The Rules of Wealth

by Richard Templar

  RULE 83

  Be one step ahead of your tax collector

  You must never ever try to evade paying your taxes. If you do you will go to prison – and quite rightly so. No, I am not on the side of the tax collector. There’s a difference here between evade (criminal) and avoid (sensible). There is a line between making sure you aren’t giving money unnecessarily to the tax collector – avoiding – and deliberately evading tax illegitimately. Cross that line at your peril. But there should be no need to do so. There are many good people out there who will give you all the advice you need.

  The more money you have, the greater the need to avoid tax – I stress this is not the same thing at all as evading – and the more expensive it becomes to do so. Obviously there is a tipping point whereby you are obliged to hand over your tax affairs to experts – who naturally cost an arm and leg – so you can avoid paying the tax collectors the other arm and leg you have left.

  THERE ARE MANY GOOD

  PEOPLE OUT THERE WHO

  WILL GIVE YOU ALL THE

  ADVICE YOU NEED

  As you move up the prosperity ladder the tax issues get more complex. And there are all sorts of options. But remember the tax collectors are closing loopholes, changing laws, cutting off avenues as fast as you and your expensive experts can devise ways of avoiding tax. It’s like a chess game only much more exciting and expensive.

  I am not going to give you any specific advice because it changes too quickly and I don’t want to get sued, but areas worth bearing in mind are:

  Consider establishing a limited company – it can attract less tax and give you all sorts of options not available to the ‘self-employed’. I’m assuming you are making some money – if you aren’t, there is obviously no tax to save as there is no tax to pay. Bear in mind also that anyone can get your company records from Companies House so if you are bigging yourself up you can get caught out.

  Always make sure you make full use of your allowances – use them or lose them.

  Always consider if something is tax deductible before you buy it.

  Become a resident in a tax haven – but be quick as they are being shut down fast.

  Invest heavily in your own pension fund – it grows tax free, or as about tax free as you can get these days.

  Become a tax nomad and wander the world not paying tax anywhere – watch out as a UK tax liability will arise when either income or a capital gain is remitted into the UK and there are circumstances when you can be based abroad but still pay tax (it depends on residency, ordinarily residency and domicile).

  And, of course, make sure you are well up on investments that you don’t have to pay tax on – get good advice and be willing to pay for good advice.

  RULE 84

  Learn how to make your assets work for you

  First off, do you know what assets you have? This means both long-term assets (fixed assets) and short-term assets (current assets). The fixed assets are the ones it would take you a while to turn into cash and the current assets are the ones easily converted into readies. Have you listed them? If not, do so now. I’ll wait.

  Back already? Got your list? I hope it has some of the following on it:

  property

  land

  motor vehicles

  pension funds

  cash

  goodwill

  works of art, antiques etc.

  investments

  money owed

  furniture and other possessions

  patents

  stocks and bonds

  intellectual properties.

  If you have a business it may also include things like:

  stock

  work in progress

  raw materials

  plant and machinery

  equipment

  trade marks

  mailing lists.

  Once you start writing them down as a list you begin to see endless possibilities for using assets to make more money. Basically the advice is:

  Don’t let an asset sit idle – if you own property, rent it out. And I don’t just mean buy-to-let. Some enterprising people have rented garages or small bits of land they don’t use in areas where there isn’t enough parking for commuters and so on. Think laterally and don’t discount anything!

  No asset is beautiful unless it is working for you – it has to be accumulating, increasing in value, to be worth keeping.

  Never leave cash sitting around – it tends to get bored and wander off. Make it work.

  YOU BEGIN TO SEE

  ENDLESS POSSIBILITIES

  FOR USING ASSETS TO

  MAKE MORE MONEY

  RULE 85

  Don’t ever believe you’re only worth what you are being paid

  Those who believe they are only worth what an employer pays them are almost always selling themselves short. Big companies depend on people not questioning their worth. Don’t let them get away with it.

  There are several points here. Firstly, it’s a fact that if you work for an employer, those who change their jobs fairly frequently tend to get pay rises each time and therefore end up earning more than those who stay with the same company (maybe for very good reasons, like being happy). If you are staying put you have to learn to ask for more and demonstrate how you are adding value to an organization to justify being paid more.

  Secondly, no company is ever going to pay more for anything than they really have to. You need to be proactive and ask for more, and show you are worth more. It requires you to take action, however. Don’t wait to be recognized. If you are freelance the same applies – nobody will suddenly offer to pay you more for your work – you need to be proactive and show you are worth more.

  Thirdly, if you think you are always worth more, it makes you restless, ambitious, keen to get on. If you accept what is offered and never question it, then it makes you complacent and you’ll get taken for granted.

