Tuesday, August 31, 2021

Framework for Release

Financial Yoga is a framework for release from seeing yourself as a productive asset. An asset is not simply something you have. 

It is true that you can buy and sell things that are not productive. They can be referred to as an asset, even though they do not do anything. They may even go up in price if more people want the thing, and more is not made. 

Cash can be a wasting asset. Something that reduces in value because of inflation and costs (e.g. in a money market fund, or because of bank charges). 

What makes an asset something that can release the necessity for you to earn money, is when the asset itself earns money. If that money is reinvested, then the asset can grow, and earn more. By working rather than wasting. 

Property can be a productive asset, if you get rent from it, but you are not making anything. So if you live in the property, you should not consider it an asset. You are consuming what it produces. The same for cars if you are driving them for you. For most people who own them, their house and car is not there biggest asset. They are. Their capacity to earn is. 

Productive assets are not valued for what they are, they are valued for what they produce. That is why you do not want to be a productive asset. Not all good ideas are good business ideas. Not everything we should do, should make money. 

Count yourself lucky if the thing you are passionate about, and competent at, is also something that makes money. To finance the difficult-to-monetize good ideas, you need to solve the funding problem and generate energy from good business ideas.

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