Modern Business

Level of wealth is not measured by the amount of actual income, but rather depends on the character of earnings management. In short, no matter how small the income, it is possible to be rich if they are willing and able to innovate in financial management. What is financial innovation? It is simply doing different things in financial management. For example, if most people use credit cards to get into debt, in the corridors of financial innovation, use of credit cards is to take advantage of grace payments so that you can use the funds of others, in a certain period of time without any cost.

So, if you shop on this day and then pay it off before maturity, meaning you can get additional cash flow in period, which can be used for various things.

Imagine, if you can buy goods at a price of “X”, for example, then resell it at a price of “X” plus a profit, you have to do business without capital, and even make a profit. In other words, debt that is used for productive activities is one of financial innovation, moreover, if the debt itself was obtained without any costs like the use of credit cards. What if it raises the interest cost of debt? No problem. As long as interest costs are still lower than the benefits, you still belong among the innovative. So, in sum, develop an asset could be done without capital. It was obtained from the debt capital then used to do business. And business results are capable of providing higher returns than the cost of debt itself.

Another example of financial innovation is to have as much earning assets compared to the asset consumer. Have you ever seen the traders who lived in a shop house, where the lowest floor used for trade, while the upper floors used as a residence? That is, a place of business and residential units into one. In other words, the shop houses are not just houses, but have been a productive asset that can generate money, or the place to do business. How about you? You may have houses more than one. And you do not live in the house every month instead drains your pockets because it must pay the cost of electricity and other maintenance costs. In fact, housing conditions continued to decline due to age and other factors. Concretely, some houses that you have not are only not productive, but instead become a burden. Therefore, those homes should be made productive in terms of revenue, such as leased to another party.

Financial innovation can also be done by choosing the right investment. Understanding the right investment here is how to send your money “work” for you. So, money makes money. How? Perform active investment. Active investing is a regular select and evaluates investments that have been made. In capital markets, for example, some circles to buy stock then continue to hold it in long periods of time, with the hope of obtaining dividend and capital gains. It’s not wrong. However, in a period of time, could have held the stock price decline in price. Among which holds these shares may be indifferent or even sell it for fear that the stock price will decline.