t sell your stocks, you don’t pay taxes on them. 

Did you know that Warren Buffett pays a lower tax rate than his secretary? How come one of the richest men in the world doesn’t pay a lot in taxes?

That’s because Warren Buffett doesn’t sell shares.

Warren Buffett’s income is actually very modest. His annual salary from his company Berkshire Hathaway is just $100,000 a year, and his secretary is rumored to make at least $200,000.

Warren Buffett’s wealth comes from holding just one stock: Berkshire Hathaway, and he doesn’t sell it – which means he pays no taxes on his accumulating personal wealth.

Some countries give you a more favorable treatment if you are a long-term stockholder. In the US, you pay regular income tax on a stock you hold for less than one year. If you hold it for one year and a day or more, you pay capital gains taxes, which are lower than regular income taxes. 

3. Combine Gains and Losses Strategically 

If you have an investment that has gone bad, you can sell it off strategically to offset capital gains.

If you sell shares with a loss in your taxable brokerage account, that loss can help offset other short-term or long-term gains. 

How does that work? In most countries, you only pay taxes on your net gain (the amount you have realized in gains minus your losses). So if you know you have some realized gain, you have an opportunity to realize some losses too to offset that gain. This is called tax harvesting.  

Of course, you don’t want to have any losing position on purpose just to avoid taxes, but if you happen to have an investment that didn’t go as planned, you can be strategic about when you sell it.

4. Structure Your Investment for Tax Efficiency

On some accounts, you don’t pay taxes, and on others you do.

You can position your investments so you get the best of each system. 

Why not place the very long-term investments in your taxable brokerage account where you only pay taxes when you sell them?

Why not place dividend paying stocks or short-term investments in your Roth IRA, where you don’t pay taxes? 

Don’t Let Taxes Overshadow Your Investment Strategy

You should buy or sell investments based on your belief that they will gain or lose value over the long term. Don’t make investment decisions just to reduce your tax burden.

Taxes are a luxury problem. If you pay taxes, it means you’ve made money. Don’t forget that. Be grateful for it.

Also remember all the things you contribute to with your taxes. Like my uncle used to say, “I pay my taxes with gratitude.” 

I’ve thought a lot about that during the COVID-19 pandemic.

I live in a country (Denmark) with one of the highest tax rates in the world, but also in a country with one of the best free healthcare services in the world. I’ve been fortunate enough to feel safe throughout the pandemic – and that means a lot when you have small children.

I try to pay my taxes with gratitude and think of how I contribute to society.  

Don’t forget the e-book Free Yourself.  It’ll teach you how to calculate how much a company is worth. You can get it for free here. 

Is Money Your Servant or Your Master?

Is Money Your Servant or Your Master?

by | Nov 21, 2021 | Mindset

Many influencers, Instagrammers and YouTubers give tips on how to save money on laundry, hairdressers, food and lots of other things.

One of the YouTubers I recently noticed explained how he lives on oatmeal and Heinz tomato soup in order to save and invest and become financially independent.

An Instagrammer posted about avoiding a competition and a party at the rowing club because he wanted to save the money.

Other people even discuss opting out of having children because – sigh – children are expensive.

One thing they all have in common is that they let money control their choices and thus also their lives, when it should be the other way around.

They should be having fun and meeting other people and enjoying life to the fullest. Money should be a servant for them to live a rich life.

Instead, they let their choices be restricted by some numbers.

I have long wondered what the real problem is with that approach… apart from them missing out on all the fun.

I have a take on that:

If money rules over so much in your life, you have become a slave to money.

You should turn it around.

Instead of shaving the cost down and having a Scrooge-like approach to life, you should focus fully on knowing and aiming for the type of life you want to live, and then go for it – no matter what it costs.

It must be a goal to attract whatever money it takes to live that life. Instead of cutting your life down to fit the money.

We only have one life.

When faced with these everyday choices, ask yourself:

Do you really want to eat oatmeal? Would you rather go out and eat with your friends? Do you want to party at the rowing club? Do you want to have children?

You should even go a few steps further and ask: If everything were possible, where would you like to live, what would you like to eat, and what would you like to do?

The people who become slaves to money forget to ask themselves these fundamental questions before making the calculator delete those opportunities.

You should make money your servant, not your master.

You have to set big, passionate goals and achieve them.

It may be goals that you don’t know how to land because these goals are inspiring and will make you grow.

If you delete things from the list because of money, you’re letting money be your master.

Let’s take a look at when money is your servant and when it’s your master.

Money is your master if…

  • You let money decide whether you should strive for something.
  • You let money decide which job you should take.
  • You refrain from doing things you love because of the cost.
  • You refrain from getting an education because of the cost.
  • You look at the price before you look at the item.
  • You avoid discussing financial issues with people in your life.
  • You often come into conflict about money with people in your life.
  • You run out of money at the end of the month.
  • You habitually spend more money than you earn.
  • You hide behind the door when charities ask for donations.
  • You worry about money.
  • Your investments (or lack thereof) can keep you awake at night.

