The phrase “life hack” is overused on the internet today. Some hacks are cool, but most teach you how clean your windows faster or turn your chip bag into a bowl. What I want to show you is a LIFE CHANGING hack. A hack so Hackalicious it will blow your mind. A Hackstrocity if you will.
The cliche says, “Money doesn’t grow on trees”. Yet when we think how the smallest of seeds turns into a massive oak tree, we can realize that wealth building seeds take time to grow. If you want to ball out tomorrow, I’m not the guy for you. If you want to build steady wealth that will last a lifetime, then welcome to club. I want to show the basics for building this money tree. Lay seeds that produce money for the rest of your life, aged money, working for you every day.
A basic understanding of Assets and Liabilities can go a long way. I know just reading those words makes you want to yawn, but they are the most important component to the money tree. They can be the difference between growing a redwood empire or a withered houseplant.
An Asset is something you own of value, but it goes beyond that. The assets you want, are assets that produce cash flow (I need it on time! I’m talking bank rolls!).
Examples of Assets you can purchase:
Businesses – that do not require your presence. You own them but the business itself is managed or run by other people. If you have to work there then it’s a J-O-B.
Stocks
Bonds
Income-generating real estate
Notes (IOU’s)
Royalties from intellectual properties such as music or patents.
Assets put your dollars to work. Each dollar is a little employee of the YOU corporation bringing you more dollars. The more dollars your dollars produce, the more dollars those dollars produce
(say that 5 times fast).
A liability is just the opposite of an asset.
A Liability is something that does not produce cash flow and/or decreases in value once it is purchased.
Heres some examples of Liabilities:
Cars
Boats
Gold Chains with with peace signs
Parachute Pants
Clothes
Your life size Storm Trooper replica
Golf Clubs
Synchronized swimming lessons
This:
…anything else that does not produce cash flow on a monthly basis.
So now you are saying: “The Andyman is telling me I can’t do fun filled activities or buy the things I want.” Aucontraire my friend. I am telling you to buy cash producing assets that will pay for your Lamborghini doors on that Escalade. You want to ensure that your Assets outweigh your Liabilities.
Here’s what most people do. They work at their Job, have a little bit of cash left over and spend that cash on the things they want. That’s fine and dandy, but you lose the value of the money you just earned immediately after purchasing a liability.
Now imagine you want a new whip (car for all the folks who aren’t hip). You have the make, model, and color all picked out and ready to go. But instead of heading straight over to the dealership, you buy Assets that will produce enough cash each month to make the monthly payments. Once your are tired of that sweet ride, you still have your entire principal (money you put into the asset) invested. Now you have yourself a free car! (*Bob Barker voice.) Do free cars sound like I’m killing your fun now?
Now you may be getting the brain juices flowing and saying: “What if I do this with everything? I won’t have to work anymore!”You would be spot on my friend. The more Assets you acquire, the sooner you will be on your way to financial freedom. It’s a simple concept that many people like to over complicate. They debate what is truly an Asset and what is a Liability.
Let’s make it simple:
Does it produce cash?
Buy it.
Does it lose value when you purchase it?
Buy assets that will produce enough cash to buy it.
Viola!
There are some additional tricks and tips that will make this even more enticing but we’ll save those for another day.
To sum it up – Make every dollar work for you, so that you can spend less time working for dollars. If your money is sitting in a savings account, with no plan to put it to work, you’re falling behind, way behind. Increase your knowledge about Assets, so that when an opportunity arises, you will be able to take advantage. The sooner you start buying cash producing Assets, the sooner you will be living the life you have always wanted, on your terms.
Cheers,
Andrew
P.S. If you want to learn more about how this asset and liability business works – read the book “Rich Dad Poor Dad”.
Andrew is the host of The Personal Finance Podcast, a show that is changing the way you think about your money. His primary goal with the podcast is to bring as much value as possible to his listeners.
Andrew's favorite free financial tool he's been using since 2014 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
His favorite investment platform is M1 Finance, a site that allows him to build a custom portfolio of stocks for free. It has no trading fees and is his preferred way to invest without having to lift a finger.
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