I dream of Jeanie, the lotto, and early retirement

Everyone dreams of life of leisure in early retirement. You spend 30, 40, 50 years working and then what. Most people will simply work all their lives until the day they die. Most of our dreams are put aside by the needs of our families; feeding, providing shelter, and just the basics. Many can’t even save enough to even help their children with schooling. So the only hope for an easy retirement is the Lotto or the casino.

Why are some people rich and some poor? The truth is most of us are smart enough to be rich, but we seldom make it. We sabotage ourselves. So what allows soon people an easy retirement and yet some never get ahead of their needs. I have spent most of my life studying the rich and the poor, and how they make money. More importantly, what they do with their money. Amazing a typical person will make a million dollars in a lifetime of work, but they seldom have anything to show for it.

So is it how they make money, or how they spend it? Or is it they are born with it or perhaps they stole it from someone else? Amazingly, it is not how much or how they made it, but how much they keep. Most wealthy people got there not by my making money but how they made it. Usually in a small business with a combination with real estate or some other asset building tool.

So let us start by defining rich and poor. My definition, a poor person has to go to work every day, in a job they don’t like, to make money to pay their bills, so they can live. Conversely, a rich person makes money working for himself, and he has the time, and the advantage of doing things as he needs them to maximize his/her money.

A poor person makes a wage or salary, a rich person worries about his net worth. A poor person worries about paying his phone bill. The rich person choose the best company after the researching it, and affords the best plan, but also invest in it to make more money.

If I am making the rich seem smarter or special, they are not. They are however more meticulous and informed buyers. They read the contracts, keep the receipts and will return the $5 item if they don’t need it. The poor, throw it in the garbage, not understanding that those $5 are not just $5, but the income it makes for him over time. The rich are more careful with their money, the poor just want more.

The rich are into multiplying their money, the poor just add to it every day. The problem with the poor man’s method is that one can spend as quickly as one adds to it. You need to multiply it to achieve any kind of a saving.

Truly, the game is stacked against the poor person. Indeed the more he makes, the more everything else goes up in cost around him. The reason is very simple, he is making more money because inflation is making his paycheck bigger, but the true value of his money hasn’t changed. His purchasing power is less even though he is making more. His weekly income keeps just as poor week after week.

The rich man invests in a big house or other equity that increases in value with inflation. If inflation is going up 4%, his investment goes up the same. We will talk about this later, but consider this. If you own a home that is worth $100,000 and it goes up 4% or $4,000 a year, did you make $4000? Well, if inflation is running at 4%, and everything is going up in value by 4% then you actually broke even. However, if instead you had your money in cash, and didn’t lose a penny, your purchasing power with that $100K went down the equivalent of $4000 or 4%.

This is the hardest concept for most people to grab so we are going to explain it in detail here in a following chapter.

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