Money is your servant (and you are its master) if:

  • You understand how much power you yourself have to create your life… including your income and your wealth.
  • You get money to work for you and not the other way around.
  • You spend money to support your personal growth and development.
  • You let money flow because you understand that what you send out comes back.
  • You have a feeling that you’ll have enough to create the life that you want.
  • You have not chosen a job or career based on how much you can earn.
  • You spend time thinking about what you want to create in the next phase of your life.
  • You understand that you can spend money to help you get to the next level.

Here’s What to Do About It

Did any of the examples hit you in a sore spot?

Maybe it’s time to review your relationship with money.

You need to focus on increasing your income – and preferably from multiple sources – than on saving to invest.

The good news is that money is always on the move. If you’re looking for it, it’s looking for you too.

Money has no national borders, no need for sleep, and no language barriers. Money doesn’t care about your sex, your race, your skin color, or your age.

Money gets you the things you want. It’s an incredible servant if you let it be.

It’s about setting huge and ambitious goals and achieving them. Always ask what before you ask how much.

Life is not about curling up. It is about growing and unfolding.

Remember, a single good investment or business idea can create high return, and that can be the thing that gets the ball rolling for you.

Don’t forget to download my e-book Free Yourself where you’ll learn to invest as one of the best – super charge yourself through the plateaus. You can download it here.

Persistence: Seven Steps to Keep Investing in Stocks

Persistence: Seven Steps to Keep Investing in Stocks

by | Nov 14, 2021 | Mindset

If you examine how people succeed with almost anything, there is always an important ingredient that is just as crucial for their outcome as flour is for bread.

No flour, no bread.

What is it?

Persistence.

The ability to keep going, even when it gets difficult.

As Bertrand Russell says:

“No great achievement is possible without persistent work.”

It’s not rocket science, but it’s important.

Are you persistent with your goals and wants?

Whether it’s investing and researching companies, going for a run every morning, or writing a book.

The truth is that few people possess the ability to be persistent when things get a little difficult or uncomfortable.

It’s not that hard to be persistent with watching Netflix every night or going to the Friday bar. It’s the stuff that requires focus, sweat, or anything uncomfortable that is tricky.

In the stock world, many people give up the moment the stock market falls.

They get nervous, sell the shares, and never return.

How do you develop the ability to be persistent?

Here are seven steps to building it:

1. Identify a Strong Desire

It has to be something that you really want to achieve.

If you’ve tried something before but have stalled, could it be you’re not really interested and don’t think it’s really that important?

I taught myself to knit during my first maternity leave, and I knitted baby vests while the baby slept for naps. But I didn’t really have a big desire to knit. It was just something that was fun to do during the little breaks that occur when caring for a baby.

Do I knit today?

Not at all. And I don’t care. There are other things that have far higher priority for me (like investments, the blog, and teaching).

2. Have a Specific Goal

Wanting something is not enough.

You need to be specific and write what you want to achieve and by when.

It should be something challenging. Even better if it’s something you have never done before.

Sometimes we stop doing something because it’s no longer challenging and gets boring. As human beings, we are meant to develop and grow.

What’s the next level for you?

3. Find Out Why You Want It

Is there a deeper reason behind your desire and goal?

Can you find a reason that is related to doing something good for others in the world?

Keep asking yourself, “and why?” until you have exhausted your motives.

Changes are if, your goal benefits others, you will be more motivated in the long run.

If, for example, your goal is to invest and build a fortune, think of the things that you can do in the future with or for the people you love. Or the causes you can donate to.

If your goal is to eat healthier or exercise, you think of how you’ll live longer and have better health – and how you can be there more for those you care about.

Who would you like to do something for?

What would you like to change in the world?

4. Seek Information

Before you lay out your plan, you need to acquire information and knowledge.

Look at how others have achieved your goal and see if you can repeat the process.

If your goal is to run, for example, it may be a good idea to take a look at other people’s running schedules before making one.

You also need to get hold of running books, running blogs, and maybe join a running club and get a running coach.

The same with investing: Read books, read blog posts, listen to podcasts, join a community (you are welcome here in my Facebook Group), and take courses.

The information will help you devise a strategy and make a plan – but also keep you motivated.

5. Make a Plan

Have a strategy and make a specific plan with sub-goals.

If you want to run a marathon and have never run before, you may first need to make a plan to run 5k in a timed competition, then 10k, then a half marathon.

You need to make a weekly running schedule so that you reach your sub-goals.

You need to look at how important the small sub-goals are for the main goal. The same with investing. Have a main goal and set up sub-goals. How much are you going to invest each month? How much will your portfolio growth within 1 year, 5 years, and 10 years?

6. Decide Wholeheartedly to Do It

Make up your mind. No emergency exit.

Decide wholeheartedly to do something every day to move forward.

Even on a rainy day.

It’s the consistent daily actions that are the building blocks of your success.

