This morning I heard a fun country music song on the radio…
“I ain’t rich, but I damn sure want to be. Working like a dog all day ain’t workin for me. I wish I had a rich uncle who kicked the bucket and I was sitting on a pile like Warren Buffett. I know everybody says money can’t buy happiness, but it can buy me a boat. It can buy me a truck to pull it….”
I thought I would re-write a portion of this song for those interested in financial freedom:
“I ain’t rich, but I damn sure want to be. Working like a dog all day ain’t workin for me. I wish I had a rich uncle who kicked the bucket and I was sitting on a pile like Warren Buffett. I know everybody says money can’t buy happiness, but it can buy me an income producing asset. The income from the asset can be used to rent a boat and a truck to pull it.”
My version doesn’t flow as well.
My advice to this fella would be to use the $100,000 he would have spent for the boat and truck to instead by a rental property for cash. Once he had the home rented, he could then use the income to rent a boat and a truck.
Instead of buying two depreciating assets, he would buy an appreciating asset that provided monthly income. This plan would make the use of the boat and truck free as it was paid for by the tenants in his rental property. His money would be sitting in the rental home and will come back to him down the road when he decides to sell the property.
Believe it or not, we have this same choice with everything we pay for in life. You can structure every purchase so that it becomes free to you by acquiring income producing assets that provide the income you need to buy the things you want. Here’s the secret…
Never to pay for anything directly out of your pocket. Instead use your dollars to buy income producing assets. Then use the income from these assets to pay for things you want to buy. Funnel all of your expenses through income producing assets.
Using your money out of pocket to pay for anything is extremely expensive no matter what price you pay. It doesn’t matter if you pay full price, or get the deal of the century at 70% off.
This is because every dollar you use to pay for something directly is a dollar that you’ll never be able to use again. It is gone forever. Your dollar is sitting in the thing you purchase. It is trapped.
When you pay for things out of your pocket directly, you pay 100%.
When you use real estate and income-producing assets to pay for things on your behalf, you pay 0% because the purchase price comes back to you and you’ll be able to use your dollars again. Your money isn’t trapped in the things you buy.
The main question to ask yourself is:
What Income-Producing Asset Can I Acquire to Pay for This?
You’ll be surprised what you find when you begin to think this way. There are hundreds, if not thousands, of income producing assets available at various price points. These various income producing assets include stocks, REITs, mutual funds, bonds, promissory notes, lending money to others (lendingclub.com, etc.), real estate, mobile homes, and more.
One idea you might consider to use this strategy is to look for income producing assets in the same industry as the item you want to use the money to buy.
Free Utilities for Life! – Want to generate income to pay for your gas, electric, and water bill? Look for a quality utility stock paying an attractive dividend and acquire these shares. Use the dividend income from this utility stock to pay your utility bills throughout the year. You can always sell the stock and recapture your investment making your utilities free. Ideas for high-quality dividend stocks might be Empire District Electric Co (EDE) which pays a 4.75% annual dividend, or Northeast Utilities (NU) offering a 3.30% annual dividend.
Free Phone, Cable & Internet for Life! – Believe it or not AT&T stock currently pays an annual stock dividend of 5.88%. Why not buy shares of AT&T stock and use the income to pay for your monthly phone, cable and internet bills? Don’t like AT&T? Verizon pays a 5.06% dividend annually.
Free Food for Life! – There are several quality blue-chip dividends stocks you could purchase as income producing assets. The income from these assets can be used to help pay for your monthly groceries. A few ideas might be General Mills (GIS) offering a 3.10% annual dividend, or Kraft Foods (KRFT) offering a 2.5% annual dividend.
Free Medical Insurance for Life! – Johnson and Johnson offers a broad range of health care related products. Even better, the company pays a 3.2% annual dividend. Why not buy shares of Johnson and Johnson and use this income to offset your medical insurance premiums?
Free Gasoline for Life! – Why not buy Chevron stock and use the annual 6.11% dividend to pay for your car’s gas?
Free Debt for Life! – Do you have student loans, credit card balances, or a car loan? Check out lendingclub.com and loan money to others to create interest income to pay for your monthly loan payments. Depending on the types of loans you make, you can earn interest ranging from 7.71% to 24.63% annually.
Free Dinners Out for Life! – You may not be a fan of cigarettes or booze, but you can use the 5.17% annual dividend of Phillips Morris, or the 3.2% dividend of Anhuesuer-Busch to help pay for your dinners out with your family.
Unfortunately most people don’t think this way. They use their money to buy the things they want directly and struggle from year-to-year. The poor fella in this song will never be rich and the reason why is because he would use his money to buy the boat.