FINANCIAL FREEDOM
BUILDING WEALTH 101
Let me share with you the path for building wealth. It’s stuff they don’t teach you in school.
Schools do a horrible job of educating about money and wealth.
My math teacher spent many hours teaching the class how to calculate the area of a circle, square and a triangle. For me, it was a waste of time. I’ve never had to calculate the area of anything. And, if I did have the need… I'm sure there is an app for that.
In contrast, money is central to surviving and thriving in the modern world. The basics... food, shelter and clothing require money. And... If you want to enjoy life above the basics, you need more money.
Here's a list of things I wish I knew after finishing school...
What is wealth? How to build wealth? How to prepare for retirement? How to become financially free?
Sadly, I finished school with Master's Degree and was never taught the basics about money and wealth.
One goal of this site is to teach you things about money and wealth they never taught me in school.
Let me share with you – “The path for Building Wealth”
When a man (or woman) is young, he is full of enthusiasm and energy. This is his greatest asset. With this asset (enthusiasm and energy), he has the opportunity to find a job and earn income. Schools do a great job in preparing a young man to get a job. Unfortunately, schools don't teach him what to do next.
Most young men want to be wealthy, but don’t understand what is wealth or how to obtain it. They chase after things giving the appearance of wealth… cars, fancy clothes, big screen TVs.
They mistake the appearance of wealth for true wealth.
A hard working man in a growing company will eventually get a promotion and pay raise. With the increased income, he borrows money from the bank and buys a bigger house, a nicer car and more stuff. He thinks he’s building wealth, but he’s really only a consumer. He’s earns a salary, but it’s all going to repay bank loans and buy more stuff.
Now the man is caught in the rat race. His job is his only source of income. Because of his monthly payments to the bank, he has become a slave to his job in order to pay his bills. Instead of owning nice stuff, his stuff owns him.
Many smart people with MBAs from brand name schools are caught in the rat race. This is not the path to building wealth.
The path for building wealth is not to accumulate stuff, but accumulate assets that generate passive income. Passive income is money you regularly collect without working. Multiple streams of passive income are what make a man truly wealthy.
The Path to Wealth
Most wealthy men are not born with a portfolio of assets generating passive income. It is built up over time. The man who becomes wealthy usually starts life the same as most other young men. At a young age, his biggest asset is enthusiasm and energy. He gets a job and earns income.
Like most young men, he desires to be wealthy. The difference is he knows the path for obtaining wealth. Instead of chasing after stuff, he invests his money into assets that generate passive income. He converts his earned income (salary) into passive income.
The path to wealth is not to buy stuff.
Instead buy assets that generate passive income.
At first, the man building true wealth appears to be falling behind his peers. While his friends are buying new cars, he's driving an old clunker. His friends are buying large screen TVs, and other items associated with success.The man building true wealth has none of these things.
Instead of buying cars, large screen TVs and other stuff, the man building wealth is buying shares of high quality companies such as Coca Cola, Wal-Mart and Johnson & Johnson. These companies pay regular growing dividends. He is building a portfolio of assets that generate passive income. He uses his money to make money.
The man building true wealth works hard at his job and at the same time works just as hard building his portfolio. He has multiple income streams. He gets salary from his job and passive income from his portfolio.
At first, the passive income from his portfolio is small. Investing seems to be a waste of time. There is a strong temptation to give up, but the man on the path to true wealth sticks with it.
As time goes by, a powerful force called compounding is at work. The passive income generated is reinvested to generate more passive income. This reinvestment is like a rolling snowball. It gets larger and larger. As time goes on, the income from his investments grow larger and larger.
After building multiple growing income streams, the man building wealth buys a car, a large screen TV and other items associated with success. He doesn’t borrow money to buy these items; he pays cash.
Years go by. The man building true wealth spent his entire working career converting salary from his job into passive income screams. In addition, compounding is doing its job. What started out as small trickles of passive income, are now large flowing rivers of passive income.
His passive income from investments are now larger than his living expenses. He no longer needs to work in order to pay his bills. This is called Financial Freedom. His passive income is able to pay all his living expenses and he still has excess money.
He's now in the prosperity cycle. The prosperity cycle is where his excess passive income is reinvested and compounding continues it's work. The wealthy man becomes wealthier from the compounding of his investments. It's really true, the rich get richer even while they sleep.
This is true wealth.
Have A Great Day!
Dragon Xu
