Friday, October 5, 2012

The Physics of Money

There are tons of books that tell stories of big challenges, taken by the richest billionaires. I have read many of them, and I can tell some of them are really inspirational. The majority of these stories, explain how these people were able to create their own fortune. 
I am here to provide you with the unique opportunity of learning how did they manage to keep their fortune. You have to know not only how to accumulate but most important how to maintain your wealth.
What if you make $1 million, and you lose it after a few months?
Do you know that this kind of “loss”, usually happens to the many who happen to win the lottery for the first time? Inform yourself… In order to build and to keep your wealth you need a plan on how not to waste your money.
First point. Wealth is Accumulating (and not spending…)

Your first fortune is learning how to maintain your money. 
In my latest post, "the Survival Handbook" , I introduced the Cash Flow, and the Tracking Ob. If you do not have a plan, you have less opportunities to become rich. Planning, budgeting and controlling expenses are key elements. Accumulating money means knowing your daily inflow and outflow. Build a plan of action, study your Cash Flow and Tracking Ob.
Second point. Money is a form of Energy
Let me introduce you a metaphor: consider a weir on a lake. The water is your wealth. If the inflow is less than your outflow, you are generating wealth. If not, you are wasting money. You need to close the plug or at least to open it carefully. If you pull out the plug, the water creates a giant whirl of energy. Same thing is for the money. 
Money, is a form of energy. And what you need to know, is how does energy works. I don’t understand why at school they taught me about physics (and that’s an important subject) but they didn’t teach me about the Physics of Money …
Money is energy!!
The more money you have, the more energy you are able to provide. 
Do not trust those who go like: “do you prefer money or love?” I prefer both. I couldn't live without my son’s smile, my wife’s cuddles and my dogs… but I cant live without money too. In these few lines I am ready to challenge every Scientist on earth to prove that Money is not a form of Energy. Money is Energy.
Third point: Net worth and Cash Flow are the measure of economic success
You need to control your levels of net worth and your cash flow, in a systematic way. Check your wealth status. 
Fourth point. High consumption lifestyle and High Maintenance are not forbidden
The important thing, is that your spending must always be under the line of your income budget. 
For example, if you buy a car with a lease, that’s not the best way to generate money, because you work to pay the lease rates and its interest rates. You work to have something you cannot afford! It’s like if you keep running without moving a step forward and if you stop you "probably" default. Ask yourself: if you stop working now, how long would you be able to keep up with the same living standards?
Advice of the day: Live below your means. 
Fifth point. Work to “Retire Rich”
Even if you have a job, my advice is to start creating your own Automatic Cash Flow. And later you will check your finances. When you are in the “Retire Rich” level, your money will work for you. 
Your time will be dedicated to generate money, counting the inflow and checking your financial status.

The Question....
Now, after these 5 points, I ask you a question: “Why aren’t you in the “Retire Rich” level yet?” 
The answer is easy: Nobody taught you how to do it. Nobody told you anything about the opportunity to “Retire Rich”. 
Sixth point. “Teach by Examples”
Thus, don’t let your children do the same mistake you did! The most important thing you can do for your children is teaching them about the money physics. Teach them financial discipline and how to be financially independent. 
If you don’t, they will always struggle to make ends meet. It is proven that a random donating system always generate financial dependence, in the end, It’s like any other addiction. Teach your kids how to fish and not simply provide them with the fish every day. They will become financial independent and productive adults. Eventually one day they will thank you.
You will find out you are able to learn the art of making money sooner than what you thought. Life is a long run.
Luigi Foscale

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