Here’s an important thing to know. (And if you can remember this for the rest of your life, it will always help you make good financial decisions.) When you buy something, you are almost always immediately poorer. When you buy a new BMW, for example, it depreciates (loses value) the moment you drive it out of the showroom. Investing in something – such as a stock portfolio – is a purchase, too. The difference is that cars are usually depreciating assets (losing value over time) whereas stocks – good stocks, at least – are appreciating assets (increasing in value over time).
Every time you get yourself into a buy/sell transaction, ask yourself these two questions: “What am I doing right now in terms of my wealth?” and “Am I getting richer or poorer?” Forget for a moment how the transaction makes you feel emotionally – because that can change. Focus on the impact it has on your wealth (net worth). If you can teach yourself to ask these questions habitually, you will make much wiser decisions.
(Source: Michael Masterson’s new book, Automatic Wealth for Grads … and Anyone Else Just Starting Out.) [Ed. Note: Here’s your chance to tell Michael Masterson what’s on your mind. What’s the single most useful piece of advice you’ve discovered in Automatic Wealth for Grads … and Anyone Else Just Starting Out? And how have you used it in your pursuit of wealth and success? Let us know at MostPowerfulSecret@ETRFeedback.com … and maybe you’ll see your name in print in a future issue of ETR.] [Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]