An “Amazing” Strategy for Making the Most of Your Money

Strategy for Making Most out of Money - picture of gold eggs sitting on money

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Who’s ready to design a life they love, travel the world, and afford things they never dreamed were within reach?!?

YES! You can do this! But let’s be real… this takes money, right?

Good news! Designing your dream life is possible when you use the money you already have efficiently and effectively. Getting out of debt is step one, but going beyond that takes a little more strategy. And while you may not be the next Bill Gates, that doesn’t mean you can’t use the same concepts the wealthy use to get ahead. So, let’s take a look at one thing rich people do really well – they put their money to work.

Thinking Wealthy

So, you’ve probably heard the phrase “put your money to work,” but what does that really mean? Put simply, it means using the money you have to make more money. Unfortunately, the average American struggles with this. Most of us go to work, earn a single paycheck, buy whatever we want, and save what’s left… which is often nothing. Here’s where we get it wrong.

What wealthy people do better than anybody is this: They use their money to purchase assets while – at the same time – limiting their liabilities. This creates multiple streams of income that can be used to invest in even more assets. By doing this, wealthy people continually use their money to make more money.

In his classic book Rich Dad, Poor Dad, Robert Kiyosaki explains why he believes people struggle with their money. He states that the poor use their limited funds to pay expenses and have nothing left. Middle class individuals use their money on things they think are assets but are really liabilities, creating more expenses which keep them stuck.

On the other hand, rich people use their money to invest in assets first. These assets are often residual income streams, helping them to earn more money without much effort so their wealth grows larger and larger.

Yes, Kiyosaki paints with a wide brush, and we all know there are exceptions…but the point remains. Wealthy people become and stay wealthy by investing in things that make them more money. They use their funds efficiently to buy assets and build more wealth.

You can do this too. Start thinking wealthy. Whenever possible, purchase assets and limit liabilities.

Assets vs. Liabilities

That sounds so simple right? But putting it into practice isn’t always so easy.

Let’s start by defining the difference between assets and liabilities. Typically, assets are considered to be items that have value. This means they can be sold to cover debts if needed.

While this definition works well on a balance sheet or for determining net worth, it’s too broad for our use. When considering true assets, think of them this way: Assets are items that make you money. They either create an income stream, grow in value, or – ideally – both. This could include a business, a rental house, possibly a stock, and more.

Liabilities are typically thought of as expenses. Again, the definition is a bit too broad. Instead, it helps to think of liabilities as anything that costs money but doesn’t make money. This includes things like your monthly utility bills, consumer debt, subscription services, and more.

Why Purchasing Assets Is Important

When you purchase a liability, that money is gone. It’s spent. The power of those dollars to earn more is gone forever.

But, when you purchase assets, that money continues to multiply. You can use that money over and over and over again to make more and more money. Even when starting small, those dollars eventually snowball into a money-making machine.

Here’s the cool thing – you’ve already started learning how to do this. By tracking your spending and starting a budget, you’ve begun cutting expenses you don’t need. Now, you can put that money to work by purchasing assets that will make you more money!

How Do I Know What’s Really an Asset?

So, what’s something you might think is an asset but is really a liability? Let’s use your car as an example. Although some consider cars to be assets for the purposes of net worth, they don’t make you money. In fact, your car is losing value as we speak. Plus, there is all the money you spend on gas, insurance, and repairs. By our definition, your car is clearly a liability. Therefore, it makes sense to spend as little as possible and keep it for as long as you can. Instead of spending $40,000 on a new car, try buying a $15,000 used car and investing the other $25,000 into true assets. You’ll be better off over the long run.

Kiyosaki even argues that your primary residence is a liability because it doesn’t put cash directly into your pocket. (Many would disagree, but you see his point.) On the other hand, a rental house is an asset because it earns money.

Growing Your Wealth Through Assets

No matter who you are, earning extra money on the side is an important strategy for getting ahead. Luckily, there are a gazillion ways to do it. Here’s a list of 99 side hustles you can start right away. Just choose one and get started.

Ideally, you want to create at least one stream of relatively passive income. This helps increase your wealth without costing you too much time or effort. Instead of clocking in, you’ll be getting paid while you sleep!

That’s one reason why we love owning rental properties. Yes, sometimes they are a pain in the ass. And yes, we do end up spending a few weekends cleaning up the yard, repainting, and doing other types of maintenance. But what’s a few hours compared to over $10,000 a year in rental income per unit? That’s a huge return on our money, and much better than anything we could hope for at a bank!

Wrap Up

It’s important to realize this doesn’t happen overnight. It takes time to build your asset portfolio before you start realizing their impact. Similar to using a debt snowball, your assets will increase over time, creating more and more wealth as you move along.

As always, it’s important to diversify your holdings. Having all your money in one spot is a dangerous thing. By spreading your risk, you can more easily cover your backside and successfully navigate the whims of any market.

Above all, start thinking wealthy. Get out of debt and seek to build your wealth through assets. Put your money to work, and you’ll have even more to use on the experiences you really want. Good luck and go get ’em!

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  1. Ayup! I also don’t count our vehicles as assets. I know many people like to, but in the long run I know we’ll lose tons of money on them. I’d also recommend tracking your net worth. I started doing this back in January and it’s super-neat to see how my assets grow each month as we pay off debt. 🙂

  2. Yup. The house debate is interesting to me. I’m losing money for sure on my car. I may or may not (hopefully not!) lose money on my car. An interesting consideration, though, is that I can probably sell my car a lot faster than I can my home. But I’m always hesitant to consider tangible things an asset that requires selling it. Can I live without a car? Can I live without a home?

  3. Christina Howell says:

    That’s funny, it’s never made sense for me to count our primary residence or cars as assets. The cars we always run into the ground and need them – if one broke, we’d have to buy another. And the house, we have to live somewhere and couldn’t do it in our city for much less unless we’re willing to do another total rehab (and we’re not!). I count the mortgage as debt in my net worth tracking, but don’t count the equity.

    1. That’s exactly how I treat the home/mortgage in our net worth calculation, Christina. Same with the car. I just don’t see those things as assets.

  4. I think considering a house or car to be a “utility” instead of an investment or a liability makes more sense. Similar to owning a computer, yes you could go to the library and use the internet for free, but you choose to pay for the utility of having a computer yourself. The computer doesn’t make money, but you would still count it as an asset and count it under your home owners insurance since it has value.

  5. My biggest take-away from Rich Dad Poor Dad, the one that’s stuck with me for years, is how to identify an asset. It was at that point I stopped thinking of our home as an asset in the traditional sense. I enjoy our home, and it will someday provide us a paid-for place to live (although maintenance, repairs, insurance and property taxes will always be required) but it doesn’t make money for us. That was a big lightbulb moment for me.

  6. A vehicle can be an asset in that it increases the number of jobs you can have, since you now can travel further to reach them. Of course, this doesn’t mean someone should opt for a $50k or more car when a $15k or even $1k one will do.

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