We know hard work is the ethic we were all taught as kids, but it does require a little more than hard work! How can it be that two people, who each work very hard, can end up a lifetime later, with such very different in levels of wealth? Allow for luck, allow for whatever, when one person has 10 times or a thousand times more than the other, and they both worked hard, what is the difference?

There's another work ethic - work smart, as well as hard! There is a strong, underlying principle here that's well worth understanding. We all use it already, but some accidentally. Those doing it purposefully are the ones with 10 or 1,000 times more. The more you use it, the more you can end up getting.

The principle is leverage. The crowbar. A little weight on one end and you can shift a huge load at the other, depending on where you put the balance point, the 'fulcrum'. This is a measure of how much leverage you use.

The principle of leverage works in so many areas and I devoted a chapter to it in my book "How to get Everything You Want NOW!" Writing this discussion note is leverage. Agmates allows me to put my information in front of potentially thousands of people at a time, rather than getting face to face with everyone, an impossible task. I write it once and it's out there for the world to see.

Crowbars are leverage - they enable us to shift logs, jack up tractors onto a chock when the tyre blows, prise out drawbar pins, and so on. But when the principle is applied to money, the difference is not in how much we can jack a tractor, but how much we can increase a profit.

Warning: Leverage works both ways. When the tractor is on the ground, it can't fall on you. Use leverage to jack it up, and it can! The same with money and leverage. Leverage is also called borrowing when we talk money and finance, and borrowings are good when the money you borrow works FOR you and MAKES MONEY FOR YOU! If your business or investment goes sour and you have money leveraged, the leverage makes it work against you - that's called INTEREST, which compounds over time and hurts almost as much as a tractor falling on you!

So what is it and how do we make it work for us?

Example. You have a good year on the farm and make $100,000 profit. You need a truck. You spend the whole $100,000 on a truck. Over the course of the next year, your brand new truck goes to work and makes you $10,000 in cartage fee profits and you get to use your truck around the farm as well. You could say it was a ten percent (10%) return on investment (ROI). But you have no money left. You have not used financial leverage at all.

However, if you leased that truck and you only outlaid $20,000 in lease payments at $1,650 per month, and still made $10,000, your profit can be shown as a 50% ROI. Same truck, same amount of work, and you still have $80,000 in your bank to invest elsewhere.

Further development of this example. You have an off season for the truck, say you only need it during the wheat carting times, and don't need it at all for 6 months. You dry hire it for that period, and make another $30,000 from it, at $5,000 per month hire to a freight company which needs it for a contract they have to fill.

Over the year, your truck has only cost you $20,000, but made you $40,000, and you still have $80,000 in the bank. A 200% ROI. Plus whatever you make with the $80,000.

OK, let's get real with this. Where can you invest a little and make a lot? Leasing equipment is one way, but it need not be a truck. It could be a harvester, a hay baler, front end loader, drott, excavator, cargo van, a whole variety of equipment, around which you can create a small or larger cashflow business. Don't do this unless you know the business is there to be done. Do a business plan for it and be very clear where the income will be to pay for it because ultimately, if you do it right, you needn't use any of your own capital for the investment, it can totally pay for itself!

When I bought my first dozer at Kingaroy, it was a month before it got home. I had forward contracts in place to do dams, stick raking and countours before I got it home and the lease payments were made with those moneys! It was paying me before it cost me a cracker! My drott was similar - I bought it secondhand, on a truck, and it was quite some time before it got home too.

If you structure your business strategies correctly and intelligently, it IS possible to have the business fund everything with forward contracts from before your equipment arrives, and have it in profit from day one! This flies in the face of traditional business thinking where you borrow to the hilt and don't expect a profit for 2 years. For me, that's always been a long and hard road and I can't recommend it. However, many of us are in that position but the 2 years has stretched way beyond that. Structuring a business strategy such as I have described alongside your existing enterprise, properly leveraged, can make a huge difference!

By properly leveraged, I mean leveraging the whole business! All you do is sign the papers and take delivery. Have a team of people in place to operate it - for example, if it was a backhoe, have forward contracts in place and an operator and marketing person hired. If you ever see the machine, you are doing it wrong - all you want is to see the accounts of the business built around the machine and the forward contracts that make it worthwhile. This is a "Business Strategy".

What else can you do? Some people have used credit cards (careful here!) or a small trading account to make a small investment in poddy calves, or rare motorbikes and other items off Ebay, keep them a little while for a quick resale and pay out the credit card with the profits. This is a "Trader Strategy" and not for everyone.

To do this trader strategy, you need to really know the market for the item you intend to trade in. You buy low, sell high and possibly value-add in the meantime. It's a fast turnover strategy, unless you are on a large scale. Some people start with a fixed budget, eg, put $5,000 into a trading account and work with that. My current neighbour for example buys motorbikes off Ebay. A Honda Gold Wing (getting rare now) in ordinary condition for $1,500 to $2,500, brings it home, paints and polishes it, complete tidy up, tune the motor, and sells it for $5,000 within a fortnight! He has done this with a Honda 500 (1974 model), 2 Gold Wings, a Yamaha 1,200 tourer, a swag of trail and enduro bikes and has picked up a couple of nice "keepers" along the way! Each larger bike has made him between $1,000 and $2,500 over the fortnight. The smaller bikes $500 - $1,000. He has 2-3 on the go at any one time...

If you are a trader type personality, happy to haggle over buying and selling, what are you a specialist in, that you could apply those unique skills to? Those are the requirements - ability to buy and sell, and an expert in that field, with a small budget available to you.

You will notice I haven't suggested "investments" here... If you look at the published yields of Super Funds for example, as they have been in the news over the last 2 years in particular, over a 10 year average, you should be able to expect a 5% to 7% yield. Over the last 2 years though, they are 25% MINUS! Investments are a whole different strategy and you can do a lot better than this, but that's a different discussion paper! However, if you invested $5,000 and it only yielded 5% per year, you just made $250! Congratulations! Whoopeee!

One more highly leveraged way of doing business that is in the minds of many people, is "off farm real estate". Whether residential or commercial, if you put a 10% deposit into a property and borrow 90% from a bank, the combination of rental income, tax deductions on loan interest and ownership costs, and depreciation may just make it cash flow positive now that interest rates are down at record low levels. However, this is NOT a cashflow strategy. You will not make buckets of cashflow from investment real estate as a general rule. This is a "Capital Gain Strategy" where over time, a well selected investment property can increase in value, while it pays most of its operatiing costs in the meantime. In 5 years, maybe more, a property bought well could increase in value by 20%, even 50% or more, depending on a variety of factors. That then gives you the choice of whether to cash out and take the increased monetary value as a "capital gain", or borrow against that increased value and invest more, elsewhere.

As there are hundreds of books written on this strategy, I won't go deeply into it except to say that for anyone who wants a specific question answered, I would be likely to have an answer. One of my books is called "6 ways to buy property with no money down" and it is a segment of one of my seminars. There are many ways to fine tune property buying and investment strategies and I have helped numerous clients with them. However, we can't cram a 500 page book into here, nor do we need to, the information is already out there.

Here, I want to raise your curiosity and awareness levels of what is readily available to you, and help with specific questions from there.

Now, it's your turn. What are your experiences with creating money with just a little down? What worked? What didn't? What can you warn others about from your experiences, or recommend as a great way to start? I'm happy to answer any questions as I have been teaching these strategies for almost two decades now and I am here to pass this information on.

Keep me busy, folks!

Ray Jamieson