In our modern society, people are often of the opinion that fulfilment and success mean owning things, such as your own car. It is not wrong to own those things, but only after you have multiplied seed or capital. Non-multiplying seed expense does not produce profit, and it is not the way to go. It is merely buying liabilities and spending multiplied liabilities. When we live in the house we purchased , we are increasing our liabilities because, apart from paying the mortgage(with interest) to the bank, we are adding to the cost of the house through maintenance and upkeep. In the end, this increases the overall cost. It would, therefore, be more beneficial to rent out the house and rent a smaller apartment, so that the rent the tenant in your house ends up paying the expense of the house – mortgage costs, related bills, and so on. It is even possible that the rent the tenant pays for your house is able to further cover the cost of the rented apartment. In this way, your house is in no way a liability but becomes a source of income in addition to being a long term investment.
The Second kind of expense is for capital. When purchasing a house and then renting it out, you keep receiving money from the house through rentals and savings. This is a capital investment of assets. Some people are very proud that they can get a loan to buy a car, but what happens if that car is involved in a crash the next day? There would be nothing to be proud of then. Buying a car for personal use with a loan or even from your savings and then having to spend money to maintain it is foolish. This is a liability.
It is a different thing when using saved or loaned money to buy a car that is not for personal purposes. For example, the car becomes a capital investment if one uses as a taxi. If one has money for only one car or one house, then that person is not prepared to live in that house or drive that car. Rent an apartment for now. Walk or take public transportation – do whatever it takes, but invest your capital. While renting out the house, you could take a loan or mortgage from the bank using the house as surety, then use the money from the rent to pay off the percentage to the bank. That is why knowledge is the key word when talking about finances.
We think knowledge is found only in universities. of course universities teach theory, but unfortunately, they do not teach you how to make money. Most business schools teach students how to manage a business, not own one – how to manage wealth, not create it. Which of the two will be the one with money – the manager or the owner? One cannot always obtain financial education in schools, but people experienced in wealth creation can certainly provide education. Hence, a financial mentor is a major key to freedom.
We at Chrestovest have one of the best team of financial advisors.. And we can’t wait to welcome you.
Mark
Thanks for your blog, nice to read. Do not stop.