18/07/2024

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Wealth Creation – Income Generating Assets

Wealth Creation – Income Generating Assets

Once upon a time, in the Southern part of Malaysia, there was a young farmer who just got married and purchased a new property with his wife. It was a dream come true as they were both excited about moving and settling down on this new land. As they were admiring this piece of real estate, they started discussing what they would build and when. They started dreaming of building a garden planting the most beautiful flowers ever seen, a play area with a swing set and swimming pool, a barn filled of animals and even renovating the house. They were so passionate about each dreams that they have but the problem was this.. Do they have the funds to build them all?

Calculate Your Cash

After doing their budgeting, they soon realized that they can renovate the house or build a barn. The wife wanted to renovated the house and she started picturing just how the living room would be decorated, the best kitchen appliances to cook the sumptuous meals, luxurious bedroom. She knew the color schemes and even the brand of furniture she wanted. The young farmer listened quietly and had to admit that her plans sounded really impressive! When she finished, he smiled and said they shouldn’t renovate the house first. He felt that they should use the remaining funds they have to build a barn. She was stunned and upset.

They went back and forth in disagreement and she shouted, “Do you mean that the animals are more important than us?” The poor husband was placed in a difficult situation and he didn’t know what to say. Guess who won the argument? Did they renovate the house or did they build the barn?

Towards the end, the argument came to an end when the farmer said, “Darling, the reason I want to build this barn first is because I know that this barn will generate income that will help us to renovate the house, build a garden, build a swimming pool, and the income generated will help fund whatever dreams we have.

Build the Barn

Well, think about it, like his wife, if you were starting a family, I’m sure you will want the best home to live in. Why? Because that’s where you eat, sleep and live. That sounded totally logical! But the wise young farmer suggested a different plan which was to build a barn because he knew that the house was a liability but the barn was the asset of all profit making activities. The barn is where the animals live, animals that produce milk, eggs and meat. The barn is where equipments stored to grow wheat, corn and soy. Without the barn, he could generate little income.

Back to Reality

In today’s world, whenever an individual receives income, he neglects his barn and focus on beautifying his house. If you neglect your barn and build on the house, liability is all you get. In fact, you will start to pile up your liabilities with the latest handphones, handbags, cars, etc. Build the barn and the income generated from your barn will help you buy the latest gadgets and fashion equipments.

My Personal Experience

At the age of twelve, I’ve personally understood the importance of spending my money in ‘barns’. It was in 1997 when Nintendo GameBoy was a Must-Have for all kids while Sega GameGear was the ‘Dream Machine’. Knowingly that my parents will never buy those gadgets for me, I bought the Sega GameGear with all the savings in my piggy bank. That was probably the best asset that I’ve ever invested in! My friends who were admiring my new ‘toy’ started renting my toy and I was renting them with the same rate as the video game shops. The only different I had was my ‘clients’ were allowed to bring my Sega GameGear home and I do not have business overheads like hiring employees or renting a shop. Best of all, I made back my investment in the Sega GameGear within 3 months and the rest were pure profit.

Lesson Learnt

When receiving money, start listing down all the dollars that you are spending on. Then identify if the items that you are spending on is an asset or a liability. Next, ask yourself: what must I spend or invest on to generate money to fund my expenses?