  Now this is not a book about how to get a pay rise but here are a few tips.

  Be very clear about what you think you are worth – and why. If you have worked harder, achieved more, produced more, got better results, then you are entitled to say so and ask for recompense.

  Don’t bargain just for money – always take into account cars, pensions, holiday entitlements, responsibility, working environment and space, staffing, whatever it is you want.

  If you do get turned down, always find out why and what it is you could do to get what you ask for.

  Return after putting right whatever was wrong in the previous point.

  Never compare yourself with anyone else – you are unique and there is no comparison.

  Getting more money – or anything else – is a matter of negotiating. Those who are good negotiators get more. It’s as simple as that. Brush up on your negotiating skills (see Rule 34). And don’t moan if you don’t get what you want. Work harder and go back again.

  IF YOU THINK YOU ARE

  ALWAYS WORTH MORE

  IT MAKES YOU RESTLESS,

  AMBITIOUS, KEEN TO GET ON

  RULE 86

  Don’t follow the same route as everyone else

  Obviously you can follow whatever route you want, but you might end up in the same place as a lot of other people. If that is a good place, you’ll have to share a lot. And if it’s a bad place, why be there at all?

  Being creative is a brilliant way to make money. Look at all the best moneymakers and one of the things they share is the ability to be one step ahead, to think creatively (out of the box if you like), to come up with schemes and ideas that other people haven’t thought of. This doesn’t mean you have to be reckless or a gambler. It just means thinking differently from other people. But that’s the problem most people have. Following the herd is terribly comforting. If it all goes wrong, being in a herd gives a collective feeling of shared grief and the opposite of shared blame. Be a loner and going wrong is a tough cookie to swallow.

  And the converse is true. If it all goes well and you are
in a herd you can celebrate together – shared joy. A bit like being at a football match. It’s a good feeling.

  BEING CREATIVE

  IS A BRILLIANT WAY

  TO MAKE MONEY

  It takes a person of real courage, confidence and maturity – not to mention creativity and drive – to stand up and go your own way. You’ve got to be pretty confident to turn your back on shared joy and shared grief. In the great stock market crash of October 1987 an awful lot of people lost an awful lot of money. Two who didn’t, and got out of shares and into cash in August, were the billionaires Kerry Packer and Jimmy Goldsmith. And remember that the closer you get to becoming a winner, the less risk you want. And the nearer to losing you get, the more you are inclined to gamble.

  I saw a website the other day – an investment broker’s one – which claimed to show the five most popular stocks and the reasons why you should sell them now no matter what your friends, neighbours or family say. These stocks have been so high for so long that they must crash soon. Sell now and get out ahead of the crowd. I was thinking that real money-makers wouldn’t have been there anyway but would have been out there investing in something none of us had even thought of.

  Lots of people invested in ostrich farms. Where are they now? Lots of people invested in worm farms. You bought eggs and turned them into worms and the big worm farm would buy them back. Loved that one. Yeah, right. Of course they’ll buy all your worms back off you.

  One of my sons invested £10 to start his own giant snail business. He bought two giant snails to breed with (or should that be from?). He fed and looked after them for about six months when I had to break it to him they were snails out of someone’s garden he’d bought. He wasn’t alone. Loads of kids at his school were sold the same dream. And the same snails.

  Now you’ve got wealth, you don’t want to let it go, so the next section is how to hang on to it once you’ve got it. Assuming you now know to avoid the giant snail scams and the ostrich farms. How to preserve, protect, enjoy and maintain it. After all, when you’ve finally got it, you don’t want to waste it, squander it, throw it away or give it to me. Actually the last one isn’t true. You can if you really want to.

  There are endless websites all offering to look after your money for you. Ignore them all. They usually say something like: ‘Start your own wealth freedom journey today – no time to lose!’ All you have to do is sign up for a newsletter and buy a ‘get-rich-quick’ book right away. They promise to make you a millionaire within three to five years.

  Perhaps you should ask for a refund on this book because I promise you nothing beyond hard work, dedication, focus, creativity, standing out from the crowd, forward planning and the honest sweat of your brow. Gosh. No promises there at all.

  RULE 87

  Shop for quality

  My lovely wife taught me this one – credit where it is due. When we met I was a great one for finding a bargain – two chickens for the price of one at the supermarket, that sort of thing. She, on the other hand, bought less (I never did do anything with that other chicken) but bought quality. So I would cook a thin and sick-looking chicken and drink it with cheap white plonk and she would provide lobster and champagne. You can see why I fell for her.

  I bought five cheap T-shirts in a pack and she bought an immaculate one of much better quality. Now her stuff:

  lasted longer

  washed better

  looked better with age

  kept its colour better

  kept its shape better

  said more about her in a positive way

  took less maintenance (I drove a cheap car that was always breaking down and I missed meetings etc. whereas she drove a better car and always arrived looking calm and immaculate).

