Money Is Not Wealth But A Path To It

I've offered similar advice and wrote about the difference between money and wealth in the past along these lines.

People have to get out of their "jealous" and myopic mindset often reinforced by silly and unhelpful political catch phrases like "tax the rich" and "regulate greed" and "tax dividends and capital gains" which only serve to prevent them from achieving wealth.

I have a liberal friend who "explained" to me what he meant by 'rich.' Apparently, in his mind (and to many no doubt) they include the uber-rich to which 'none of us will ever become.'

Aside from the self-defeatist attitude sprinkled with some realism (the probabilities are indeed low a person becomes a billionaire) this is besides the point. They look to put 'caps' on the uber-rich in order to "control" what they perceive to be 'wealth hoarding' never realizing (and this is the crux of the problem) all they're doing is preventing or cutting their chances of achieving wealth.

As I've explained, but of the equation of being wealthy is to have access to capital in which you can leverage to buy income generating assets. Only a fool would place their money (IE income) into ONE basket; say a savings account which basically does nothing but sometimes erode (e.g in times deflationary or inflationary environments). If you have, say, $1000. Put $250 in an investment that generates dividends. Keep $250 for a rainy day. And save $250 for future investments. That is, your savings must be put in income generating assets. Make your money work for you. It's not that hard to do. If you live in a triplex paying rent, for example, if it goes up for sale buy it. The rent is your income flow - though in the beginning you will have to pay off your mortgage. The sooner you get on this the better. In my humble opinion starting at 50 years old is late since it can take 25 years to pay off the mortgage. Not impossible, just riskier since your time horizon is shorter. Start as early as possible. The balance should be used to cover life expenses within your means. The money saved can be used for collateral to get a line of credit or a down payment on a income generating property.

That sort of thing. People can adjust the amounts as they see fit.

The point is, the middle-class is not 'poor.' It has the greatest asset to achieve this potential: Income.

This is why I argue on this blog the economic policies of the Parti Quebecois and the Obama administration are destructive to the middle-class. Rather than encourage savings and investment they simply look to tax to redistribute wealth. More often than not, the middle-class is stuck footing the bill. Does this strike you as an intelligent way to achieving wealth and financial stability?

It doesn't to me.

There is no 'we' since' 'we' will not pay your mortgage. Does a bureaucrat call to check up on how you're doing? Nope. It just sends you notices (of course, laced with coercion through the threat of fines) to pay up for 'we.' But let's look at it this way. If 'you' are not in a healthy financial position how can 'we' (ludicrously defined as 'society') be strong? The 'we' is weak if you're weak.

This is why I argue taxing things like dividends and capital gains is left-wing bull shit. It destroys your ability to achieve wealth. Why would you advocate for policies that hurt your economic health?

But enough of me.

Here's a nice essay explaining it better.

"...Wealth is measured in net income generating assets, in things that allow you to generate money: skills, stock investments (if they generate profits), profitable businesses you own, cash-flow positive lands and properties, etc.

Money is not a net income generating asset. Money is not wealth. Money is a medium of exchange. By reading about rich people, you'll notice they generally try to avoid having a load of cash lying around, because money is not a place to store wealth. It is and has always been, historically, a very, very poor store of wealth. Currency, since its invention, has been a fantastic tool to facilitate exchanges of things of wealth. That is what it is, nothing more, nothing less. Our economy could not function without money, but its value is not in the money. The relationship between value and money is like that between a community and a message board, or a bicycle and its tires. The first can exist without the other, but the second without the first is mostly useless...."

"...Robert Kiyosaki, author of Rich Dad, Poor Dad (worth reading along with its sequels), proposes that rich people get rich by building their net income generating assets column (i.e. things that generate positive cash flow each month, not "buy and pray" investments like most stocks or houses), and that middle class people fail to get rich because instead of buying or building net income generating assets, they buy loss-making assets (e.g. by buying a bigger house with larger mortgage payments, or a new car with monthly payments) that drag them down...."

"...To get rich, what you want is net income generating assets, including the skills to generate those net income generating assets. Learning how to turn business opportunities into functioning businesses is an invaluable net income generating asset: I believe you can exploit that net income generating asset in almost any economic context, even war. But, as a more generic category, the fundamental pillars of wealth seem to me to be health (including youth, energy, endurance), education (including work ethic, general knowledge, wisdom, self-knowledge), intelligence and relationships (connections to useful people, trust, reputation, power)..."

"Pensions changed this somewhat - they were equivalent of handing the potato farm over to the state in exchange for a steady supply of potatoes until your death. In theory, this was a great idea. Unfortunately, history is showing that the state is a stingy, cruel, unfair and generally grossly incompetent manager of potato farms. Any people my age who, today, trust that the government will provide for them in their old age through pension schemes, are, in my opinion, delusional. Perhaps something else might change this situation, but who knows when such revolutionary ideas will actually take hold. In the meantime, Caveat Emptor."

The gross incompetence of people running pensions coupled with government policy that can raid your pensions, is why you shouldn't rely on them. I like telling people to stop reading left-wing sources on matters of money. I see them as offering horrible financial advice. They don't advocate financial freedom; they advocate financial slavery. The government will take care of you is their philosophical bottom line.

My advice to you (I'm educated, my family owns properties, I own a business (that carry debt), shares in a U.S. company, and stock investments so I know what I'm talking about) is to ignore them.

It's a path to nowhere.

"...Wealth can help with that, depending on what you want to do. Lack of wealth can definitely hurt that goal. I took some acting courses, and one acting teacher once declared that a "successful actor" earned about £5,000 a year from acting. The rest of their living costs came from odd jobs like being a waiter or working in a supermarket. I politely kept silent, but my thought was, this is not a successful actor, it is a successful minimum-wage worker with an acting hobby."

And it shouldn't be on 'we' to susubsidize that decision. This is not 'enemies of the poor' gibberish as the likes of Krugman often like to childishly argue, but just about sane, common sense approach to life. Why should you enable someone else's bad decisions? The poor; the real poor with absolute no access to money (arbitrary definitions tied to income and wages can be misleading) to generate wealth, deserve our attention but this is not the point of this post. Using the poor as a political wedge is pointless.