One of which is to stop valuing the dollar bill so highly. I think for the majority of my life I have thought that the dollar bill stays worth a dollar and the price of everything goes up. So that house that was worth $30,000 thirty years ago is now worth $300,000 because there are more people and thus a higher demand for it increased the price.
But what I am beginning to understand is that a dollar is worth pretty much whatever value we ascribe to it. Let me try to explain.
In 1971, Richard Nixon took our currency off of the gold standard. Before that, the dollar bill was worth a specific amount of gold. It was literally a gold-standard currency. But because we did not have enough gold to back all of those dollars, we fixed the problem by no longer pegging the dollar to gold and saying that our dollar is backed “by the government”. At that point, the dollar started to spiral downwards, being valued less and less.
To go back to my previous house example, it is not that the same house that was $30,000 thirty years ago is worth $300,000 now. It is that the dollar has lost so much of its value that it now takes $300,000 in dollars to buy as much house as it took $30,000 in dollars to buy thirty years ago.
This thought is why I have been pursuing building a business and investing in real estate. If I buy a $100,000 house now for income purposes (Let’s say a rental property), I get the rent from it each month plus the real asset (the house) keeps its value and thus seemingly “makes” me money by being worth more dollars in the future.
In this example, I make money in two ways: I get rental income from the tenant each month, plus I get the “added value” of the house being worth more and more as the dollar continues to decline in value.
What is even better than that? I have to put the work in to buy the house initially, but how much work does it require for appreciation to happen? Or how much work does it take to collect rent each month? If I continually invest in buying more and more rental properties, my monthly cashflow goes up and up.
In my mind, it is not financially intelligent to chase after a job that will pay me more because I have to work harder and harder to earn more and more dollars. Whereas, if I hone my skills in being able to purchase cashflow producing rental properties I can make more and more money doing the same amount of work. Even better, if I purchase enough properties to cover all of my expenses from cashflow alone, I no longer need to work.
Don’t chase after dollars. Working harder and harder for 40 years of your life for a dollar that keeps losing value is a zero sum game. Chasing after assets that make more and more money the longer you have them, however, means you can take control of your financial life.