Wednesday, July 9, 2008

The Road to Wealth is Stuff ---- NOT!

My dictionary defines wealth as "A large aggregate of real and personal property." To me, this means "lots of stuff." Is wealth about how big your house is, or what car you drive, or the new stereo or computer or other fun piece of consumer electronics you just bought? Or might your stuff be actually getting in the way of your ability to develop true wealth?

If you look at the difference between the way rich people, middle class people, and poor people spend their money, you begin to see where some of the differences begin. Each of us has choices in life, sometimes very limited choices, and sometimes a great number of choices.

When you choose to spend your money, do you spend it on liabilities or assets? Now watch out, this is something of a trick question.

If you are talking traditional accounting, an asset is something you own and a liability is something you owe. If you own more stuff than you owe, you are rich!

"Take advantage of your most valuable asset!" cry the home equity line of credit ads and the online insurance quotes. "Put your house to work for you with home equity loans!"

Until the bad times come & you have to liquidate your assets to pay off your liabilities.

But for a rich person an asset is something that produces income while a liability is something that buys you stuff. And since most stuff is bought on credit these days, you have a double liability of paying interest on top of the price of your stuff.

So if you want to move in the direction of "Rich" from wherever you are at now, you have a choice to make each time you get ready to spend money.

You have to decide "Is this purchase a true asset?"

Ask yourself if this will help you increase your income. Assets include educational books, tapes & movies if they are part of your business or your profession. A car or truck may be an asset or it may be a liability. Think hard now. If you are a gardener, a reliable truck can increase your income. If you are a realtor or salesperson, a mini van or SUV can allow you to drive prospects. If you are a fashion model, that breast augmentation could very well be a sound business investment. But if you are a claims processor for a health care insurance company, all of these purchases constitute "stuff" and will only keep you trapped where you are.

Browse this blog for ideas to convert your cash into assets instead of stuff and move yourself along the path to wealth.