Backstory. This article stems from a reply on a video by Beau of the Fifth Column sharing his thoughts on Patty Hearst, the homeless, and pitchforks.
In the video he uses an example of Jeff Bezos and what he could accomplish if he used his net worth to directly affect homelessness, and I disagreed with the premise itself because it failed to consider a few things, for example the 300,000 plus employees that would be out of work at just one of his companies.
The conversation turned toward financial intelligence and wealth inequality and I took the time to explain a lot of the things that I learned on my journey to achieve financial freedom (wealth).
I’ve included the video here for you to enjoy, but most importantly, I decided to share some of the financial advice that I learned along the way, and I hope that they will help you as much as they helped me.
Leave me a comment below and let me know what you thought. Which piece of advice was most relevant to you?
Financial Rules I With They Taught Me In School
1. Stop caring where your money comes from. There are many ways to make money, but people tend to limit themselves to making money only from one way.
We hear it all the time, for example, “you want to make money? Get a job“. That is absolutely ridiculous thinking that leads to poverty.
As long as it’s legal and ethical, I don’t care where my money comes from. That was the hardest lesson for me.
2. The wealthy are wealthy because the find two or three ways to make money doing what they’re already doing.
This is a really important one because most people only get 1 paycheck. What if you could make 2 or 3 or more?
For example, I run a music business. I was teaching music privately. That was one paycheck.
Then I wrote a book teaching music theory. I did the work once and it pays over and over again. That’s two paychecks.
Then I started a music blog syndicating news from other sources and I earn money on advertising AND I receive a commission for music sales.
That’s two more paychecks.
I’m in the process of creating different products and services to sell. That’s two or three more paychecks.
I do the work ONCE and I get paid over and over and over. I turned one paycheck into many paychecks, and I didn’t have to take on any large time commitments.
That skill is important because of this next one.
3. The game of wealth boils down to having more assets than liabilities. To simplify this, at the end of the day an asset is anything that puts money in your pocket, and a liability is anything that takes money out of your pocket.
Owning a home is a liability. It continues to cost you money. Maintenance and upkeep, mortgage, taxes…
The value, (financially speaking), is the equity, which isn’t worth anything until you sell your home, (there is an important lesson about this coming up).
Your car is a liability too.
Your home and car are obvious liabilities, but there is also a liability that most people don’t recognize – their jobs! That’s right, your job can become a liability.
Your job is an asset as long as it pays more than the liability.
It costs money to have a job. You have to pay for clothes, (some people pay for uniforms), some have union dues, gotta pay for gas and maintain your ride, transit if you don’t have one, you have withholdings for taxes, etc.
In order to have a job, you need a place to live, and a working telephone, and a way to get there. This by the way is why homeless people can’t just go out and get a job. It takes a lot more than a shower, a haircut and good clothes.
All of the things needed to find and maintain a job are liabilities.
This is why companies will lay off employees. When productivity drops, employees are still costing them money, (maintaining safety standards, retirement and health insurance contributions, and more).
TIP: If you have a job, the BEST way to keep it, or get a raise, is to show your employer that you’re an asset, not a liability.
So, at the end of the day, if you are making MORE money than the liabilities you have, your job is an asset.
If it’s not covering everything, it’s a liability. You still have to pay to keep your job, but it’s no longer covering everything.
The solution most people have is to decrease their lifestyle. They’ll cut back, try to save. Those are SHORT TERM solutions. The long term solution isn’t to decrease your lifestyle, it’s to INCREASE your income.
Getting a second job, putting in more hours… those are also short term solutions because you’re trading time for money, and you only have so much energy and so much hours in the day, and if you fall sick or die?
You have to create more income. This is where #1 and #2 come in. You have to stop caring where the money comes from, only that it’s legal and ethical, and you have to find more ways to make money doing what you’re already doing.
The game of wealth is this. Have more assets than liabilities.
Addressing the previous point where I said there is a lesson coming up, here are three guidelines the wealth use for HOW they spend money.
4. They understand that all money is someone else’s money. The only reason to build wealth is to spend it. It’s not your money. You’re only holding on to it to give to someone else for something of value.
You have to start thinking in terms of, “what will I trade this money for?“. If you’re saving for retirement, the money belongs to the people you’re going to trade it to for what you need – the electric company, healthcare, etc.
ALL money is someone else’s money. We have to lose the idea that it’s “my” money.
Jeff Bezos for example, has a huge net worth. But that’s not his money. That’s his employee’s money, and the power company’s money, and his investors’ money, and his affiliates’ money, and everyone else that he spends money on. That is their money. It’s not his.
Divorce from the idea that we own money. We don’t. Money is just a tool that we hold on to for someone else.
5. This is the big one – Money only has value when it’s used.
You got a million dollars in the bank? You don’t have anything of value until you spend it. Until then, it’s just ones and zeros on a screen, numbers in a register, or numbers printed on a piece of paper.
It will do nothing for you until you use it. And if you just let it sit there, it devalues over time, so you end up with less money than you started with.
You have to put money to work. If you don’t use it, you will lose it.
Like your home. Equity does you no good until you use it. If your home is a liability, one of the best ways to turn it into an asset, is to rent or lease it out.
You’ll learn this about the wealthy. They rent where they live, and own what they rent.
Did you know, that for the same cost as a traditional home, you could get a commercial building?
A lot of real estate investors start out, not buy buying a home, but buying a small apartment complex for roughly the same amount of money. They will live in one of the units and rent out the others.
They still got their mortgage payments, except now they have tenants, and they’re making more money than the payments on the building and if it’s done correctly, they essentially live in their own building rent free.
Each rented apartment is a stream of income, and they continue to work their jobs. So if instead of a house you get a duplex, live in one, and rent out the other.
I’m not saying go out and do that. I’m using that as an example. There’s a whole LOT to learn about real estate investing that you should learn.
Okay, I lied. I’m sorry. You’re not getting 5 rules. You’re getting 6.
6. Outside of necessities, don’t spend money unless there is a tax benefit, makes you money, or has the potential to make money.
That third one is a book when you break it down. Bottom line, you have to become money smart, and apply the strategies that opens the door to new opportunities.
In other words, before you spend money on something, ask yourself, “is this a liability or an asset? Can it become an asset?“.
When you think in terms of assets and liabilities, and only spend money when it benefits you, (a tax benefit, makes you more money, or has the potential to make money), you’ll find that you have a lot more resources than you think you do.
As a BONUS, I’ll share with you something that literally changed my life.
It’s a financial lesson that I received on a Monday night call with someone who I watched make over a million dollars over the course of 8 months to a year, from scratch. It’s always stuck with me.
He said, “Your bank account doesn’t reflect who you are, but who you are being and your thoughts about money“.
Wealth is a mindset and money game that anyone can play, and quite frankly, should play.
On the topic of money, there is a book I highly recommend. It’s called Money Master The Game by Tony Robbins. It was instrumental in helping me transition from working a job to running my own business at home, and is continuing to help me as I work toward building wealth.