Page 52 - December 2015

SCOTT ARNEY
Building wealth: back to basics (part 2)
FINANCE
You’ve certainly seen a steady stream of offers money is taken directly out of your gross earnings before you and claims of instant wealth. While many of these receive your paycheck.

schemes may seem to hold some promise, we

have established in last month’s column that there
Participating in a qualified plan is just one example of a step

are only two ways to build personal wealth: own-
you can take to begin developing passive income. Other common

examples include establishing a savings account, purchasing a certificate of deposit (CD), setting up an Individual Retirement
ership and the development of passive income.
In last month’s column we covered ownership, Account (commonly known as an IRA), and investing in stock or

the first wealth-building tactic. In this edition, mutual funds. Consult your financial adviser to review which

we’ll cover the need to develop passive income. choices make the most sense for you.

Passive income can be thought of as mak- Clearly, this two-step process of building wealth, through

ing your money work for you. Active income is the type of ownership and passive income, is not complicated. In fact,

i n c o m e t h a t y o u e a r n a s a d i r e c t r e s u l t o f y o u r l a b o r . T h e y o u m a y b e t h i n k i n g i t i s t o o s i m p l e . W h i l e t h e t w o s t e p s

salary that you earn from your job(s) is an example of aresimple,thedifficultycomeswiththetime,levelofcom-
active income. Dividends, interest payments, capital gains, mitment, and skill you will need to continually follow those
ally everyone.

and other forms of investment returns are all examples of two steps successfully. This plan will not lead you to riches

passive income. The importance of passive income is simply that overnight. In order for it to be successful, you will need to commit

it is not reliant on you being at a specific place at a specific time. to making good decisions over a prolonged period of time and

You will earn it regardless of where you are devoting your efforts. maintaining your self-discipline in order to stay on course.

It is an exponential expansion of your earning power and, like
Makingg ooddecis ionsa nd maintaini ngy our self-disci pli ne will also h elp you to s teer cl ear of the sche mes an d stra te gies most like ly to de tra ct from you r w ealth inste ad of help ing you to buil d moreofit. You ’vecertainl yheardth e oldadage: “Ifso methin g s e e m s t o o e a s y o r t o o g o o d t o b e t r u e , i t p r o b a b l y i s . ” T h a t i s n e v e r truer than when it applies to your financial choices.
CONTINUED ON PAGE 54

ownership, passive income is something that is available to virtu-

Two way stod ev eloppassiveinc om eare touti lize e mployer-
sponsored pre-tax contribution programs, such as deferred com-

pensation, 401(k) or variations thereof. It is easy because you can

set up your contributions directly through your employer and the

52 CHICAGO LODGE 7 ■IDECEMBER 2015