So here’s the thing. I’m reading that book, Rich Dad, Poor Dad. I told you about it yesterday. The fear and greed thing has really got me thinking. He contends that most people deal with money emotionally and that the most common emotions used are fear and greed. He’s got a good point. He then goes on to describe the typical American family. Get a job, meet someone, move in, get married, combine incomes and buy a house, have a kid, keep working. Always as an employee of someone else. By this time you are stuck because you have bills to pay and mouths to feed and lots of debt. You didn’t take any time to build a portfolio of assets so that your money could grow independently of your income. So you are stuck working until you are 65 or 70 for someone else, and may or may not have money put aside for retirement or your kid’s education. That does sound pretty typical.
He advises getting that job but starting to amass assets as soon as you can. Investments and real estate and royalties and whatever else you can come up with. Even if you’re not that young anymore, start. It is only through income generating assets that you will ever become truly financially independent. This is something that Dave Ramsey and his Total Money Makeover advise as well. Once you have paid off your bills, have an emergency fund, have funded a retirement account, and started saving for your kid’s schooling, start investing. He agrees that it is through those investments that you accumulate wealth. The difference is what they advise investing in.
Rich Dad, Poor Dad advises taking risks with your money. Don’t just play it safe, take a portion of your money and invest in start ups. Own a business that you don’t have to run, or an apartment building that you don’t have to personally manage (property management companies can do that for you). Invest in mutual funds and index funds, but also take risks and truly diversify. He doesn’t seem to have a position on debt. He finances some of his properties, as one must if one wants several. But he seems to be down on personal debt. That’s good. No credit cards, but mortgages that will be paid for by the asset (rent or lease income) plus a bit of profit are fine.
It’s an interesting thing, fear. I am afraid of risk. Terrified of it. I hate putting myself out there. I hate taking chances with money because I may lose it. But, there is a point at which you have to be willing to take a risk or wind up stagnant in your own little rut. Sometimes I know those good risks when I see them, but feel like we don’t have the money or ability to take advantage of them. We have two kids after all. I don’t want to be poor and bankrupt because i took a risk that didn’t turn out well. But that’s jut not good enough sometimes. I knew when the market crashed that that was the time to put everything we had into index funds. The market would eventually go back up and we’d make a bundle. We didn’t have any “extra” money at the time though. I should have scrimped and put even just the change jar money into the market. I saw the opportunity but didn’t take it because I was afraid of making us feel poor just then by skimming as much money as I could from our regular play money.
Greed is another interesting emotion. I am greedy. I admit it. I want more money. I always want more money. The problem is that once I have the money I don’t want to give it up. I will give it to someone who needs it, but I am afraid of losing it to bad decisions once I have it. I want to stuff it in the mattress so that I can sleep on it every night and know that it’s safe. I am greedy as hell and it’s a long-standing habit. I need to figure out a way to not just curtail my greed, but make it work for me. I want more money, so I need to start thinking in ways that will actually gain wealth rather than just save income. That saved income can go towards acquiring assets.
Unregulated Capitalism is not the way to go. Robber barons were crappy. Child labor laws and weekends and such are good things. As are Social Security and labor unions for certain jobs (coal miners NEED unions). Regulations against monopolies in industry are good. However, capitalism isn’t all bad, either. It does afford people the opportunity to create businesses and wealth. It allows for social and financial mobility. I am still a bit of a Socialist, but as long as Capitalism exists, I can make use of it to help people who need it.