Boomerangs vs Sticks

 In News, Uncategorized

Throw a boomerang and it will return, throw a stick and you have thrown it away forever.

Many people work hard, yet no-one seems to earn enough. We end up working for money rather than making money work for us. Yet we wonder why this is the case. We went to school, attended university and got a good job. So why don’t we have the financial independence promised to us?

The reality is that most people, even those who are highly educated, were never taught how to properly spend and manage their money. Yet the solutions are simple. As Charles A. Jaffe said “it’s not your salary that makes you rich, it’s your spending habits”.  Many people know the difference between an appreciating asset – something that is financially valuable, and a depreciating asset – something that ultimately costs you money. Is that in itself not a valuable lesson and guiding principle of your spending habits?

The financial decision making process is the fundamental path separating the wealthy you from the poor you, and what assets you decide to purchase. There are two types of assets, those that make money over time (appreciating) vs. those that are valuable but do not make money over time (depreciating). Those who prioritise spending on appreciating assets – what we call the “boomerang mentality” – including stocks and real estate are actively seeking to recycle their money. It gets sent away and you are often left surprised by exactly what it can turn into. Yet people who prioritise spending on depreciating assets – the “sticks mentality” – such as a new car or mobile phone, see a negative correlation between their spending and their return on investment.

The wealthy, or those – with the “boomerang mentality” – who prioritised appreciating asset acquisition, generate income to cover their expenses, whilst actively reinvesting part of their income into new assets further increasing their generated incomes. For these wealthy people, their assets are another form of income, whilst for the people with the “stick mentality” towards money, their only income comes from their profession.

Whilst the art of investing in assets is by no means simple, that’s where people like us at MW Lomax can assist in valuable high-return strategies and financial advice, the first step to financial freedom and independence ultimately lies in your decision to spend on appreciating assets – the boomerangs – or depreciating assets – the sticks. It is the fundamental financial decision you must make every pay check.

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