This article is an excerpt from the first draft of my next book.
At its core, money is a record of favors owed. I give you a cabbage from my garden. You give me a dollar in exchange. The dollar is an “I owe you” note. Next month, I can hand you that same dollar and ask for a watermelon from your garden.
When you work for money, you’re doing favors for other people. They give you money in return for the favors. You can then use your money to ask favors of other people. Those favors can be anything that has value: food, services, electricity, entertainment, etc.
To make money, help others. Help as many people as you can, as much as you can. That is the path to wealth.
Your goal when you work is to build enough wealth so that when misfortune strikes, you can use your money to ask favors of others. Beyond a certain amount, money ceases to improve your lifestyle. Sure, you can always pay for more lavish goods and entertainment, but it doesn’t really improve your life. And enjoyment is relative. Once you get used to a lavish lifestyle, you cease to enjoy the simpler things in life.
The Millionaire Next Door by Thomas J. Stanley and William D. Danko distinguishes between prodigious accumulators of wealth (PAW) and under accumulators of wealth (UAW). If you want to become a millionaire, you need to be a PAW. That means making lots of money while spending significantly less than you make. It’s the ratio between the two that matters. If you make $50,000 a year, but only spend $20,000 of it, then you are a PAW. If you make $500,000 a year but spend it all, then you are still a UAW.
Be a PAW. Eventually, you will become a millionaire.
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