A "thousandaire" is my made up term to describe those of us who aspire to be millionaires but have failed to this point.
Look, I'm a millionaire in the making here, until I'm not. There is still hope. The real question is what happened to slow down the accumulation phase of my life?
I've reflected on this for three or four minutes and to follow is my insight, my points of wisdom gleaned from my years of failing to become a millionaire.
First, not all 50-50s are created equal. Some years ago, my ex and I split our $100 in assets 50-50, she got her $50 in cash and I got mine in assets. Recall from my last post on financial statements - assets are just numbers in a spreadsheet. It's not really money until you sell it. In sum, not all 50-50s are created equal.
In fact, let's work this a bit more. Any dollar figure on paper is not money, it's a mental concept. Maybe even fantasy. Self-delusion. But not actual cash.
Your house's appraised value is not the same as money. It may be, but it isn't until you sell the house and you have the money. Stock portfolios, the same. Statements like "I made $500 today in the stock market" isn't really true, unless you sold and took the $500. Same with your car's blue book.
Of course, the opposite is true. You didn't lose $500 today...though it seems to come true more often in the end than its opposite.
Second, if you do buy assets, say for $100,000, and three years later they are worth $50,000, this is not called investing. It is something else, perhaps stupidity, or an expensive hobby. An investment is supposed to grow and/or give you a rate of return that is positive. I'm a business professor, I know this kind of stuff.
Third, if you do have investments in stocks, it is not wise to keep the stock after it has lost 50% of the price you paid for it. It is more likely it will lose another 50% than it is to regain what it has already lost. Trust me on this one. I'm smart. I'm an old, poorer business professor.
Fourth, offers to purchase financial newsletters for $3000/yr from some guy who made his millions selling financial newsletters should be viewed with suspicion. Purchasing multiple newsletters at $3000 each per year from multiple guys who made their millions selling financial newsletters is directly related to poverty.
I'm a business professor. Let me explain this. As you increase the amount of money you spend on financial newsletters, the capital available to invest declines at a predictable rate, eventually reaching zero. I've demonstrated this in my research.
I could be a bitter professor now, but I've simply become fatalistic.
Fifth, if you want to increase the rate at which your investment pool grows (call it savings), you have to spend less tomorrow than you are today. Or, you have to earn more. Math is funny that way. Just accept this, grasshopper.
Sixth, a house is an investment if it grows in value and/or pays you a stream of money over the time you own it. Let me see, we bought our 1500 sq ft house for $80,000 prox, remodeled it for $45,000 over the past 5 years (or $125,000). Today it is worth approximately $125,000. So, let's do the quick math here: 125k -125k=0. That ignores the 8-10k commission and other closing costs. And we'll just ignore the taxes and insurance we threw at it each year. Ignore the maintenance costs, too.
If something is costing you money versus handing you money, it probably isn't an asset. Read Rich Dad Poor Dad.
Related to this, think carefully before buying a house in Podunk, USA as it will not grow enough in value to justify any of the headaches associated with its ownership. Even sweat equity in this case becomes just, well, sweat, with accompanying odor.
Seventh, following from my earlier point above, in general, sweat equity is 90% sweat. Most Flip or Flops are flops. Contrary to HGTV.
Finally, my conclusion in all this is that there are worse investments available than stuffing cash in a mattress. I do recommend using your own mattress, where possible.
I'm a thousandaire business professor who still has his mattress.
Musings of a Slow Learner