Over the last decade, the rich have gotten richer and the poor have gotten poorer. Why? because money makes money.
Anyone can do what the rich do, but you first have to understand how to build wealth.
In the first article of this six-part series, I outlined the four-step process for achieving financial freedom:
- 1: Cut Expenses
- 2: Invest Your Savings
- 3: Make as Much Money as Possible
- 4: Keep Score With Key Performance Indicators
Cutting your expenses requires awareness of your assets and liabilities.
What are Assets & Liabilities?
I don’t see assets and liabilities in the way your CPA sees assets and liabilities. To me, an asset is anything that, when acquired, save or make you money. A liability is something that costs you money when it is acquired.
Let’s look at a car as an example.
I consider a car a liability. Our cars depreciate in value over time. There are also costs of operation (gas), as well as periodical maintenance costs.
Your house, on the other hand, is an asset. Some experts consider the house you live in as a liability, but I don’t agree. My reasoning is real estate almost always appreciate in value over the long-term.
The real estate crash of 2008 has scared many people away from the real estate market. The reality is now is a great time to invest in real estate. Why?
Building Wealth is a Long-Term Game
The reason real estate is always a great investment is building wealth is a long-term game. You’ve probably seen business “gurus” give keynotes based on building massive wealth at a breakneck pace.
I don’t do this at my business seminars. Titanium success coaching seminars hammer home the concept of wealth building as a long-term game. There is no shortcut to true wealth.
Wealth is built through a series of small decisions to acquire assets and resist acquiring useless liabilities.
The reason investing in assets like stocks and real estate is so crucial to build wealth is the concept of compound interest.
Albert Einstein said “The eighth wonder of the world is compound interest: he who understands it earns it, and he who doesn’t pays it.”
The next article in this six-part series is all about understanding compound interest and making it work in your favor.
If you’re a successful professional or business owner who needs help getting their finances in order, then contact Arman for a coaching consultation today.