The Most Authentic Guide on Personal Finance and Investments


Words of Wisdom : "A successful man is one who can lay a firm foundation with the bricks others have thrown at him." ~ David Brinkley

What’s The Secret Of True Financial Freedom?

For many people, their car is their asset; their house is their asset; their electronic gadgets are their assets; their smartphone is their asset; the furnishings and fittings in their house are their assets.

Therefore, the more they own them, the richer they feel.

As such, whenever they have surplus cash, the first tendency is to buy more of these things. Isn’t it common to see them rush to the nearest mall the moment they get their annual bonus — to splurge on the latest mobile phone or a designer dress or a new air conditioner?

In fact, nowadays given the easy access to the credit cards, they don’t even wait for the surplus cash. They just BUY NOW and hope to PAY LATER… a dangerous tendency indeed!

And this is where their wealth starts depleting and diminishing... penny by penny.

The first problem is that (except for probably property) they all depreciate. In other words, most of these things lose value with time. If you go to sell them, you will fetch a much lesser price than what you had originally paid for them. So, logically speaking, your wealth or Net Worth has gone down.

The second issue with such things is that within a few years they become outdated and useless. Hence, you have to go back to the markets and buy their replacements. In short, more money outgo!

Last, but not the least, you have to spend money on them even while you own them.

To run your cars you have to buy fuel; you have to service and maintain them regularly; and from time to time you will have breakdowns too, which will cost you more money. 

Your electronic gadgets and home furnishing too consume money – the TV needs cable subscription, Home Theatre needs DVDs, sofa set need cushions and cushion covers; and so on. In addition, from time to time, all these will need repairs too.

Even for the properties that you own, you have expenses such as municipal taxes, insurance, annual maintenance, repairs, etc.

In other words, there is a regular outflow of money on the ownership and usage of all these items. Hence, year on year, that much of your income or wealth reduces or dissipates.

Accordingly, the more you own such products, the more is the wealth or income dissipation.


fake-vs-real-assets
Right choice of assets is the right road to financial freedom.

Financially speaking, assets are things that should give you some returns i.e. they should PUT MONEY INTO YOUR POCKET.

These things don’t.

On the contrary, all these (except property due to rent and price appreciation) TAKE MONEY OUT OF YOUR POCKET. Therefore, truly speaking, they are your LIABILITIES. Caution: Property beyond a reasonable budget, or too many properties, can also become a liability than be an asset.

Surely, by now you understand and appreciate that these items are mainly a FINANCIAL BURDEN, and not a resource. This is the change you have to bring about in your perception about "assets".

As such, you have to be (very) careful when buying such things. Sure you should own such things. After all, that's the whole purpose of becoming rich. But proper planning and moderation is important, if you don’t want them to drain too much money.

You can’t have too many of such liabilities if you wish to become a millionaire.

Instead you should be buying REAL assets.

Stocks, property, gold, bonds, mutual funds etc. will put money into your pocket. This happens either through 
(a) regular interest / dividend / rent, and/or 
(b) by way of capital appreciation with time. 

They will make you real millionaires and not more cars or the fancy mobile phones.

In fact, the best strategy — though this would require your patience and discipline — would be to first convert your income into wealth. And then, buy these things out of the ADDITIONAL INFLOW that this wealth generates.

This way you will achieve both the objectives. You will not only create wealth, but also enjoy the luxuries. In short, this would be a more enduring and long lasting affluence. Genuinely rich people follow this path to a life of #financialfreedom.

Most people, however, buy things from income money (or loan money), which gives only a temporary (and illusory) affluence. 

Buying a REAL asset is like planting a tree, letting it grow and then reaping the fruits... year after year.

The more the trees you grow, more the fruits you reap. The more the assets you create, the wealthier you become. Learn how to Grow your Gigantic Money Tree

And the best part is that you don’t have to work for money. The money works for you 24x7x365 and keeps adding passive income into your pockets. That’s the true financial freedom.

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