Chapter 13: Focus on total assets
Never depend on single income, make investment to create a second source. ― Warren Buffet
When it comes to money,
everyone in our society often has the same question:
“How much money do you make?”.
Very rarely do you hear the phrase,
“What is your total net worth?”.
Very few people ask this question,
except perhaps in outdoor sports clubs.
In those clubs, the financial discussion always revolved around total assets:
“Jim just sold his shares and now he has over three million.
Paul’s company has just been converted into a joint stock company
and his total assets are now worth eight million.
Sue just sold her business;
Now her net worth is worth 12 million.”
At outdoor clubs, you don’t hear questions like,
“Hey, did you know Joe just got a raise?
Wow, and a two percent increase in the living allowance.”
If you hear that, you must understand that you are listening
to a visitor who just happened to drop by.
If you think being an entrepreneur is risky,
try working for someone else for 40 years. ― Warren Buffett
Prosperity Rule #29: The correct measure of wealth is total assets, not employment income.
The measure of wealth is your total assets,
not your employment income.
It was like that in the past, and it will always be like that in the future.
Total wealth is the financial value of everything you own.
To determine your total assets,
add up the value of all your assets including cash
and investments such as stocks,
bonds, real estate, and the present value of your business or if any),
the value of the home you live in if you’re the owner,
and then deduct all of your debts.
Total wealth is the absolute and most accurate measure of wealth,
because if need be, what you own can be converted into cash.
The rich understand the huge difference
between employment income and total assets.
Employment income is an important factor,
but only one of the four factors that make up your total wealth.
Those four factors are:
4. Multiply your value service
Rich people know that the process of building their total wealth
is the amount of time it takes to solve an equation containing all four of those unknowns.
Because they all play their own roles,
let’s look at each one in turn.
Income exists in two forms: employment income and passive income.
Employment income is your actual earnings,
if you are an employee,
or profits or business income,
if you are a business owner.
Income from work requires you to put in time and effort.
This is an important income,
because without it it is almost impossible to get to the other three factors.
You can compare income from work to how we fill our “financial funnel”.
When all details and values are considered equal,
the more income from your job,
the more favorable conditions you will have to save and invest.
Despite the key role, this income is only worth
as a part of the entire total wealth equation mentioned above.
Unfortunately, the poor and many middle-class people
only focus on income from work and ignore the rest.
Passive income is money you earn without actually putting in the work.
We’ll discuss passive income in more detail later,
but for now think of it as another source of income
that flows into the “financial funnel,”
income that can then be used to spend, save and invest.
Savings are also an essential component of total wealth.
You can make huge sums of money,
but if you don’t keep any of this money, you’ll never get rich.
Many people make financial plans in mind,
but only towards spending.
How much money they make, they all spend.
They choose temporary gratification,
not long-term financial balance.
Spenders have three catchphrases:
“It’s just money” so they don’t have a lot of money;
“Whatever goes, will come” at least they hope so;
and “Sorry, I can’t right now.
I’m broke.” Without generating income to pour into the “financial funnel”
and without savings to hold onto what you earn,
you won’t have money to allocate to the next component of your total wealth.
Once you start saving a decent portion of your income,
you can proceed to the next stage of making your money grow through
different investment channels.
In general, the more successful you are in investing,
the faster your money grows and produces a greater wealth.
Rich people always spend time
and effort to learn about investment activities
and research and analyze investments.
They pride themselves on being great investors,
or at least hiring great investors to help manage
and invest their money.
Poor think investing is a field only for the rich.
They never bothered to learn about investing,
and as a result, they never got out of poverty.
You see, every factor in the total wealth equation matters.
The fourth component of our total wealth is the “black horse” on the chessboard,
because few people realize its importance in creating prosperity.
That is the “simplification” component.
This goes hand in hand with saving money,
so you can actively create a way of life
without spending too much money.
By properly cutting your living expenses,
you will increase your savings
and thus increase the amount of money in your investment fund.
The following story from one of the Millionaire Minds attendees illustrates
the power of “simplification” in building wealth.
When Sue was only 23 years old,
she made the decision of an experienced,
wise and wise person: to buy a house.
At the time, she had to pay less than $300,000.
Seven years later,
just as the real estate market was boiling,
Sue sold the house for more than $600,000, which is
She made more than $300,000.
She immediately thought about buying a new house.
