We all have a very strong ownership mentality.
We want to own things. We want to have our name on it in order to be happy. We want to own bigger and bigger things than we have before. We don’t seem to be satisfied at the very least.
We not only want our cars to be bigger than our neighbours’, but we want them to have the louder exhaust sound as well.
There is nothing wrong with the ownership mentality per se. It is all about the things that you want to own, and how you are going to pay for them. That is the topic of this blog article.
Many people have the habit of buying a new car every few years. They want to show to their peers that they “can”, that they have “arrived” in life.
What they don’t realize is that a car is basically a mode of transport and it is, in my opinion, a piece of over-priced liability that has the potential to reduce their future net worth every single day of your ownership.
There are many expenses associated with car ownership. Insurance, Petrol, and Road Tax etc. Just to name a few. These expenditures are what I termed as “Financial Leakages”.
Imagine yourself trying to fill a bucket with water. But this bucket is full of holes at its bottom and on its side. I think you will agree with me that no matter how much water you put into the bucket; it is NEVER going to get filled to the rim.
This is the main reason why most of the working class MUST continue to work to pay for their “ownership”, or their bucket will run dry and they die financially.
So much for showing off to your peers.
Know what you own
Look at Warrant Buffett or Bill Gates.
What do they have in common? They are all multi-billionaires.
What else do they have in common?
Warren Buffett drives a Ford pick-up truck. Bill Gates drives a Toyota sedan.
Why not they own the most expensive cars on earth? Bill Gates was mentioned that he could fully own a Lamborghini every passing minute. Why not he owns one? Why not Warren Buffett owns one as well?
They don’t because they know the difference between assets and liabilities. They know what to own, what not to own, and how to own those things they want to own.
They just use their money more wisely than most of us and that simple habit has made them billionaires.
They own only income producing ASSETS, NOT income depleting liabilities.
This is the small difference that make a huge impact in their financial net worth.
They know income producing assets increase their net worth, and income depleting liabilities decrease their net worth.
AND, most importantly, they own their assets with their massive passive income from their business and investments. NOT from their active income or future income like most of us. Therefore, the rich will always get richer. No two way about it.
Focus on passive income generation
At AlgoInsights, our aim is to increase the net worth and wealth of our clients by trading the Forex market with our trading algorithms.
Because our algorithms are fully automated and requires no active participation on your side at all. The income generated are all passive in nature.
We equate more sources of passive income as having more wells for you to drink water from. Therefore, the more the merrier.
With multiple streams of passive income flowing into your life, you can quickly pay off your debts, and start building your financial life. This is what our clients received as a major benefit from the use of our algorithms.
Debts on Liabilities is Bad
I talked about good debt and bad debt in my previous post. If you have not read it, please go here.
Most people own their car with a loan on the car. However, most people do not realise that getting a loan on a car is double whammy for serious financial leaks.
This is because in addition to all the daily and monthly expenditures you need to put into the car, you have a loan to repay. It is like having 2 metal balls tied to both your feet. How far can you walk before you decide to give up?
This is the reason why I never encourage my friends to own a car with a car loan. You are using your current active income and future money (loan) to pay for a piece of liability sitting in your car park every night.
Pay in FULL or wait to buy at another time when you can afford it in full.
When You need a Car
When you really, really need a car, own a used one. Let the first owner and/or previous owners take the depreciation off your car before you bought it.
Better still, own it with your passive income and maintain it with your passive income. No financial stress in this manner.
As far as good financial management is concerned, it is wiser NOT to own any piece of liability with your active income or future income or both. Doing so will get you into a financial hole and you will have a hard time getting out.
Alternatively, plan your time, journey, and take the public transport instead. Do your part and make this world a greener place for all. Your financial future depends on how you use your money TODAY.
Thank you for reading my article.
CEO & Founder, AlgoInsights