Money is just printed paper. It has no value in itself. A vault full of money is worthless unless that money is used to produce something of value, be it physical substance or the enhancement of the spirit. Many people fail to see that money is linked to every short-term and long-term goal. They know they need to set goals, which, in itself, is difficult to do, but they don’t plan for the use of the money that is needed to achieve their goals.

If you want to rise above the crowd and feel you deserve more, you need to define your goals. The difference in using money for wealth building and just spending money wisely is huge. There are two main kind of purchases: wealth-building and necessities. Everything else could be classified as frivolous.

Wealth building purchases consists of buying assets that provide income. Here are examples of wealth-building purchases:

• Buying assets like stocks, bonds, and certificates of deposits.
• Buying or investing in companies
• Investing in income-producing rental properties

Necessities While some things are not wealth-building, they are things which need to be purchased in order to live. Here are examples of spending money on necessities:

• Food, clothing, transportation, education and living accommodations.
• Buy protection through insurance for home, life and car.
• Healthcare costs.
• Pay for essential services through taxes, law enforcement and fire prevention.
• increase in value so it pays for a child’s education, or produce an inheritance for loved ones.
• Maintenance on cars and homes.
• It could be argued that having a hobby spending money on leisure is a necessity. There’s nothing wrong with going to the movies, parties or dining out, it’s when the money is constantly spent for such activities that leads to poverty. Man is a social animal and needs to take a break from routine at times so money is a convenient way to take those breaks.

Buying “Stuff” on Credit. Going into debt to pay for things which are not necessities and do not pay a return is the fastest way to poverty. Many don’t realize that physical possession are inanimate things that don’t produce income. They take away dollars which could be used for investments, and put it towards things which do not provide a good value for the money. There is always a new electronic gadget coming out: the latest computer, game consoles and phone – do you really need the latest and greatest?

While some people might argue otherwise, smoking, drinking and eating excessively don’t equal the value of the money. These activities may even increase expenses due to increased health bills as a result of excess. Here are other examples which create debt and return questionable value.

• Easy credit and bank loans to buy the latest furniture and appliances soon have many digging themselves a financial hole with little to show for the hard work and effort it took to acquire the money spent.
• A car is necessary to get to work, but buying one every three years to get that new car smell doesn’t add to the value of the money spent.
• Even the all American dream, owning your own home, is not necessarily a good investment, as recent events have shown. The recent real estate boom was an aberration – in most times, if someone purchases a new home every 3 years without building up equity, they might as well have rented .

Understanding the real value of money and how it should be used is an important part of real wealth creation. Spend it wisely, or invest it carefully. Always keep in mind that even if a purchase does not buy an income providing asset, it must do something that enhance the value of life in some way. Only then can you get the most for your money and realize its true value.

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