WW: Asset

Welcome to Word Wednesday. The word this week is Asset.

The common usage of Asset is anything you could sell for money. For instance a banker will ask you what your assets are, and will look for houses, cars, boats, furniture and even golf clubs. They are looking for an answer to the question, "If you stop paying me, what can be sold to cover your debt to me?"

I find this usage of asset a bit misleading. Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that assets generate you income, or as he states assets feed you. The idea is that if something is costing you money to own, it's not really an asset.

Take a house, for instance. Even if you sell your house, you'll need somewhere to live (although your parents basement may be an option, that comes with a different price). And homes cost money, a lot of money. Property taxes, interest payments, insurance, upkeep, maintenance, decorations, cleaning, etc. So while the banker has no problem with you going to live in your parent's basement to cover his loan to you, you'd be better off to look at things that generate you income (especially passive income) as an asset. Don't fool yourself.

I always felt that my greatest asset was not my physical ability, it was my mental ability. 
Bruce Jenner 

as·set

 noun \ˈa-ˌset also -sət\

Definition of ASSET

1

plurala : the property of a deceased person subject by law to the payment of his or her debts and legaciesb : the entire property of a person, association, corporation, or estate applicable or subject to the payment of debts

2

: advantage, resource <his wit is his chief asset>

3

a : an item of value ownedb plural : the items on a balance sheet showing the book value of property owned

4

: something useful in an effort to foil or defeat an enemy: asa : a piece of military equipmentb : spy

MM: What's Your Excuse?

Movie Monday with Nick Vujicic. I have no excuses. What is holding you back? Why is it holding you back? What do you do to reevaluate your stumbling blocks on a regular basis?

WW: Wealthy

Welcome to Word Wednesday. The word of the week is Wealthy.

Last week we talked about Rich. Most people would consider wealthy and rich to be the same. Robert Kiyosaki, in his book Cash Flow Quadrant, defines wealth as the number of days you can survive without actively working for income. I like this definition. This ties together having the thinking to manage your resources as well has having the resources to meet your needs.

So, for instance, if you had $20,000 in savings and you spend $5,000 a month, your wealth would be 4 months. Now if you had some passive income, say a royalty or some other form of income that does not require your active participation, you can stretch that $20,000 even further. Let's say you had $1,000 a month passive income, then you'd be 5 months wealthy.

If the median household net worth in the United States is around $120,000 and most people have the majority of their net worth tied up in real estate (their home), how wealthy is the average American? I've heard it said that most people are 90 days from bankruptcy. In other words, if they were unable to actively provide for their income, they would be bankrupt after 3 months.

There are three ways you can increase your wealth. You can spend less (although there is a limit to that), you can make more and you can build up more passive income. I'd recommend doing all three. Imagine if you could get a year's worth of expenses in savings (by decreasing what you spend and increasing what you earn). How much freedom would that give you? How would that affect your daily decisions? That would make you "rich," however, you would be 1 year wealth. Now imagine if you created enough passive income to cover your expenses each month. What would that do for you. The difference is that now you would be infinitely wealthy.

Now, most people can figure out a way to turn infinite wealthy into a smaller number (increase spending), but that wouldn't be any fun.

I refuse to feel guilty. I feel guilty about too much in my life but not about money. I went through periods when I had nothing, so somebody in my family has to get stinkin' wealthy. 
Jim Carrey 

wealthy

 adj \ˈwel-thē also ˈwelt-thē\

wealth·i·erwealth·i·est

Definition of WEALTHY

1

: having wealth : very affluent

2

: characterized by abundance : ample

— wealth·i·ly adverb

— wealth·i·ness noun

wealth

 noun \ˈwelth also ˈweltth\

Definition of WEALTH

1

obsolete : weal, welfare

2

: abundance of valuable material possessions or resources

3

: abundant supply : profusion

4

a : all property that has a money value or an exchangeable valueb : all material objects that have economic utility; especially: the stock of useful goods having economic value in existence at any one time <national wealth>

MM: Habit Forming Creatures

Movie Monday with one of my favorite Authors, Chris Brady, on the value of forming good habits. How do you ensure that you are constantly forming good daily habits?

WW: Rich

Welcome to Word Wednesday again. This week we'll discuss the word Rich.

Many people want to be rich, by which they mean they want to have a lot of money. An interesting note is that while many people would like to have a lot of money, they both despise people who have much more than they do and consider themselves to not have much. What is a lot of money? It seems to always be more than what you have.

