Using Money To Make Money

Published on Wednesday - February 05, 2014

The term asset, in real estate, is one that is often misunderstood and readily ignored. Robert Kiyosaki, the famous author of Rich Dad Poor Dad, is on record as saying that your house is not an asset. While this may be true, using real estate in the right way can be a source of extraordinary gains. The richest people in the world are the ones that own companies, stocks, properties or even ideas. Many investors lament the fact that they do not have as much money as they think they should. This comes down to how they choose to spend their money and exactly what are they getting for every expense.

Every dollar you spend should be used to either make more money or to pay for services used that accomplish your desired goal. Spending $100 on a nice lunch with some drinks and appetizers may be a good way to spend a few hours, but it is a terrible waste of money. What are you getting for your money other than an expanded waistline? Your money and time are your two most valuable assets. If you waste one of them, you will be constantly stuck in the mud.

When you buy real estate, you are using your money to buy what is arguably an asset. If you use real estate for investment purposes, there is no doubt it is an asset instead of a liability. Once you take ownership, your goal then becomes to maximize the return on your investment either for the short term or at some point in the future. As simplistic as it sounds, regardless of how much money you start with, your goal as an investor has to be to get as great a return as you can for the money you have available.

You accumulate wealth much like you accumulate anything else you want to collect. You pick and choose which areas of the market you want to focus on and attack them with the financial means you have at your disposal. There can be the temptation to spend money you make on a property to treat yourself and to improve your quality of life above your means. Once you take that money away from your business, you can never put it back. From that point, you will be on the clock chasing that money and on to the next deal with reduced capital and leverage that you would have had.

Financial independence is not about how much money you make, but how much money you keep. One way to keep score of this is by the assets you accumulate. Leased cars, swimming pools and tickets to events should not be mistaken for assets. Real estate, fine art, mailing lists and companies are things you can tap into down the road to make your money. If you are not using money to make money, all you are doing with it is essentially wasting it.

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