3 misconceptions about money and wealth
“Money is in every way like sex. You can’t stop thinking about it when you don’t have it, and you can’t stop thinking about something else when you do.” James Baldwin
Foreword:
In this article, I deconstruct three false ideas that seem to be anchored in the French collective imagination. It is not the fault of the French, but I think it is the fault of the State. Why don’t we have the choice to take fiduciary management courses in high school or university? We’d have a lot more entrepreneurs and leaders than we do low-wage earners. But the more I go on, the more I think that people are kept in ignorance, even worse, in ignorance of their own ignorance in order to perpetuate a system that benefits a minority.
A high salary is necessary to become rich
No. A high salary is not necessary to become rich. It may help and accelerate the process, but the more you earn, the more likely you are to screw up financially, falsely believing that you are safe from trouble. Earning a lot will not protect us in any way, and if we are not able to get rich even though we earn the minimum wage per hour, this will not change by earning more.
From my modest point of view, I conceive enrichment above all and especially as a state of mind or a philosophy of which I must initiate the foundations precisely by earning little at first.
Earning little is probably the best lesson I’ve ever learned because it forces me to think hard to get rich. It forces you to move forward in an unconventional way and it forces you to become a professional in managing your own cash flow. What better learning experience than to be able to initiate your own projects without any money?
When we earn little, we have our backs to the wall and we conceive our enrichment not as an option but as a leitmotiv. This is what will make us create great projects and make us proud of ourselves because we started from a zero level if not abysmal.
Personally, the fact that I didn’t earn much during my first professional years made me relentless in my work capacity. 90 hours a week? Cat’s piss, literally.
Earning little will make you bigger because then you will be able to create a project, get it financed and reap the benefits in the long run.
When you earn little, especially at the beginning of your professional life, it is precisely this that serves to develop your unique vision and gives you the strength to think big and far. To say to ourselves that Ok we are starting a staircase that is probably endless, but that in the worst case it will benefit our offspring.
While earning a lot immediately, we develop less of a sense of effort and dedication to what we believe in.
Saving a lot is essential to get rich
No, no and no. I have created my own maxim on sterile saving, the one that prevents us from living while falsely believing that it is necessary for us: “Saving excessively and without conscience is only the ruin of our finances”.
Saving is what, it is saving money over time while telling ourselves that it will enrich us while at the same time, the value of the money put aside will decrease like snow in the sun.
Given the ever-increasing inflation, excessive saving is more of an impoverishing choice than a rewarding one.
Personally, I am in favor of small savings, which will be used in a few months either to acquire real estate or to finance home improvements. But no more.
I’m not for leisure savings either, because I believe that one should invest on credit and live on cash. If my income doesn’t allow me to go to the other side of the world, then I don’t go and I increase my income until it allows me to go. Period.
To those who say to me and the big savings then, the one which would allow us to acquire real estate cash, without financing thus without refunding I will answer them that the very principle of the real estate as an investment it is to be financed otherwise there will be enrichment but much less in the long run.
Too much savings certainly kills savings, but it also does not serve society because it is money that sleeps. But the more money is moved from account to account and from hand to hand, the more it serves society in that more people are likely to benefit from it.
Excessive saving is the worst in that we deprive ourselves in order to constitute it and in that it impoverishes us at the same time, although ab initio, I have no doubt that the objective in itself is praiseworthy.
Saving too much often makes us give up investing. You have to realize that the French are among the biggest savers (or pigeons, I don’t really know anymore) in Europe… Sad, isn’t it?
Rather than saving, let’s invest. The money that is sleeping only benefits the banks, not the men and women who deserve it more.
Let’s remember the quote of Alice Parizeau, who was already aware decades ago of what I am saying here: “Money must be constantly in motion. It is ridiculous to save. You have to invest.”
Borrowing is bad because you are in debt for the long term
LOL.
In my eyes, it is precisely the opposite, debt that constitutes enrichment.
Of course, not all debts are equal and as for humans, there are bad and good ones. But in itself, debt is neither good nor bad, it is the object of the investment that is.
Let me explain.
In investment, we distinguish ab initio between liabilities and assets. While a liability is an asset that costs (for example a car, which costs us in gas, insurance and maintenance), an asset is an asset that enriches (rental real estate that brings in rent).
In concrete terms, a liability is a recurring red debit line on an account. Whereas an asset is a green credit line on an account which is also recurring.
Hence the need to practice enriching indebtedness, to exercise indebtedness if and only if it relates to an asset. Otherwise one will be reduced not to enriching oneself but to enriching the bank above all.
Typically, it is necessary to avoid imperatively the consumer credits and caetera because it amounts to shoot our finances on several years.
We have to deconstruct our basic considerations on debt. Personally, I managed to do it but not without difficulty. In fact, the first time I heard about debt was in my last year of high school, in economics and social sciences classes where we were studying the subprime crisis.
Of course, the poor families who got screwed by the banking system and who had to pay exorbitant bills (in the best of cases, because other families literally found themselves on the street) believed in debt, but they had only been offered an unhealthy debt, mainly on real estate, but at a variable rate. Hence the importance of always getting into debt at a fixed rate because the indebtedness being contractually fixed, in case of doubt one will turn against the lending organization whereas with a variable rate it is the uncertainty which reigns. As an investor, we must establish forecasts over 10, 20, 30 years, however pessimistic they may be.
So remember this: debt is neither good nor bad in itself, but if it relates to a liability it becomes impoverishing just as if it relates to an asset, it becomes enriching. Moreover, there is no option between fixed and variable rate because one cannot resolve to indebt oneself without visibility.
For ethical and valuable enrichment,
Maxime Villeneuve.
