Why money is NOT wealth

[SPECTRE]

Many people think that having a mil in a bank equals to being rich. Sure, on the paper, it might look like it, the number is right there, but in reality it is not.

Why?

Well, if you have that mil and you spend 200k on a lambo, now you only have 800k in the bank and a car that lost quarter of its value right after you signed the deal. So your "wealth" has been diminished right on the spot.

Now take that mil and buy some kind of real estate. On the paper, you no longer look as rich as you did when you had that one mil in the bank. But now you own an asset. An asset simply means you can sell it later and usually not lose any money you have put into it to begin with. Most likely, due to time, you will actually make money on it. But instead of just letting it sit, you will make it an active asset by renting it out. So say you bought 5 apartments, each one rents for 600 a month. That is 7200 a year, times 5 is 36 000. Say tax is 20%, that is 28 800 and say 3800 for some yearly expenses, which leaves you with 25k a year, or little over 2k a month of disposable income. Now, on paper, you not only still own property worth of that initial mil, which will possibly go up in value with time, but now you are also getting 25k a year on top of that which you can now actually spend and your wealth won't be diminished one bit. So that initial mil now yields you 2.5% a year of net cash. This is what being wealthy is all about. It is not about the cash. Because the cash is a one-off deal. It's just an i-owe-you that is due when you spend it. An asset on the other hand is literally an inifnite money-maker. Even if you only can spend 2k a month, it is money the asset made for you without losing any value - your wealth is preserved and yet you have money to spend freely.

So what is the difference between wealthy people and poor people? The rich invest all they can and live off what is left. The poor live off all they have and invest what is left.

 

[KEEPER]

Thanks for the perspective my dude.

I grew up in a condo at one point in my life, and the guy that owned the condo 3 other condos all right next to his, from 2 on the bottom two and the bottom top condos.

I can't remember how much made per condo, but it was probably around eight hundred something just for the rent.

But I eventually learned, that he basically lived off of everyone else's rent and helped him to pay them all off with that money he earned from their rent.

Now he ran a business of Investments on the side while doing this.

The man practically never left his condo except to go to some high up places and to meet clients or something, or at least that's what he told me.

This bit was kind of a random event, but I was just a 17 year old kid, and he invited me into his condo one day with some woman that wanted to be gang banged LOL, I was too much of a prude at the time and I was too picky because the woman wasn't exactly attractive, so I didn't take him up on the offer even though I probably could have, as I was a virgin at that point.

But when a woman is not attractive and you're a prude, you pretty much don't go for it.

Sorry for my derailing of the comment, I do this sometimes.

 

[SPECTRE]

it's a bit OT but since we're talking money, why not. i mean, that's how many people start. say you have 20k savings. you will go to the bank and take a mortgage on a 100k property. you rent this property out for 600, which is 7200 a year. but you have to pay the mortgage, say 200. so now your 20k is earning you 400 a month, or say 320 after tax. that is 19% a year. over time, you put some small cash into it, make the property nicer, and when the market condition is right, you sell it with a profit, say 130k. you pay off the 80k loan and not only you just made 30k and have 50k in total, but that property has been paying you those 320 every month during this entire time. then, you take that 50k and take a mortgage for a 250k property. rinse and repeat.

check out ben mallah on yt if you're interested in flipping real estate.

 

[KEEPER]

I know, my bad.

I do like the idea of investing, LOL one of my first experiences and understanding the concepts of Investments actually came in the form of a video game.

And that video game is Assassin's Creed Brotherhood, while the money you made you could put into refurbishing or rebuilding shops throughout the city, and every shop within every District how to return based off of how populated the area you are in to how much gross your money could make.

A bit unrealistic because of the game, but it was still a great concept to learn from that I enjoyed playing.

It's funny, I actually started that game over several times because I love the mini game of building the economy up to the point of either owning everything and managing everything which made my purchasing power are much higher as well as passive income.

In real life of course it's a lot more complicated, and the stakes are much higher because we're using real money, but in real life it can be kind of like that, depending on how much money you have and where you put that money such as the asset you talked about.

Anyway I'm kind of obsessive compulsive when it comes down to management with almost anything, which in some cases probably makes me a very good candidate for what we're talkin about.

 

[KEEPER]

It's too bad there aren't any other video games that teach this mentality before it's actually done in real life.

I've seen a few other games that kind of scratch on this idea to teach and how to properly invest, but not a lot of them do well enough in detailed information and require you to pay to learn.

However I could see how that's understandable as they are on there side of the information, however I can see it being done within an app that plays ads as you're learning all the investing techniques.

So it actually might be of value for someone to create an app that teaches these things, but also allowed the author to earn money on the app as it's being used to teach people how to invest.

 

[KEEPER]

I thought I might give this one try.