There are only five things you can do with your money. Five. The aftermath of our spending decisions is different depending on the choices we make.
1. Waste it: Buying worthless stuff that is fleeting, temporary and does almost no good beyond a temporary thrill.
2. Use it: Buying things that, while they may be temporary, make sense. Buying things like electricity for the house, food, and education. Remember, our monthly housing bills are things that we choose to buy from the utility company. In this respect, they are no different from anything else we choose to buy.
3. Let it sit: Not a bad idea really. If the alternative is to waste it, I would suggest sitting on it over that any day. Although we do need to think about the opportunity lost when we let our money sit around, it’s not as bad as, dare I say, most things we do with our money. But remember the time value of money and inflation are eating away at your money like a broke down car parked in a field. We should put our money in a sheltered place where it can grow in value.
4. Buy liabilities: Debt, car payments, loans, that stuff. Stuff that goes under the debt or liabilities column. Some of these purchases are arguably needed for things like a house, car or education, but most are just a bad idea. When you get your paycheck for working hard all week, why go out and buy liabilities? That’s like throwing anchors overboard because you are bored and want your ship to go slower for no good reason.
5. Buy Assets: Now we are talkin’! We can choose to buy assets with our money just like we choose to waste it, use it, sit on it, or buy liabilities. Assets are of course things like investments and even life insurance. Things that will “pay out” or grow in value above and beyond the amount that we put in.
It’s a choice, and you only have five to choose from. Everything we do with our money falls into one of these categories. Think about which one you are “buying” next time you open the wallet or swipe the card or click “add to cart.” Happy choosing!
In 2010, I was trucking along in life, earning a steady, decent-sized paycheck and had managed to save up a small pile of beans. My net worth was approaching six figures and I was only 30. Debt free and loving it I had a comfortable and reliable financial buffer between myself and the Bad Things in Life. As if there is such a thing as a financial buffer between ones self and the bad things in life.