Doing Something Different is Not Always Better...But Doing Something Better is Always Different!
Regarding your finances, are you doing the same as what your friends are doing? What your parents taught you to do? What the financial gurus are saying? Or, are you doing something different?
It has been said that 90% of Canadians must rely on government programs such as CPP or OAS to survive during retirement. Does this sound like fun? What are most Canadians told to do with their money? Number one would be to pay off your mortgage. Number two would be, invest in RRSPs or build up a similar type of nest egg.
The wealthy are doing something different. Instead of working for money, they get money working for them. They get paid while they are sleeping. Author of Rich Dad Poor Dad, Robert Kiyosaki said, ‘assets put money into your pocket, and liabilities take money out of your pocket’. Wealthy people purchase their liabilities with passive income from their assets and they purchase their assets with their earned income.
Is a paid off home an asset or a liability? Based on Robert’s definition, your house is a liability because it does not put money into your pocket. In fact, it takes money out of your pockets through payments of property taxes, maintenance, repairs etc. Can we turn our paid off house into an asset? If we were to use our equity as collateral and borrow against it to purchase a passive income asset, would this not be putting money into our pocket? If we transferred our RRSPs and other savings to true passive income assets, for example rental real estate, would this strategy not put money into our pocket? We could use this extra cash flow to finance our liabilities, like vacations, cars, home renovations etc. This will free up your regular income to purchase your assets.
Remember, different is not always better but better is always different.