Does Money Really Make You Rich?

It is typical to grow up believing that if we studied hard, excelled in school and landed a good job, the fairytale of having a luxury car, a dream home and being able to live the good life would come true.

money

But the reality is, there are many people, including highly educated ones, who work hard for money and yet plunge deep into debt with every dollar earned.

Some take the short cut by placing bets on the lottery. While millionaires have been made overnight, they can become bankrupt just as quickly if they lose all of their winnings to extravagant lifestyles and frivolous spending.

Even today, the downward spiral of the real estate markets has completely shattered the dreams of ordinary people hoping to create wealth. It is worse for those who have been driven out of their dream homes and into the “poor house” as a result of property foreclosure.

Luxury cars, too, have become liabilities as fuel prices increase drastically and people are more concerned about survival than seeing their dreams come true.

It is your knowledge about money that makes your dreams come true

While the recent news over the mis-selling of investment products highlights the importance of financial literacy, it was my personal experience with gold that taught me to take financial education seriously.

Gold was my first real investment as a young adult. I invested in gold before I began my foray into real estate. In 1972, at the age of twenty-five, I bought gold coins when the price of the commodity was approximately $70 an ounce. By 1980, gold was valued at $800 an ounce.

My caution gave way to temptation when rousing speculations about a gold rush spread like wildfire. Gold prices were expected to skyrocket to about $2,500 an ounce! That sparked a buying frenzy among investors, who bought piles of gold, even though they had never done so before.

Instead of selling my gold coins to make an instant profit, I waited, like everyone else, hoping their value would go up. That proved to be an unwise decision. About a year later, prices plunged below $500 an ounce and I had no choice but to sell my last coin. The situation never improved and the value of gold finally bottomed out at $250 an ounce in 1999. In retrospect, many who speculated in gold when it was valued at $800 an ounce, lost huge amounts of money.

Although I was unable to take advantage of the high price of gold, that experience taught me priceless lessons about investing. I realised it wasn’t gold that was going to make me rich. It was the knowledge concerning that asset that ultimately determined if a person became rich or poor.

Having the best golf equipment does not make you the next Jack Nicklaus.

A friend of mine is crazy about golf.

He spends thousands of dollars a year on the latest high-tech golf clubs and nearly every new gadget that arrives on the market. Despite being a fervent fan of the sport, he has never invested a single cent to improve his game. Not surprisingly, my friend’s golf performance remains the same today, although he owns some of the best equipment money can buy. Had he invested some money to upgrade his skills, he would certainly have risen from average to great.

In fact, that same crazy phenomenon occurs in the game of money. Billions of people have thrown their hard-earned savings into assets such as stocks and real estate, but few have ever invested in information that would help to improve their financial knowledge.

A powerful lesson to take home

Many believe that “only the rich become richer”, but that is not true.

Always remember this: it is not gold, real estate, stocks, mutual funds, businesses, or money that make you rich. It is what you KNOW – your financial IQ – about gold, real estate, stocks, hard work, and so on, that will make you rich!