In yesterday’s post about money, I stated that wealth is measured in time, not dollars.
I also mentioned that a lot of people don’t know the difference between being wealthy and being rich.
This may explain a bit of the confusion some people have over why some people become wealthy and others do not.
Wealthy people don’t accumulate their assets by magic or by using some unknown wealth formula; it’s not a secret.
Wealthy people follow a consistent asset accumulation process to become millionaires.
Instead of spending $5,000 on eating out and going to the movies over the course of five years, they invest the same $5,000 in their investment account; not some low-yielding savings account.
As they continue to systematically add to the money they invested, in a little while, what started as $5,000 grows to become $20,000.
What are people who are struggling with money doing wrong?
Some people have
They don’t know what to do with discretionary cash so they end of accumulating receipts instead of assets.
Here are two simple things that people do wrong.
- Not making investing automatic with periodic transfers from a checking account to a brokerage account.
- Not putting money in a place where it can grow.
If you are doing these two things, the good news is that this can easily be fixed.
It’s very easy to have your bank account set up to make automatic withdraws and have these funds credited to your investment account.
Putting the money in an investment account is very important. If your money is not invested in something that will allow your money to make more money, you’re letting your money go to waste. Even worse, you are wasting time and forfeiting any gains from compound interest.
Let me explain this further by using basketball as an analogy.
Making money is like basketball
If you are on a basketball team and you want to play in the game, the coach typically requires you to come to practice sessions.
The same goes for your job. If you want to receive a full paycheck and get paid at the end of the week, then you better be at work each day you are supposed to.
After a week of basketball practice, it’s time to play the game. You put on your jersey and take your seat on the bench. However, the coach doesn’t put you in the game.
This goes on for the whole basketball season. You work hard during practice like everyone else and suit up for all the games. But the coach never puts you in the game. At the end of the season, everyone else on the team has scored except you.
Were you a part of the team? Yes, but because you are never allowed to leave the bench you couldn’t score any points.
You can only score points if you are in the game. You can’t do it from the sidelines.
Going to work each day is like going to basketball practice.
After a hard week of work, you look forward to your paycheck the same way the basketball player looks forward to the game.
Receiving the paycheck is like being able to suit up; it’s the reward for your hard work.
Don’t miss the point about money.
If the proceeds from your paycheck don’t make it off the sideline – it is not invested – the money will not be able to make more money. It never makes it off the bench; therefore, it won’t be able to score points.
When you fail to invest your money in something that will allow your money to grow, you are no different than a player that goes to practice but never gets in the game.
You are a participant. You do the same work that everyone else does. But because you don’t invest your money, you don’t get to accumulate any stats.
Investments produce stats; cash flow, dividends, capital gains, etc.
Get your money in the game as soon as possible
Those who employ the concept I have explained at an early age
tend to have more wealth than those who do not. For many Americans, it’s not
about how much money you have, it’s whether you allow your current money to be
turned into more money or if you give let it sit on the sideline to waste away.
To summarize, your money needs to be in the game and be
invested in something that will allow it to accumulate meaningful stats.