Posessions are overrated

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Now that I am done with law school I have been looking at white luxury cars for the upgrade.  I have priced them and worked them into my budget so nicely.  It is a good feeling to know that not only can you buy the car you want but you can buy it comfortably.  I also love real estate.  I love the idea of owning my own spacious home with a great view.

The problem with both of these possessions is that a car and the home are not assets but they are liabilities.  They are liabilities because they take money out of your pocket not put money in.  Additionally, both require financing and that financing involves debt and interest payments.  The key is that you buy luxuries and liabilities from your assets not your working income.  That is the true key to actual advancement.

I am finally at a place in life where I live for true advancement and not competition based on what looks like advancement.  Lets face it, a lot of the things we compete on, clothes, bottles, meals, shoes, trips, do not progress you one iota.  They bump you up in the social hierarchy until someone one ups you or until a new product comes out.  Congrats on your short lived success.

That is why my next purchase will be something that puts money into my pocket not something that pulls money out of it.  People can agree or disagree with the idea of there being such thing of “good” debt, but I want to at least discuss the concept.

Lets say I want to buy a $400,000 home. That home will require me to stay at a job for another 30 years to pay it off.  I’ll then be forced to stay in that location and stay paying mostly interest for the first 15 years.  OR I can use that same $400,000 to buy a duplex that puts $800 into my pocket each month.  Both require debt but only one is liberating.  That is what makes it good.  Bad debt keeps you in bondage, good debt sets you free.

The moral of this post is that we are living in such a heavily consumer culture but one thing I have found is that the dollar has way more power than the possession.  Having a fancy watch, the newest car and gadgets just put you into competition with other people who live based on the acquisition of those things (aka the Joneses).  Those people, normally, are losing the big game.  You want to be the person that has 100k set aside than can pick up that foreclosure or gobble up that heavily discounted stock or buy that business.  You don’t want to be the guy that has a closet full of shoes but is forced to go to a job he hates because you have no assets.

My millionaire mentor is a 70 year old jewish man worth 200m+ who wears a citizen watch and lives in a paid off home.  He doesn’t chase possessions, he chases assets, your assets, and he is very successful at doing this.  If he was constantly chasing what was new and hot he would  spend big money to purchase it and then have to spend even bigger money maintaining it. The best thing you can do is start accumulating and then continue to accumulate more and more so nothing can pull you down from your success.  After that you begin to purchase assets on discount from the people who lose their assets because they chase possessions.

Assets are the key to wealth.  Possessions are the key to keeping you in the rat race.

Be great!

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