As soon as he told me that he spent $16,000 on a car that actually cost him money every month, I knew he could spend that same amount on a website that earned him money every month instead of costing him money.
The difference isn’t really that much, it’s just one investment is a liability and the other investment is an asset. Even though most people can’t see the difference, this is a crucial lesson you need to know before you go out spending your hard earner cash.
This one lesson could be the turning point between your financial troubles and your financial freedom. Which only takes comprehending what an asset is as opposed to what a liability is in the true sense of the word.
Liabilities (noun) – Money owed; debts or pecuniary obligations (opposed to assets).
Asset (noun) – An asset is an item of economic value that is expected to yield a benefit to the owning entity in future periods.
As you can see a liability is something that cost you money, for example a car. Sure it is a tool that can help you to get to work and earn more money. I certainly understand the use of a car because this is how I used to get to work too. However, at the end of the day that car in itself is taking money out of your pocket. For wear and tear, for registration, insurance and a long list of other little expenses that cars have.
Where as an asset, for example an online business. Is something that earns you money month to month allowing you to save it up and do what you wish with it. The difference is that one costs you money and one makes you money. Which is why before investing in anything from a bike to a business, it is critical to understand which one will cost you money (liability) and which will make you money (asset).
So back to my friend who is eager to buy a website business but is not sure how just yet. Now that he knows the true sense of the meaning between what owning a liability is like as opposed to an asset. All it was going to take was some further education into what options he has for investing in websites and how to execute them.
Because as I said to him “If you can afford to buy a car, you can afford to buy a website”. You just need to know a few easy steps to raise the money if you don’t already have a little capital saved up just yet. So I went through a few basic principles with him, which I am going to share with you now.
1. Minimizing Your Expenses
2. Earn More Money
3. Seek Financial Backup
Just looking at some if not all 3 of these steps you may be thinking, well it’s easier said than done right. And yes this is generally always true, however if you want to be making smarter choices and start investing in things that make you money instead of things that are costing you money, these 3 steps are important.
Minimizing Your Expenses
First thing I did is ask my buddy how much he was earning. We then listed out all of his expenses. Once you do this for yourself you can start to see how much you are really spending as apposed to earning. If at any time your expenses outweigh your income you are in trouble.
What you should do is start to get serious and cut out all the expenses you don’t need. Now I don’t want to tell you how to live your life that is not my job. But should you wish to start saving more money, being brutal and cutting out as many expenses that are unnecessary will really help.
For example, you can quit your gym membership and workout at home, you can stop eating out as often as you may do, stop buying clothes and fashion accessories you don’t REALLY need if you are an avid shopper. Because at the end of the day whilst you do have unexpected expenses here and there, the most important things you only really need is just food, shelter and transportation for work. All the other stuff you can do without.
Earn More Money
This one isn’t the easiest to achieve, but that does not mean you should simply leave it out or quit trying. There are many ways to earn more money and you can get as creative as you like. Though generally the easiest way is to start working more hours or putting in more effort at work and asking for a pay rise.
If you have spare time than it may pay to get another job doing night work or weekend work. You could even start selling things you don’t need/use on eBay, or simply buy bulk products at wholesale and sell them at retail price on eBay. There are options and opportunities seriously ev-er-y-WHERE!
Seek Financial Backup
Last but not least you don’t need to save all the capital to start investing. Like I told my friend, if you can get a $16,000 car loan that is costing you money every single month. Why can’t you get a loan for the same amount for a website that makes you money every single month?
When starting out buying a website you don’t have to be spending hundreds of thousands of dollars either. Though in my opinion to get the most out of your investment and especially when just beginning you should start with no less than $5,000-$10,000 or more. This is because the smaller websites entail so much more work to build them up and the amount of work and effort you will be putting in will not be worth the amount you are getting back in return. Which is why we need to invest smarter and not harder.
So as you can see just by sticking to these 3 principles no matter where you are financially in your life, you can start to build a little bit of capital, get some financial backing and invest in a website business that is going to make you money every single month. Which is far better than blowing your hard earned cash on things that cost you money.
It’s all about learning how to not only work smarter and not harder, but also live smarter too!