Is Your Money Working for You, or Are You Working for Your Money?

by on August 16, 2010 · 3 comments

It’s a simple question, with a simple answer. Do you work for your money, or does your money work for you? Yet getting to the point in your financial enlightenment of having your money work for you—earn money of its own without you lifting a finger—is oftentimes difficult.

                Let me back up a moment. In my quest to not only master frugality, but to then grow my savings with the proceeds from my low-expense life, I am reading this incredible book called Rich Dad, Poor Dad.  In plain and simple language, this book lays out the financial lessons that are not taught in school, the ones that the wealthy teach to their children, or at least the information that the author was privy to while growing up.

                As a person who was raised in a normal financial household—by educated parents who did not have much money—let me tell you that the words in this book are eye-popping to me. As I read new excerpts, I would periodically run into the living room while Paul worked on his Facebook Farm, and spurt out sentences that particularly rang true to me. I am excited to share some of these nuggets with you.

Money Issues do not Dissolve Because You Acquire More of It

This is seen countless times in the news, when someone wins the lottery and ends up bankrupt a few years later, or when actors and actresses declare bankruptcy (and we are all left to wonder, dumbfounded, how on earth someone with even a million dollars, let alone 5 million dollars, can lose it all). In other words, in all but a few cases where the adults do not make enough money to cover necessities, making more money is not going to solve your money problems.

But this is also an exciting proposition for everyday people like you and myself who have decent jobs and make decent money, but not loads of money. This concept means that you do not need to have money or to make lots of money in order to acquire lots of money. You simply need to widen the gap between your income and your expenses.  

Working for Someone Else Will Not Get you Rich

What? But what if I love my job? What if I don’t want to start my own company? These are the questions that ran through my head as I read this. Well, that is fine, and you can certainly work for the rest of your life for someone else, make a decent living, and have a great life. If this is what you want to do, you need to make sure that you break the cycle where you acquire things you do not need, then have to pay them off which makes you have to work harder in order to get paid more… to acquire more things… If you fall into this constant loop, then you will never increase the gap between your income and expenses in order to do the next step.

Acquire Assets, Not Liabilities

“Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets.” What an intriguing statement. The author goes on to explain that assets are defined as something that puts money in your pocket. Period.  

Think about your own life; are you acquiring assets, or are you acquiring liabilities? In this category, I give Paul and me a “C+” grade. In other words, we are mainly working for our money. True, we both have retirement accounts, and thus are investing and owning assets, and we also have a brokerage account where I made money investing in US Steel stock when its prices plummeted in the recession. But there are many liabilities in our lives that were purchased with money that could have been used to purchase assets. As I write this, I can see a Mustang sitting in our driveway, a fish tank next to me, and two cats that eat an awful lot of tuna! Hahahaha—okay, the cats may be liabilities according to the definitions in this book, but we love them anyway.

My brain synapses are still working on digesting this book. In the meantime, I am trying to answer the question of whether or not I can call things like my account with MyCokeRewards, MyPoints, and Swagbucks assets. After all, they are producing things for us (that we would have purchased with our own money), and they are not costing us any money to maintain…

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