4th Step to Financial Freedom: Wealth Accumulation & Increase Passive Cash Flow part 2

In looking at your assets or your family’s assets, you can see what are income producing and which are not. The goal in this 4^th step is to produce more income producing assets, thus providing more cash flow and asset growth.

Some people have cash to invest. However, the majority of people do not have cash sitting around doing nothing. We have to free up money and generate passive income to start wealth accumulation.

Here are some of the places you can find money to free up:

Home Equity - When your are planning to free up money from your home, you should make sure that the investment that you are going to put the money into is as secure as your home is. You have to feel comfortable with that guarantee as you feel with your home or land. You also need to know how much equity you have:

Equity = Value of your Home - Mortgage

There are three ways to free up money from home equity: 1. Second Mortgages work for people that do not have good credit.

2. Line of Credit on your home equity; with a line of credit you pay interest only with no principle, or you can pay as much principle as you’d like, anytime with no penalty.

3. Adjustable Mortgage is a mortgage and a line of credit all attached in one. This has a locked in portion and a line of credit portion. If you are worried about interest rates, you still have a regular mortgage locked in and a line of credit that fluctuates with prime rate. So every time you pay principle on your mortgage, your line of credit lending goes up. So you do not have to re-evaluate your house every time you need money.

More place to find money to free up on my next blog!

Making your Mortgage Interest Tax Deductible

Introducing a powerful way for you to turn the largest debt of your lifetime into annual tax refunds, knock years off your mortgage, and build a larger retirement portfolio at the same time, using legal tools from the CRA. Because you are able to deduct interest paid on money borrowed to invest it is all about paper trail. To be able to claim this deduction you must be able to show that the borrowed money did get placed into a qualified investment. The first step to making your mortgage interest tax deductible is to get a re-advanceable mortgage, such as a home equity line of credit. Next you must get as much liquid cash as you can from assets and investments. Use this liquid cash to pay down your mortgage, and then reborrow the same amount that you paid down. Use this newly borrowed money to purchase new qualified investments and you now have a legitimate tax deduction on that portion of your mortgage interest. Now with any tax savings or other lump sums of money you get, continue to pay down your mortgage, reborrow and invest. Use this method to continue to increase your tax deduction and build your retirement portfolio!

Interest and Carrying Charges Deduction

If you borrowed money to invest you may be able to deduct the interest and charges associated with the borrowed funds. The main exception to this is if the borrowed funds were put into an RRSP, TFSA or your personal residence. However, if it is a qualified investment and you are claiming investment income, you may be able to deduct the interest and fees paid on the borrowed funds, fees for managing the investment, safety deposit box fees, associated accounting fees, brokerage fees and investment counsel fees. If you have a mortgage on your personal residence and you have other assets or investments that can be turned into cash you may be able to begin transitioning your personal residence mortgage so that you are able to deduct some or all of the interest paid. Considering personal mortgages are one of many peoples’ biggest expenses why not make the interest a tax deduction. To learn more on this see our blog “Making your Mortgage Interest Tax Deductible.”