Making money

Friday, November 14, 2014 - 12:12

Making Money

Anyone remember the story, “The richest man in Babylon?”

If not it was this guy explaining how he became so rich by promising himself that he would always put away 10% of anything he earned as Capital and would never touch it. He argued that no matter how little you earned, you could always spare that 10% and if you say you can’t, you are just kidding yourself…

Moving into adulthood I remember all my friends having these flash cars when I could only afford old bombs. The difference was that they were paying on Hire Purchase and through the nose while I owned my cars outright.

The same with houses and apartments. You buy one, pay it off and then can use that as collateral for the next. After you buy your third the bank does not even ask for back ended collateral. And you never default. 

The other anecdote comes from old Walter who owned tons of properties in Tasmania although he couldn't read or write. He came in one day and asked for a blank contract he could put his X on to buy a property in the Derwent Valley. I said “Walter you have so many properties we have not even sorted them all out yet, why buy another one?”

Walter's response was “Look son “Man printing all this new money. God not making any more land”.

So the answer is squirrel a little away over time and invest but don’t use the capital and if you have to use it as collateral, hedge against any eventuality…