A Money Rule For Life

An important rule that I live by is that any dollar that goes into my investment or asset column, STAYS in my investment/asset column. In other words let’s say I put up $100,000 as a down payment on a $1,000,000 property. Each month that property gives me a cash flow of $1,000 or 10%. I can use that cash flow from my property however I want, but if I sell that property the original $100,000 goes into another investment. I don’t spend it because I want my investment portfolio to keep growing. Once a dollar bill goes into my investment/asset column it never, ever, leaves that column. If I buy 100 ounces of silver (and I do buy a good amount of 1 ounce silver coins or larger bars) which today would cost me about US$1,500 and later I sell that silver, I then move the original $1,500 into a new investment. My profit or capital gain I can use as I choose.

What I see happen repeatedly is that a person buys the $1,500 worth of silver, then an unexpected expense pops up, such as needing to buy new tires for her car. What does she do? She cashes in her silver, buys the new tires and now she is back at square one and has no investments. Again, once you’ve committed a dollar for an investment, that dollar never goes towards anything else but investments. If that investment is the first place you turn to when a financial emergency arises then your investment portfolio will never grow and you’ll find yourself back at the beginning time and time again.

Stay tuned for next week’s blog in which I will share a method I use to keep my money separated so that I avoid this pitfall.

Original publish date: August 13, 2009