Getting the most out of your MONEY - Lesson 3

In today’s lesson we are going to look at accumulating capital and why you would want to do that.

Before we start let me ask you a question;
Do you want to be financially free one day?

So what would that look like financially?
A simple answer might be; Pay off all my debt and have lots of money in the bank!

My question to this is ‘And then what?’

No one knows exactly how long they are going to live and therefore the only way to be financially free is to get enough sustainable income which can be produced without you having to work for it. This is often known as passive income.

So how would passive income be generated?

The only way to do this is to make money work for you rather than you working for money. This means accumulating capital which can produce income.

In The Financial Fence® there are two types of capital.
1. Personal Capital which includes Family homes, Motor vehicles, Boats, furniture etc. This type of capital usually creates expenses not income.

2. Investment Capital which includes rental properties, shares and superannuation. This type of capital usually produces income.

So which type of capital would you want to accumulate is you were hoping one day to be financially free?

It’s obvious but how many people thought that to be financially free all you had to do was pay off the family home and everything would work out. It doesn’t unless you are planning on a short life after stopping work. But accumulating capital is not as easy as it looks.
How many people pay cash for a rental property? How many people have lots of money left over each month that they can invest?
Not many so tomorrow we are going to learn about leverage and why it is a necessary tool to accumulating capital more quickly.

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