How are you prepared for the future? Are you going to be rich or will you always be someone who is stuck in “The Rat Race?” During adolescence and into adulthood; Many of us are so worried about going to college and getting a good job, that we don’t take the time to learn the reason for both; Our society revolves around the acquisition and expenditure of money. Many people get divorced specifically because of arguments about money.
So what are you doing now to prepare for tomorrow? One of the biggest differences between someone rich and someone who is always going to be stuck in “The Rat Race” is what they purchase!
For example: Let’s imagine there are 2 people who each receive a bonus or raise at work. The average person will take the money they receive, and immediately spend it on a liability; They buy a new car, a nicer house, vacation.. The person who is preparing for the future instead invests their bonus/raise in assets. They may purchase another house, but rent it out… They may invest in stocks that offer dividends, or maybe even invest that money in their own company on the side..
The reason people never stop working, even once they reach retirement age, is they spend all their money on things that cost them more money (liabilities). Many have a 401k (a tax-deferred, not exempt, government sponsored program) and they let other people control their savings. When you take money out of your 401k, you are taxed, and If you take money out before you are 59 1/2, you get taxed an additional 10%.
Many people have seen first hand that if all your savings are in stocks (like a 401k), and there’s a stock market crash; you “lose your shirt”. The only reason why you should have a 401k in my opinion is if your company matches, and only invest the maximum that your company will pay. If you want to be rich, a good place to start is to keep track of where your money is going, minimize your liabilities, and start investing! The secret to getting rich is how you spend your money. The rich obtain passive residual income. The poor spend their money on liabilities.
The majority of people don’t bother learning about investing in school, though obtaining more money is the main reason for getting a degree! I heard something recently that sums this up very nicely. “If you aren’t working on achieving your own dreams then you are only helping someone else (the owner of your company) achieve theirs!”
Money is a very different kind of thing than most people think. You don’t have to work hard for money except initially, once you have some; invest, and let your money work hard for you (earning interest)! The secret to wealth is not work hard for 40 years and hope your 401k did well, the secret is to actively invest in passive residual income.
The wealthiest people in the world don’t have to work to earn money anymore; they own assets which they earn interest from. In order to get out of “The Rat Race” you have to be aware of the true difference between an asset and a liability, and collect assets!
Speaking of the difference between an asset and a liability; It is a common misconception (for home owners) that your home is your greatest asset. A home is usually a person’s greatest (though a necessary) liability. You spend more than you earn from it. In reality your job is likely your greatest asset. A house is only really an asset if you earn more than you pay on it. A house is an asset for those who rent their house out, or house flippers. For most people, a house is only an asset in the rare case that they sell it for more than they spent both initially and while living there.
If you want to be the master of your own destiny, you must actively search for all details on every topic, learn both sides of the story, scrutinize the differences. Then, and only then, are you able to make an educated decision, ideally based on good morals/values, and empathy, and truly have the correct answer to any problem.