Is Money a bad word
Is Money a Bad Word?
By Armstrong Williams
March 12, 2007
Would anyone disagree that generating wealth is a bad thing if it's earned honestly, legally, and ethically? That would be a strange thing to criticize wouldn't it? That person's paycheck should be celebrated, not shamed, because anyone with a solid paycheck and sound investments can secure their future for themselves or their family for generations to come. A business has incentive to provide a service or product to its community, income for employees, and can give back to charitable causes. If you have a sound mind and heart, every dollar you earn will be for good.
But somewhere along the line, money became a bad word. Maybe it was the TV showing us politicians, CEOs or celebrities who were reckless with their money. Maybe people hate what they have to do for it, like give up time with their family, fight ungodly commuting times in traffic, or even sacrifice their health, just to provide a decent standard of living. Whatever the reason, people love to hate money.
The lower and middle class culture that most of us grew up in urged us to disregard money and focus on community service. In these environments, we might hear "money is the root of all evil," or "money can't buy happiness." We find the actual words are "the love of money is the root of all evil." However, common sense tells us that house payments don't make you happy either, and the lack of money is actually a curse--the highest crime rates are typically in the poorest areas. And even though money can't buy happiness, if you're in the 98% of Americans reading this, chances are you are the same person dreaming of all the positive things you could do if you won the lottery. Most people are dreaming of all the good things they could do with that kind of money, such as help out a parent or family member, put some money in the bank for savings or education, get out of a bad neighborhood, or give to their church or charity. It would be a shame if those things happening rested on a winning number rather than an honest effort.
In spite of the need for financial education, there are few communities, schools, or churches that teach us how to make money, or what to do with it once we make it—the average national savings rate is -4%! Can you remember anyone ever teaching you how to balance a checkbook, earn good credit, invest in the stock market, or avoid debt? Can you remember a mandatory class or seminar in school that gave you tips about buying property, starting a business, or embracing an idea? Can you even recall a situation where you were encouraged to do the basics: get a good job, invest for retirement, and save for special circumstances? If so, you are among a fortunate minority. But this is no excuse. All of us can make money, invest properly, and save smartly regardless of our background, education, or experience.
The concept probably most helpful to the novice wanting to learn about making money is—and you’ve heard this before—“time is money”. The good news (or bad news) is you determine how much money your time is worth. Your time is the most precious thing you posses. You’ll never have enough money to buy more of it, and you don’t know how much you have. Although you can and should plan for the future all you have is right now. So, it is up to you to choose how to invest your time and make it as valuable as possible. When it comes to making money, you have two options to convert your time into income: you can trade your time for money or, you can leverage time or money to make money.
The sum of advice most people receive about making money is to get an education, get a job and work hard. In other words go trade your time for money, and increase the value of your time by increasing your level of education. Getting education is essential and being employed is a great thing because there's always a need for roads to be built, codes to be written, cures to be found, etc. There are actually a few people who are very highly paid in this capacity, but the majority of employees earn less than $100,000/year. You should know that if you choose to spend all your time at a job, even with benefits, you may not be able to retire in comfort, if at all depending on market forces. Even if you saved most of your income, the money you put in the bank loses half of its value every 10 years. (Remember what a house used to cost in the 1990s?) And what kind of interest does your savings account get? Let's assume it earned 5% annually. That means you would have to have $1,000,000 in the bank to have a $50,000/year passive income—income you don’t have to get out of bed for. That means if you saved $1000/month ($12,000/year), it would take you about 33 years to achieve $1,000,000 in the bank, assuming the interest compounds. Not bad, though your spending power in 33 years would be about $12,000 to $30,000 in today’s dollars, and you can’t will your job to your son or daughter.
The second option is to leverage your time (or money) to make money. There’s only two ways to do that: own a business or invest (in a business). If you get your education on how to run a business, it will make you a better investor. The reason a business allows you to leverage your time is because you can leverage it through people and technology. The business owner can hire other people to perform tasks that he cannot complete on his own. This frees up his time to generate more income, thus increasing the value of his time. Another option now is to use technology to increase productivity, thus freeing up time to make more money. Computers and the Internet now make it a lot simpler to run a business because a program can handle the mundane tasks and the internet allows communication with a lot of people simultaneously. The business owner also has the key advantage that they spend money and then are taxed on what’s left over, whereas the employee is taxed and then spends what’s left over. Remember your network is synonymous with your networth.
For example, Bob and Dan are young and want to make some money while they’re in school. Bob gets a job and wants to buy a computer for $700 so he can play World of Warcraft, Burning Crusade. His income is $1000, but when he looks at his pay stub, $300 went to Uncle Sam. So he ends up with a computer and $0. When he goes to college, he’ll be taking his computer with him and taking out expensive loans. Eventually, he’ll have to get another job while he’s in college, but hopefully he started working in the field he wants to work in with his degree, so he can use his education. Dan the business man needs a computer for his painting business so he can book appointments through a website. His business generates $1000 in profit. He buys his computer for $700 and has $300 left over. Uncle Sam takes his cut (about 1/3) and Dan is left with a new computer and $200 which he can put into his college savings account. He can also take his business with him to college or sell it when he moves. He can repeat this pattern anywhere he goes, hire employees to help expand his business, and put the excess money towards buying real estate or put it into other businesses that will generate more income.
