It’s not what you make, but what you keep that matters

It’s not what you make, but what you keep that matters

It’s not what you make, but what you keep that matters.

 

How many of you have heard stories about lottery winners who win it big, only to lose  everything in a short period of time? I was reading a web article on this subject recently and it was mind blowing. The article went through many stories of how different people had won millions, only to lose it in 10 years or less. One guy won $31 million and was bankrupt two years later.

 

I just can’t fathom that.

 

It’s not what you make, but what you keep that matters

 

Lottery winners aren’t the only people who come into large sums of money and lose it. We see this happen to professional athletes with some regularity. Names like Evander Hollifield, Scottie Pippen, Mike Tyson and William “The Refrigerator” Perry are big names that are now broke. Theses guys made hundreds of millions of dollars. Yet they have nothing to show for it today.

 

Why is that?

 

I surmise it’s because you get kids who are straight out of school, and they sign with teams for more money than most of us will see in our entire lives. Yet they’ve never been taught how to properly manage money. So, they live an extravagant lifestyle while their paycheck comes in. But once their athleticism is used up, so is most of their money.

 

That reminds of a quote from the book “The richest man in Babylon” that says, “A man’s expenses will grow to equal his wage unless he protests otherwise.”

 

How true is that?

 

Now, you might be thinking to yourself that if you were making millions a year that you would manage it differently. And you might be right. But to quote the book “Rich Dad Poor Dad” by Robert Kiyosaki, “It is not how much money you make. It is how much money you keep.” That’s what matters.

 

It’s not what you make, but what you keep that matters

So, let’s take the “millions a year” off the table and ask yourself these questions: How much of my paycheck am I spending? And how much of it am I keeping?

 

If the answer to these questions was that you’re spending everything and keeping nothing, there is a high likelihood that making millions won’t change that.

 

But if you are saving some of it, where are you keeping it? And what kind of rate of return are you receiving?

 

According to bankrate.com, the best money market, CD and saving accounts for 2020 are offering interest rates hovering below 2%. Interestingly enough, the inflation rate for 2019 was right about the same. Therefore if you invest your money in these types of investments, you won’t lose money, but you won’t make any money either.

 

Ashley and I didn’t think savings accounts with rates like those were a good place for us to keep our money. Instead, we decided to keep it by buying assets that appreciate in value in the form of single-family rentals.

 

Just so you know, an easy definition of an asset is anything you buy that puts money in your pocket. The opposite, which are called labilities, are anything that takes money out of your pocket.

 

You see the lottery winners and the professional athletes spent millions buying big houses, cars, boats and things like that. All those things took money out of their pocket and never put any back.

 

You’ve probably heard that buying the house you live in is purchasing your biggest asset. And you’ll hear a lot of people claiming that idea. I’d disagree with that statement though. I think your personal house is a liability.

 

To illustrate that point, look at Evander Hollifield. He lost his 54,000 square foot house to foreclosure. And the reason for that is the house was taking lots of money out of his pocket in the form of mortgage payments, property taxes, insurance and utilities. It was taking money out, but not putting money in, and was therefore a liability.

 

It’s not what you make, but what you keep that matters

 

Whereas your home may not be a mini mansion like Evander’s, it’s still taking money out of your pocket each month and not putting any back.

 

Rental houses that produce positive cashflow, on the other hand, are assets. They put money in your pocket, increase in value over time and give way better returns than what’s being offered at the bank.

 

And that’s why we keep our money in real estate.

 

Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.

 

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