  She taught me that the money I was spending, although less, was being wasted because I had to replace stuff much more often. I was throwing money away and looking cheap at that.

  Shopping for quality rather than price was a hard lesson to learn. I had to discard all those money myths from my childhood:

  Don’t spend more than you need to.

  No one needs to look that expensive.

  It is somehow wrong to spend money on yourself.

  It is somehow better to get a bargain than to buy quality.

  Shopping for quality says masses about the way you live, the way you conduct yourself and your business. It says quality to others who will adjust the way they treat you. It also saves you money in the long run – cheap can often be a false economy.

  SHOPPING FOR QUALITY

  SAYS MASSES ABOUT THE

  WAY YOU LIVE, THE WAY

  YOU CONDUCT YOURSELF

  AND YOUR BUSINESS

  RULE 88

  Check the small print

  I could write you a contract promising you a cast-iron, no get-out clauses, guaranteed, money back without quibbles, cross my heart and hope to die in a cellarful of rats, sort of thing that would stand up in a court of law and withstand any scrutiny you cared to put it under. What am I selling? It doesn’t matter. Small print can cost you dear. Check it carefully.

  I love the sort of small print classics, such as taking shoes back that don’t fit only to be told they can’t be refunded if they have left the store. Or the small print on medications that say they can make you sick and you can’t sue. Or the small print on computer software that says you are bound by the agreement if you break the seal on the packaging – and the software can’t be tested until it has been run and you can’t run it until you’ve installed it and you can’t do that until you’ve broken open the packaging. Agh!

  SMALL PRINT CAN COST YOU

  DEAR. CHECK IT CAREFULLY

  There’s a wonderful story of someone who sold their soul to the devil. The devil wanted five years off their life and the person reckoned it was worth it. Oh no! He didn’t check the small print. The devil took five years off his life all right – the first five years. Agh! Can you imagine what missing the first five years would do to you? And you thought credit card companies were bad?

  What do I mean by ‘checking the small print’? What do you actually have to do? Three basic things:

  Obviously check that it covers you for what you want.

  Check there are no hidden clauses that will twist the basic meaning of the contract.

  Check for penalty clauses – ones that penalize you for late or non-payment of anything.

  It’s a bit like checking the small print on food packaging. If you don’t like what’s in it, don’t buy it. Move on up the aisle and buy organic, green, fresh, unpasteurized, whatever. If there is small print, the hairs on the back of your neck should be rising. There is only one reason for it to be there – to trip you up. Move on.

  RULE 89

  Don’t spend it before you’ve got it

  Gosh, this is a hard one for me. I have to admit I find this one of the most difficult to take on board.

  How am I to learn this one? Any tips?

  I know I should:

  budget for today and only for today – if I don’t have it, I don’t spend it

  ignore what I think or know is coming in, in the future

  put loads aside for tax – no, even more than that

  have no loans, overdrafts, no borrowings of any sort so I won’t be tempted to use future income to pay off debts run up today – or the reverse, run up debts today knowing that income from the future can be used to pay them off (very naughty).

  The downside of spending future income is:

  the income may not materialize or be less than you thought (counting chickens that never hatch...)

  the bubble has to burst somewhere and if you are always spending in advance you will get caught out one day

  it encourages sloppy financial planning

  whatever you bought will have long lost its appeal or wear out, get broken or even completely forgotten

  you lose touch with reality – the future isn’t real until it becomes today – and as such you can o
verspend only too easily.

  I guess I need a four-point plan:

  Question whether I need a particular thing today or could wait until later to buy it – a useful ploy as once the ‘blood lust’ has worn off the appeal often wears off too.

  Question whether it is worth it. Obviously, if buying today against tomorrow’s income, I will incur interest – so is it worth the extra?

  Question the risk factor. If I commit myself today, what if my circumstances change and I need that future income for other purposes?

  Question that if I spend today I might not have income for a really exciting spend that might come up – better to keep it just in case.

  Follow this plan with me and it should reduce our credit card balances considerably.

  THE FUTURE ISN’T REAL

  UNTIL IT BECOMES TODAY

  RULE 90

  Put something aside for your old age – no, more than that!

  When you realize you are cracking along fast in the outside lane of the age motorway and can see less road ahead than there used to be, you should be keen to make sure that if you do stop earning you will still be able to afford the level of style, luxury and comfort you now enjoy or want to enjoy.

  There are some really good reasons why you should put aside money for your old age:

  You can’t rely on the state any more.

  If you don’t save for yourself, then you may have to rely on the kindness of strangers – or family, which might be worse.