However, after attending the Millionaire Mind seminar,
she realized that if she invested
that money in a second secured mortgage with a 10% interest rate and simplified her lifestyle,
she would She could live comfortably on the profits of her investments
and she didn’t even need to work anymore.
So instead of buying a new house,
she moved in with her older sister.
Now in her thirties, Sue is financially free,
but not by making a ton of money,
but by reducing her personal expenses sensibly and consciously.
Of course, she still works, but because she loves it,
not because she is forced to work for a living.
She only works for six months a year,
the rest of the time she goes to live on the island of Fiji,
first of all because she loves the place,
and another reason, she says,
is because her money continues to grow while she is there.
She lives a simple life like a local, not a tourist,
so she hardly ever spends money.
How many people are like that:
living a year and six months on a tropical island,
not having to work in their thirties? what about 40? 50? 60?
To old? Sue was able to do that
because she made a habit of living simply and because of that,
she did not need a large fortune to support her.
And you, how much money do you need to feel financially comfortable?
If you have to live in a big mansion,
own three motels,
have ten cars, go every year
Traveling abroad, eating the best caviar
and drinking the best champagne to enjoy life,
while that’s fine,
admit that you’re aiming a little high and it might take a lot of time.
Reach your standard of happiness.
On the other hand,
if you don’t need all those “entertainments” and still be happy,
you’ll be more likely to hit your financial goals much sooner.
I repeat, building total wealth is balancing an equation with four unknowns.
This is similar to driving a four-wheeled vehicle.
How would the car run if you could only control one wheel?
Surely the car will move slowly, bump, spark and turn around.
You must have known this experience before, right?
The rich drive the financial car with all four wheels in good working order.
That’s why their car is fast, light,
straight-forward and in general they drive with relative ease.
I took pictures of the car to compare, because once you succeed,
your next goal is to take other people with you.
The poor and middle-class also participate in the financial game,
but their car has only one wheel that works.
They believe that the only way to get rich is to make a lot of money.
They believe that only because they have never reached that destination.
They do not understand Parkinson’s law that: “Expenditure will always increase in proportion to income”.
This is very common in our society.
You have a car; when you make more money you will buy a better one.
You have a house; when you earn more money you will buy a bigger house.
You have nice clothes;
when you earn more money you buy more beautiful clothes.
You have vacations; the more you earn,
the more you’ll spend on those vacations.
Of course, there are some exceptions, but very rare!
In general, as your income goes up,
almost all of your expenses go up at the same time.
So you understand why with just one way to make a lot of money,
you will never be rich.
This book is titled Secrets of the Millionaire Mind.
A millionaire chooses income or total assets?
If your goal is to become a millionaire or more,
you must focus on building your net worth based on multiple factor,
not just your employment income, as we just discussed above.
Make a plan to control every penny of your total assets.
Here, I present to you an exercise that can change your financial life forever.
Take out a blank piece of paper and write it down with the title
then make a simple chart that starts at zero
and ends with what you consider your total target asset.
Then you write down the total assets available.
Then every three months you fill in the new total assets number your.
Just simple as that.
If you do, you will find yourself getting richer and richer.
Why? Because you will keep track of your total assets.
I often tell students in our seminars,
“Where there is attention and effort, there will be results”.
Rule of Prosperity #30:
Where there is attention and effort, there will be results.
You keep track of your net worth, which means you’re focusing on it,
and because what you focus on,
it pays off,
so your total wealth will increase.
The same rule applies to every other area of your life:
what you focus on and watch will increase.
I recommend finding and partnering with a good financial planner
who can help build and track your total wealth.
They will assist you with financial management,
familiarize you with a variety of savings
and investment tools to increase your money.
The best way to find a good financial planner is to ask friends,
relatives or refer to organizations that have used their services.
I don’t recommend absorbing everything your financial planner says it
and see it as a handbook for asset management and development.
I only suggest that you find a professional with the qualifications
and skills to help you plan and track your capital,
specifically providing you with the tools, software, knowledge,
recommendations helps you build profitable investment habits.
In general, you should find a planner
who can work with a wide range of financial products and instruments,
not just limited to insurance or mutual funds.
That way, you can discover many interesting details about the different investment options,
thereby deciding which one suits you best.
Place your hand on your chest and say…
“I focus on building my total wealth.”
Then you put your hand on your forehead and say…
“I have a Millionaire Mindset!” We are self made millionaire.