It turns out that the result people want and how they think they can get there are disconnected. Take lottery winners, for instance. People who receive large amounts of money, like lottery winners, have a tendency to get in more trouble financially, even though they have more money. Money doesn't solve their problems, it's how they think about money. This goes back to the thinking that money is an idea. Money just reveals your financial habits.

I find it interesting that anyone making 10x what you make is usually considered rich. If you compare the world average personal income or $7,000 per year to what you make, consider the other viewpoint. You are the rich. Yes there are a few who are the next 10x above you. When you compare yourself with the rest of the world, chances are you'll find that you are in the top 5% of the richest people in the world. The money your throw away on trivial things people works hours to earn.

So next time you consider the "rich," remember you are talking about yourself.




Who is wise? He that learns from everyone. Who is powerful? He that governs his passions. Who is rich? He that is content. Who is that? Nobody. 
Benjamin Franklin 

rich

 adj \ˈrich\

Definition of RICH

1

: having abundant possessions and especially material wealth

2

a : having high value or qualityb : well supplied or endowed <a city rich in traditions>

3

: magnificently impressive : sumptuous

4

a : vivid and deep in color <a rich red>b : full and mellow in tone and quality <a rich voice>c : having a strong fragrance <rich perfumes>

5

: highly productive or remunerative <a rich mine>

6

a : having abundant plant nutrients <rich soil>b : highly seasoned, fatty, oily, or sweet <rich foods>c : high in the combustible component <a rich fuel mixture>d : high in some component <cholesterol-rich foods>

7

a : entertaining; also : laughableb : meaningful, significant <rich allusions>c : lush <rich meadows>

8

: pure or nearly pure <rich lime>

— rich·ness noun

MM: Death Crawl

Movie Monday with a clip from one of my favorite movies. We can do so much more than we are currently doing. How do you make sure you are challenging yourself regularly? How do you keep from falling into the automatic?

WW: Money

Welcome to Word Wednesday. This weeks word is Money. 


Most people look at a dollar bill in there pocket and think they have money. By many accounts they do. However, if you look at that dollar bill, it does not claim to be money, it claims to be a Federal Reserve Note, good for debts public and private. 


Money is a funny thing. Many who lack money like to mis-quote the 1 Timothy 6:10 in the Holy Bible by saying that money is the root of all evil. Many people will work 100,000 hours for a company during their lifetime to get it. People think of money as paper and coins, however most of the money in the United States exists as 1's and 0's on computers. 


Robert Kiyosaki, in his book Cash Flow Quadrant, states that money is just an idea. History seems to back this up. The United States was on the Gold Standard for quite a while, which means that you could exchange your Note (paper money) for a fixed amount of gold. It was an on again off again proposition until 1933 when the link was broken and it was even illegal for most Americans to even own gold for a while. 


The thinking behind a Gold Standard is that gold has an intrinsic value. It is rare and valuable, which makes to a fairly good store of wealth. This also means that the government cannot change the value of the currency, but the market value of the gold sets the value. Since going off the Gold Standard in 1933, the United States dollar has been considered fiat money, or in other words, it's money because the government says it is.


To even further back the concept of money as just an idea, most of our money is digital. How many times do you actually use the fiat paper money anymore. We use the internet to setup direct transfers, bill pay and use credit and debit cards to transfer most of our money around.


We generally consider money as a means of exchanging value. Instead of the artist trying to exchange a painting directly for eggs, he can exchange is painting for something that holds value, money, and then later exchange that money for eggs. Money becomes a third-party to the transaction. As long as the value of the money is stable (doesn't change much), it becomes the equivalent of exchanging a painting directly for eggs, without having to find someone with extra eggs who wanted the painting.






The lack of money is the root of all evil. 
Mark Twain 

From Miriam-Webster dictionary:

¹mon·ey

 noun, often attributive \ˈmə-nē\

plural moneys or mon·ies

Definition of MONEY

1

: something generally accepted as a medium of exchange, a measure of value, or a means of payment: asa : officially coined or stamped metal currencyb : money of accountc : paper money

2

a : wealth reckoned in terms of moneyb : an amount of moneyc plural : sums of money : funds

3

: a form or denomination of coin or paper money

4

a : the first, second, and third place winners (as in a horse or dog race) —usually used in the phrases in the money orout of the moneyb : prize money <his horse took third money>

5

a : persons or interests possessing or controlling great wealthb : a position of wealth <born into money>

MM: Boom and Bust

It's Movie Monday. EconStories does some awesome videos. Here is one of my favoites: Fear the Boom and Bust. Keynes is standard in United States schools today. Have you looked into Hayek's economic theories? After studying both, what is your opinion on Hayek vs Keynes?