For instance, say you work in drywall for a local construction firm and your wife is a school teacher. That's two sources of income that aren't likely correlated (meaning if one gets laid off, statistically, the odds aren't that the other will be affected whereas if you both worked in the jewelry industry during a massive recession, that might be a higher probability). Now, imagine if you also owned an ice cream stand in town. You could save much of the labor by doing the work yourself and during summers, she could use her three month vacation to work behind the counter, saving labor. That's a third source of income that has nothing to do with your other two jobs. On top of that, you take all of your profit and buy into a low-cost dividend index fund that generates 3% to 4% in cash income each year, while the underlying stocks continue to grow over the long-term; that's a fourth source of cash.
When you keep your fixed expenses low, and use the tax code to your advantage by only borrowing (if necessary) for cash generating assets, a collection of diversified cash sources can help you build wealth much faster. That's all your trying to do to get rich - put more of your money to work - nothing more, nothing less. As one financial writer once said, it is that simple and that hard.
4. Maintain prudent levels of insurance coverage
Too much insurance can cost you millions in ultimate wealth because you'll end up making the insurance company rich instead of building your own portfolio. On the other hand, too little or no insurance can leave you devastated at the very time when you are much vulnerable. That's why a wise mix of life, health, disability, and some even argue retirement funding insurance can be an important part of your overall planning strategy.On this topic, you'll need to delve into a more specialized source. About.com has a tremendous amount of information on insurance both for individuals and businesses so I encourage you to browse the network for information by some of our other guides.
5. Don't tap your retirement accounts for any reason short of health problems
This isn't always true, but for the most part, it's a horrible mistake to tap into your retirement accounts to pay bills because in the event you need to declare bankruptcy, courts will often allow you to keep a major portion of what you've put aside for your golden years. Not to mention that any withdrawals would likely be taxed heavily and incur penalties from the IRS.That's part of what worries me about the most recent credit crisis. People might very well be tempted to cash out of their 401k or IRA accounts to keep up the payments on their primary residence. If they can't get themselves out of the mess, or they are hit with a run of bad luck such as losing a job, they have now decreased their net worth substantially, transferred a bit portion of their wealth to the Federal Government, and are still left wiped out with nothing, or very little, to their name.
Had they managed the crisis with more knowledge, they might have been able to salvage a big part of their assets even if they did lose their house. That would make it far, far easier to start over and that's what you should be concerned about if you ever reach that point. As many of you will no doubt remember the words of the immortal King Koopa (Bowser), enemy of Mario over 25 years ago when he debuted in the United States and later had his own television show: "He who lives to run away lives to fight another day." That same advice would serve many people facing disaster well.
