It seems for some families no matter how much money they make they simply cannot get ahead in life. The more money that comes in, the more money goes out and they simply cannot identify where the leaky holes are in their financial ship. They have the average necessities of a modern family, a house, two cars, dog, yearly vacation, and sporting activities for the kids. But unfortunately they keep telling themselves, “If only I could make a little bit more money things would be much different, things would be so much easier.”
Well guest what? I’m going to be honest and give it to you straight! They won’t be any different not in the slightest bit and here is why…
Debt Is An Excruciating Anchor!
No matter how much money you make, chances are you will always have this unidentifiable desire to want more and that desire will never be satisfied.
Mortgage Debt – Instead of a 2500 sqft home, you will suddenly have the need for a 3500 sqft home. Oh yes, that theatre room is a necessity and the play room for the kids because you’re tired of cleaning up their mess so you’d much rather just shut the door and not deal with it. That massive deck is a must have because where else are you going to host friends and relatives in the summer.
Driving Around Your Kid’s College Tuition – You just got that new promotion at work and in order to impress future clients you can’t be seen in anything less than a luxury car. Nothing says “You’ve Arrived!” better than a brand new BMW, Mercedes Benz, or Range Rover. And let’s be honest who is going to take advice or guidance from someone who drives a Honda Civic or Toyota Corolla?! You must be broke!
Borrowing $50k for an education you could have gotten for a $1.50 in late charges at the public library – It’s no secret that a college education isn’t what it once was, yet we have our young children flocking in droves to 4 year universities without the assurance of a job afterwards. If you’re one of the successful students who studied, worked hard, and landed a job after graduation congratulations! You can now start paying “the man” back his money WITH INTEREST (that is at approximately 6% last time I checked).
Keeping Up With EVERYBODY – The age old term is keeping up with the Joneses but let’s be honest, it’s keeping up with everyone. You see something that you weren’t even considering and if more than one person has it then by nature of the universe you need to have it too. You bought a 60″ TV last year, but they just came out with a 75″ TV. It makes absolutely no sense for you to punish yourself by looking at a small tv when you could have much bigger! And let’s be honest here, you earned it! You worked hard all year and should be rewarded when you get home.
As you can tell, I’m being incredibly facetious but let’s be honest here, we see this stuff happen all the time. Let me be clear, I am not hating or jealous of people who have large houses, luxury cars, expensive educations, or nice things. I just simply believe that nobody should ever borrow money to purchase them. Quite frankly if everyone had to pay cash for every single purchase they made people would be a lot more frugal. I find it hard to believe that someone would take the time to save $50,000 only to turn around and go spend it on a car, which is a depreciating asset by the way.
In fact it almost seems like people actively seek out debt instead of seeking out legitimate assets.
Lack of Assets In Families
A lot of financial bloggers would argue this issue with me until the sun comes down but I’m still sticking to my guns. I truly believe that the most important thing a person can do in their “financial” lifetime is acquire assets. What is an asset you ask? Simple – A cash producing vehicle, it’s that simple.
Stocks That Pay You Money – A lot of people believe by simply contributing to their retirement accounts (401K & IRA) that they are acquiring an asset. This is really just a half truth, yes technically a stock can be viewed as an asset but people tend to not mention the fact that they can decrease in price making them a failing investment. In actuality what people should be looking for are dividend stocks, these stocks actually return cash to investors every single year. Of course not all dividend stocks are created equal, you need to conduct your due diligence and find the best businesses that are stable. If you purchases these type of dividend stocks at a great price you can enjoy a great revenue stream for life.
Your home is not an Asset | Rental Property is an Asset – The home you physically live in is not an investment. I don’t care what anyone ever told you, if your current home is not producing a monthly income then you are simply consuming that home. One of the best and quickest ways to financial freedom is through real estate investing. Like any other investment there are risks but they can be mitigated through education and due diligence. I personally am looking at getting into real estate investing and am taking a bunch of pointers from FI Fighter who is building a very nice real estate portfolio.
Start A Business But More Importantly Create Value – I get so sick and tired of hearing people say starting a business is easy and anyone can do it. Another half truth that gets the hairs on my neck standing up. It is true that starting a business is easy and yes anyone can do it, but not everybody can be a successful business owner. Creating a business is very hard work, I don’t care what industry you are in. Creating a product or service is a hard task, but I believe convincing someone else that there is value in the product or service is a monumental task. Making a sale is one of the hardest things I have ever done. However, knowing that I created something that someone else values enough to pay for is a truly rewarding feeling. Creating a business is the number one way to wealth in the shortest amount of time. A properly run business will produce income for you month after month and can be scaled or put on autopilot depending on the industry.
So What Is The Solution?
All of this seems so simple in theory and on paper, but in practice it’s extremely difficult to implement. It requires an extreme amount of personal discipline of not just one person but of two people when you have a family. I mean think about it, just living debt free requires sacrifice, planning, and determination. It’s hard to fight off that impulsive spending and we all know credit card companies and banks make it so easy to borrow money. Now that I think about it they’re like financial drug dealers that are willing to give you that high in a heartbeat, but for a steep price!
I hate that you’ve read this entire article only to find out that I don’t have a solution for you. Every person and every family is completely different, but what I can definitely tell you what my family is doing to create generational wealth…
Pass Down Wealth – We are currently in the process of buying land and plan to build a home for each family member that moves onto our land. This land and all the structures built on it will be paid in full and will be passed down to future generations. We believe that the simplest thing a family can do is pass down property to their heirs, as it is one of the biggest purchases most families will make.
Share Financial Knowledge – If our family ever has the pleasure of having you over for dinner you won’t find sports or celebrities being talked about at our dinner table. We use our time together as a family to bond but also learn, my children are very young, far too young to understand finances but finances are not taboo at our house. In fact I plan to develop and share a financial curriculum for young kids that teaches them financial responsibility and financial independence.
Create Businesses Early In Life – The best experience and knowledge is gained by hands on experience. You will never ever have absolute certainty that you will succeed when you create a business, it is in my opinion that sooner you make mistakes, the sooner you will learn and become successful. When my kids become teenagers instead of getting a job at the local mall or grocery store I am going to encourage them to create a business. There is tons of grass to be cut in my area and quite frankly a lot of homeowners that don’t want to cut it or pay premium prices to have it cut. Insert the eager teenager who wants money for non essential items because he or she certainly isn’t getting it from their parents.
At the end of the day you have to sit down, make obtainable goals, and do everything in your power to achieve them. Some couples may want If you want to become a billionaire then I would say that you have a lot of work cutout for you. Or perhaps you simply want to leave your children with more than you had, that’s what my wife and I plan on doing. We don’t want to be a multi millionaires we simply want to live debt free and generate passive income so we can enjoy our most precious asset, our family?
What are you doing to create family wealth?
A Few Quick Link Love Shout Outs!
- Aspiring Blogger – Personal Finance Carnival #28
- Blog Post of the Week! | The Free Financial Advisor
- Savy Scot Does the Carnival of Retirement
- Articles from Personal Finance Experts and Bloggers
- Financial Carnival For Young Adults
- Carnival of Financial Camraderie
- Carnival of Financial Independence – 47th Edition
Here’s to our Wealth!