Saturday, October 31, 2015

Do you really know the difference?

Do you really know the difference?

Spending vs Investing

Do you really know the difference between spending and investing? An expense is gone forever while an investment is expected to bring a return. Do you know the different types of spending and investing? Learn and profit from knowing and taking action.

1.      First Party Spending. When we spend our money to buy something for us. This is when we are the most concerned about value, the cost and the quality of what you buy.

2.      Second Party Spending. When we spend our money to buy something for someone else. Here we are not as concerned about value because we are most concerned about the cost of what we buy.

3.      Third Party Spending. This is where we are spending someone else’s money to buy something for someone else’s. All types of government spending by definition are third party spending. The money is spent with the least concern about value. No wonder governments spend so much and get so little for what they buy.

4.      Fourth Party Spending. This is where we spend someone else’s money to buy things for ourselves. This is the easiest form of spending. Student loans, car loans, mortgage loans, credit cards, etc. This is where we mortgage our future for something we want today. The government and banks promote this kind of spending because they know we are not as diligent as we ought to be when spending someone else’s money.

5.      First Party Investing. When you invest your money in something for you. Investing in yourself is the best type of investing because it will bring you the best return. Invest heavily to improve your financial, personal, and professional life. Invest in great books, audios, and association (seminars, conventions, etc.). Apply what you learn. Knowing and not doing is not knowing.

6.      Second Party Investing. When we invest our money in someone else. Companies invest in training and development of their key employees because they expect a return on their investment. Investment in people brings the second best form of return.

7.      Third Party Investing. When we invest someone else’s money for someone else’s benefit. Investment companies through their investment brokers fit this type of investing. Be sure to ask your investment advisor if he or she has invested at least the same amount of money as you are about to invest in the same type of investment. This is the third best form of investment. Be completely out of debt (including your mortgage) before investing in stocks, bonds, CDs, mutual funds, etc.

8.      Fourth Party Investing. When we invest someone else’s money for ourselves. This is where many people get in trouble financially because of greed. We borrow money (margin) to invest is something to get rich quick. We get that hot tip and borrow money to invest. Stay away for this type of investing unless you want to go broke quickly in a grand scale.

Thank you for reading and reflecting on today’s nuggets. Share them with others.   
Be blessed and be a blessing to others
Carlos Fontana
Author of the book Priceless, Co-author of the book Follow to Lead

"The future belongs to those who can see and pursue opportunities before they are obvious."
"Those that take swift action will always leave those that don't breathing the dust."

I would love to do a podcast or a blog interview and share my Nuggets with your audience!

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