The power of money

Updated: Feb 21

If you were to stop working, how long could you survive on your remaining savings? What I just asked you is the definition of wealth. Money doesn't buy happiness, it buys the freedom to go find it. Ignorance of money can result in falling into lifes trap of modern day slavery.

To become wealthy, we need to understand the differences between assets and liabilities. In simple terms, an asset is something that generates money such as property, stocks, shares or businesses and liabilities are those that cost money. The basic concept of building wealth is to acquire assets and reduce liabilities.

The rich will acquire assets while the poor and middles class will acquire liabilities - often confusing them with assets. The primary cause of financial struggle is not knowing the difference between assets and liabilities.

Cash flow from a 'normal' individual would stereo-typically come from one primary source, for example their job. Expenses can include; food, clothing, transport and entertainment. They have no money generating assets and liabilities include their mortgage, loans and credit cards.

Even if the income generated from a job is a good amount and they are relatively well paid, expenses can very easily catch up and take away opportunities for individuals to invest into assets that could provide passive income. This is the fault of having: Income = Expenses & Assets < Liabilities.

If you were to take the approach of investing and reducing liabilities, income would become greater than expenses because assets are greater than liabilities. This is why the rich are getting richer.

There is a huge difference in the attitude towards money between the rich and poor; both can work hard and have equal education but different principles. The poor would suggest studying hard to work for others while the rich would encourage studying hard to create their own jobs. One looks for safety and the other looks for calculated, managed risks. When it comes to money there are two emotions that can dictate how we think; fear and greed. Fear can force an individual to never leave their comfort zone or take risks. While greed can keep people stuck in a cycle of working to receive the joys of money to buy things for instant gratification. Learn to use your emotions to think, not to think with your emotions.

Examples of thinking with your emotions are “I need to get a new job" or "I want this job because its provides safety" rather than "Am I doing something wrong here?".

Education and a good job are important but they wont handle that fear; to handle the fear you need to know the power of money and not be afraid of it. Money is the most sought after commodity so use it wisely and make it work for you.

Risk Warning

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