Photo by Elizeu Dias
I was at a seminar many years ago where I spent several hundred dollars in order to be there and I also had to give up a whole Saturday. On top of that, I had to travel several hours out of state to attend the session. However, I was told by an acquaintance that it was one of the most valuable seminars that he ever attended and for him, it was worth every penny that he spent on it.
At 8:00 AM sharp a balding gentleman made his way onto the stage and opened up his laptop that was already connected to the projector. The crowd of around 200 people settled down and it got quiet very quickly. The gentleman told us his name, gave us a brief bio on who he was and then immediately flashed up his first slide onto the screen.
Never own non-income generating assets
What took place next I will NEVER forget. In fact, it made as deep a grove into my brain as anything else has in my life. I can remember it as vividly as if it had happened yesterday, although it has now been more than two decades ago.
More importantly, what this gentleman said formed the basis for my financial blueprint that has led me on a path to financial success, a path that I have always tried to never waiver from nor question its viability.
As the first slide flashed up on the screen, I and everyone else in the auditorium could clearly make out the passage that was displayed. It was in massive letters and took up the entire screen. As I started to read the passage, in a booming voice the presenter read the passage out loud, “Never own non-income generating assets”, he said stoicly.
I took what he said in and began to try to decipher it on a deeper level. As I was doing that, the gentleman closed his laptop and walked off the stage. I looked around and thought to myself that he probably headed off stage to grab something that he needed for his next slide. Then nothing.
A few early minutes passed by and he still hadn’t returned. Deep silence from the audience turned into chatter. Chatter turned into conversations.
Some people in the audience were clearly upset and began to loudly voice their displeasure.
Other people began to stand up and look around trying to see if there was anyone from the company that was hosting the seminar to find out what was going on.
The importance of not owning non-income generating assets starts to sink in
A total of several minutes had easily passed by. The attendees were now clearly upset that they had spent several hundred dollars and perhaps like me, had given up their weekend in travel and other inconveniences and seemingly had been played. Some attendees were packing up their laptops and other paraphernalia and were heading back to the exits.
In the chaos of what the presenter had created, all of the sudden the gentleman walked out from the back stage and started walking back to the podium that was on the other side of the stage. Seeing this, the audience quieted down and immediately just stopped in place to see what was going on.
The gentleman adjusted the microphone, stared out in the audience for a few more seconds until you could literally hear a pin drop and then said, “Do I have your attention now, because the next thing out of my mouth will change your life forever.” Seeing that he clearly had everyone’s attention in a way that I have never seen any presenter ever have, he went on to his next slide.
This second slide was even larger than the first one and read “Never, EVER own a non-income generating asset” and as the passage flashed up on the screen he once again read it in a booming voice.
He was dead right. What he said literally changed my life forever. (What he would go on to describe about this strategy would be nothing short of mind blowing).
Assets that generate income
Over the weeks and months that followed this presentation I changed EVERYTHING about how I approached my financial life. I looked at all financial decisions using the filter as to whether or not an asset was a non-income generating asset or not.
If I found assets that generated income, I was interested. If they didn’t, I didn’t want a thing to do with them.
Now clearly this passage has to be some sort of metaphor or something and can’t possibly be applicable, right? Because the truth is, if we followed this advice in the truest sense of the word we’d never own a house, we wouldn’t own a car and we wouldn’t buy furniture. In truth, if taken to the extreme definition of the passage, that would be exactly right!
Now that said, the intent of course is to draw a distinct comparison with the practice of borrowing money to ‘buy’ every non-income generating asset possible which on its surface would seem ridiculous but when at least looking at the American consumerism society, it may sadly not be that far from the truth.
So how can we use this strategy to restructure how we approach our financial lives? The easiest way is to conclude that the more we can structure our financial dealings in ‘the spirit’ to strive not to own non-income generating assets the more probable it is that we will create and maintain wealth over our lifetime.
A different approach to buying real estate
As an example, when purchasing a dwelling instead of purchasing a single-family house (which does not generate income) purchase a duplex instead and have the rent from the other unit offset yours.
Or instead of borrowing money to buy a new car, purchase a fully depreciated used vehicle in cash or purchase a vehicle under your business, claiming the payment as a business deduction.
Just these two items alone, housing and transportation, consume more than 50% of the average American’s income. Therefore, being able to significantly reduce costs in these two areas alone will have a HUGE impact on your financial future.
Obviously, any savings from these two areas that could be diverted into income generating investments has a duel impact; significantly reducing expenses and growing net worth. Should this concept be extended to other family expenses such as education, food, health care, retirement and other living expenses, the overall effect is truly life changing from a structural perspective (much more about this in later posts).
Conclusion
Although it would probably be nearly impossible to not own any non-income generating assets, as most people need to have a car and possess furniture, it’s pretty clear to see that if you COULD live as close to this principle as possible wealth would accumulate very quickly.
Regardless of whether anyone can live completely by this strategy or not, should anyone simply follow this overarching principle it would literally be the ONLY strategy they would ever need to follow.