7. Visualize The Result and Feel the Joy

Sports stars visualize their victories.

They see how they enter the field and score goals.

They feel the emotion and hear the audience cheering. They are positive and feel the excitement.

Studies have shown that it affects their performance. Statistically speaking, they actually score more goals if they visualize it first.

You have to do the same.

Stay focused on the belief that it can be done and feel the joy already today.

The brain doesn’t know the difference between fiction and reality. It will believe that you can do it.

That keeps you motivated.

The Road to Living Your Dream Life

When we are persistent, we have the opportunity to achieve our goals and dreams.

The biggest danger is probably that you slip back into your old habits and patterns because you get caught up in the everyday machine.

Avoid the danger of getting caught up in the fear of what could go wrong by visualizing the goal.

Remember that procrastination creates more fear and action creates confidence.

In the end, it comes down to taking action, building knowledge, experience, and habits.

Learn about investing like Warren Buffett in my free e-book Free Yourself here.

Five Tips for Making Good Investment Decisions

Five Tips for Making Good Investment Decisions

by | Nov 7, 2021 | Value investing, Mindset

To become a good stock market investor, you need to practice becoming good at making quick decisions on your own.

If you think about it, investing is all about being able to make decisions.

After all, decision-making is the core of investment if you cut it right down to the bone. You must be able to assess all possible information and make the call to say yes or no to investing in a company.

The ability to make a clear decision without relying on others is what sets successful investors – and people in general – apart from others.

When people come to me with challenges they face in the stock market, their problem is often due to the fact that they have left the decision-making to others.

Maybe they:

  • invested in specific company because someone hyped it up on a podcast.
  • bought shares in company because their neighbor gave them a “good investment tip.”
  • let the bank invest for them and are unhappy with the result. While others have benefited from 12 years of bull market, their fortunes have virtually stalled, and any profit has been eaten up by fees. Well, they left it to the bank to make the decisions.

Why You Shouldn’t Get Stock Tips From Others

A lot of people are looking for stock tips from others.

Don’t do that. You’re looking for someone to make the decision for you.

If you invest in a company because someone else thinks you should, you’ll quickly become nervous and fearful if the stock drops, because you don’t really know what reasoning is behind the decision.

Can you call that person up at 3 a.m. when you can’t sleep and ask them?

When the stock market takes a general dive, those who have invested following a “stock tip” get scared and sell with a loss.

They argue with family about the economy and sleep poorly at night. It affects their whole life. And that’s just plain wrong.

Making independent decisions is the key to success (in investing and all sorts of other areas of life).

Here are five principles for your decisions.

1. Make Decisions Without Asking for Advice

I’ve done it too.

You ask someone else what they think.

Should I go to the party or not?

Should I wear the blue or the red dress?

The next time you feel like asking someone what they think, stop yourself. Make the decision on your own without asking or talking with anyone about it. Instead, check in with yourself. You have the answer inside you.

Think of it as a practice that will benefit you as an investor… and in decision-making in general.

2. Challenge Yourself to Make Brave Decisions

We only have one life.

What do you want to do with your life? Play on the safe side? Or try your hand at new situations?

When I’m faced with a big decision, I try to ask:

“What’s the worst that can happen?”

If we move to Portugal, what is the worst thing that can happen if it’s a bad call?

It will be having to move back home again after a year. But then we tried it.

Just as you clarify the “worst case,” you must also give yourself space to expect the best outcome.

When you do that, you’ll be heading in that direction. The best case will become your target.

3. Make Quick Decisions

Search for the data you need, but once you have the information, you need to be ready to make quick decisions.

With ordinary everyday decisions, you need to know where the party takes place, what time it starts, whether you should be dressed up or not… and when you have the basic information, you decide if you want to go.

When it comes to investments, follow the checklist and get the questions answered, and once they are answered, you’ll make a decision.

As I say: money loves speed.

4. Change Your Mind Slowly

Once you’ve made that decision, stick to it.

Don’t glance towards the exit. Be faithful to your choice.

Only in exceptional cases should you change your mind.

When it comes to investing in stocks, this means that you have to avoid speculating whether you should sell every time you or the market get a little nervous.

Only reconsider if important new facts about the company emerge or if some key event changes the answers to the checklist.

5. Let the Money Go Work Its Magic

When it comes to everyday decisions, put your focus on whether you really want to have it or do it… and not so much on the finances behind it.

Of course, you shouldn’t throw all reason overboard and live beyond your means; Always make sure that your income is higher than your expenses.

But having said that, don’t let the cost or price of something be the deciding factor in your everyday decisions.

When it comes to investing, look at the company’s valuation and compare it with the stock price. But once you’ve done that and decided it’s reasonable and have invested in it, you must let go of the money. Kiss it goodbye, send it into the universe and let it do its thing. In other words, don’t stare at the stock price as it jitters up and down, as stock prices tend to do.

You need to have some faith in the process…and in your own decision-making ability.

Remember, you can download the checklist here and the e-book here.