Put 10% of your money away each pay and do it consistently. This is not a rainy day account. No matter what life crisis decides to creep up and smack you in the face be sure you always put one-tenth of your earnings away.

This money is not to be spent, it must be invested. A good idea for those with an employer is to ask your payroll office to transfer a fixed (roughly 10%) amount into your saver account each pay. That way it goes unnoticed... by YOU

What happens?

Well, if you put $100 per week away in a regular savings account for 1 Year at 6% Interest you will have $5,357.91. Do that for 5 Years and you will have accumulated thanks to compound interest a whopping $30,308.82 !

Okay, is it possible to get rich from a compounding savings account? No.

$100 per week over 40 years at 6% return will compound to a total amount of $796,607. Having that invested will return $47,796 before tax. Yes, you can live a frugal life of that stream of income but how can we be rich? How can we live a life full of abundant wealth?

Apply Leverage

I bought my first property with a $1250 deposit, a steady job and a smile on my face. I leveraged that poultry sum to $125,000. That is leverage applied at 99%. Leverage is borrowing funds to buy an asset such as a house or shares. Simply put, make your money work for you.

Why is this better?

You can invest $1250 in an investment that returns 10% per year and have a return of $125. However, by applying leverage at 90% and we now have $125,000 invested. With a 10% return on the $125k we get a return of $12,500. If the interest and borrowing fees add up to 7% we would have a profit of 3% or $3750. Invest $1250 and get $125 or us leverage to invest $125,000 and get $3750.

You borrow to invest in an appreciating asset and get bigger returns. If the assets depreciates you get bigger losses. So do your research thoroughly and buy assets that will appreciate. Usually the higher the return the higher the risk. So invest in assets with an average return and amplify your results with leverage. Can we get richer faster than this? Yes - by increasing the amount you invest.

Spend Less and Invest More

Cut back on unnecessary spending. Shop for bargains, buy non-label clothing and downsize your SUV to a small car. Stop wasting time on your lunch break lining up to buy a chicken sandwich and spend that time at home in the morning making one quarter of the price. Do you really need that wall-sized plasma television or can you make do with a half-wall plasma?

The sales and marketing industry is very clever so the next time your strolling through your local markets and have an impulse urge to buy - STOP and THINK.

Plan when you need to buy your next big item such as your washing machine. Find the most cost-effective way of accessing a washine machine. You could research into leasing, using cash to bargain them down to cost price or go to your local laundrymat to use communal washers.

Yes, you will feel satisfaction walking out the store as the proud owner of your new toy but is it worth the cost? The cost of your financial freedom.

Robert Kiyosaki coined the term 'Doodad' for these wealth negating items. If it isn't a passive income generating asset then it is a Doodad. Stop wasting your money on them and start taking control of your financial future!

Invest More than 10%

Now that you have cut back on impulse buying and lavish spending put that money where it counts. Increase the amount you invest to 25%. If you put away $250 per week for 40 years at 6% with the glorious effects of compound interest you would have amassed $1,991,502 ! Now invest that and get a 6% income stream and before tax you would receive $119,490.

It is possible to invest 25% on a consistent basis which would lead quite a wealthy life in your later years.

Can you invest more? Maybe, you are struggling with investing 10% already. It's all about budgeting.

1. Sit down and work out the exact amount you earn after tax.
2. Invest 10%
3. Pay for your necessary expenses like food, transport, rent and utilities.
4. By now you may only have 20% left over. STOP and THINK. You can either buy yourself luxury items or re-invest this amount to live even wealthier later on in life. Remember the more you put away earlier in life the more effect compound interest will have.

There are many online compound interest calculators. Just go to your bank's website and look for savings calculator and enter the actual amount you have decided to invest each week. The variables you will need to enter [and the ones I used above] are the following:

• principal/starting amount  [$1]
• interest rate  [6%]
• contributions per month  [$1000]
• term [40 years]

Is that it?

No way. The above information is the basics. Pay yourself first by investing. Borrow to leverage your money to work harder. Cut back on frivolous spending and pump that into investing. What now?

Set Goals and Strive Towards Them

Have short and long term financial goals. This is my 1 year plan - I want to invest $200 per month into constant performing well managed blue chip managed fund returning 12%p.a. Meanwhile, any of my extra money I will put into my mortgage offset account which should according to my budget amount to $5200. Set goals that are challenging and definite - they will help motivate you when that Laser TV Wall Mount is advertised to the masses for 48 months interest free!

Make you goals and review them weekly. If your circumstances change modify your goals but keep them challenging. Be aggressive yet realistic with your investing goals. Read more on goal setting with the help of Napolean Hill.

You Must Keep Learning

No one cares about how much or how little you make from your investments. If they do then they are getting a commission. YOU must take full responsibility of your finances. Mind your own business! Closing your eyes and handing the money over to any managed fund or property investment trust is not the answer. Keep learning and researching on various investment vehicles. Keep looking at the figures and find out ways to make your investments more efficient. Cut the fat out the portfolio and turn it into a lean mean passive income machine by utilising your own ever growing library of knowledge.

On The Long Road to Riches

The average person works 50 years. From your first job to your last job put away at least 10% into investments. Be more aggressive to get greater long-term results. Borrow money to invest in conservative assets to utilise leverage. Set goals to stick with your long-term strategies. Keep learning because no-one else is going to look after your money better than you.

The three types of income are:

Active Income - Income for which services have been performed. This includes wages, tips, salaries, commissions and income from businesses in which there is material participation.

Portfolio Income - Income from investments, including dividends, interest, royalties and capital gains.

Passive income - Income received on a regular basis from a rental property, limited partnership or other enterprise with little effort required to maintain it.

Passive Income can be broken down into two types - residual income and leveraged income.

Residual Income

Income derived from sources which require your once-off direct involvement to set up but then pay out on a regular basis there after. Examples include:

• A marketing consultant who creates a workbook and sells it as an eBook online
• An insurance agent who gets commission every year when a customer renews his policy
• Royalties from publishing a book or from licensing a patent or other form of intellectual property. ie: A photographer who sells their photos photos through a stock photography clearinghouse and gets paid a royalty whenever someone buys one of his images
• An aerobics instructor who produces a video and sells it at the gyms where she teaches
• A network marketing or direct sales rep's income from her direct customers when they reorder product every month
• A restaurant or retail owner who has grown to the point of hiring a trustworthy manager

Leveraged Income

Leveraged income leverages the work of other people to create income for you. Some examples of leveraged income include:

• A network marketer who receives commission from each sale in their downline
• A eBook you wrote sold by marketers in your affiliate program
• A contractor who makes a profit by work done by sub-contractors
• Taking your business model and franchising it to other entrepreneurs

To read more about online sources of passive income check out my article at Blog Monies.

Other sources of passive income are:

• Pension
• Rental from investment property;
• Often portfolio income is labelled passive income

In order to sit on that beach sipping your mango shake without a care in the world you need to acquire passive income streams. The more the better. Yes, they take time to set up but seriously - Why work to make some other guy rich? Just remember, keep learning and apply these principles over time consistently and your bound to succeed.

Good luck and please comment below as to which passive income streams you have.

LifeMonies