The Theology of Wealth Creation
“The rich rule over the poor, And the borrower is slave to the lender.” – Proverbs 22:7
King Solomon, the author of Proverbs was the most wealthy person in the Bible. It is theorised that his wealth amounted to that of 2.2 trillion dollars. The proverb shared in the outset gives us a glimpse into his mindset.
Build wealth by understanding this concept; In every given transaction, you are either a consumer or a producer.
Consumer=buys goods and services
The consumers mindset is concerned with things that can satisfy their personal desires. The consumer is governed by instant gratification (the desire to experience pleasure or fulfilment without delay).
Producer=offers goods and provide services
The producers mindset is concerned with things that can be created. The producer is governed by delayed gratification (the ability to delay an impulse for an immediate reward to receive a more favourable reward at a later time).
If we consider both on a spectrum, everyone you know is either a consumer or a producer.
Why do the rich rule over the poor? The poor live in the consumer spectrum. Their lack of financial literacy keeps them there.
To build wealth, you must be on the producer spectrum. What does this involve? Think in terms of production. Your philosophy must be to buy things you produce and rent things you consume.
The tax system is designed to benefit producers. Business and land owners have the most leverage.
What is the strategy? Good debt is borrowing money to make more money. Bad debt is borrowing money for yourself. Lets use the example of Real Estate.
- Buy an apartment/land/house and collect rental income whilst simultaneously renting another place to live in.
Most people make the mistake of concluding it is better to buy and live in the investment. If you are doing this, you are a consumer. Yes, a live in property is an investment and can be considered good debt, but you are still a consumer. You might reason well its better if I pay off my mortgage quickly/its a really nice apartment/house/its the perfect place for me etc. This thinking is dangerous as you are making what should be an objective decision into a personal one. Wealth doesn’t have feelings. Building wealth is about objectivity.
The bank owns your home and you are leasing it from them. The borrower is slave to the lender because you put yourself in a position where if you lose your income, you could be in a vulnerable position and the bank will take what’s theirs. If the producer loses his income, the consumer renting is likely able to cover most of his investment costs. The producer understands that it is better to buy an investment property for someone else to consume, and to rent a property that they themselves consume, all with the intention of leveraging tax benefits, minimising financial liability, having profit (if positively geared), and using profit from capital gain to invest again.
Business Owners (goods and services)
- Focus on compounding Owners Equity.
- A country is only as great as its army. As a business your greatness depends on your employees. Most people don’t think. Grow your business by focussing on employee personal development ie use psychometric assessments to help employees understand themselves and their managers. Encourage employees to set their own goals. Create a system for communication. Hire divergent thinkers, strategists, organisational psychologist.
- Treat day, swing, and holds as different businesses that you own. Reallocate resources in accordance with that ideal.
- Treat your role as a business that you own. The best employee doesn’t focus on what he can get, he focusses on what he can become. Ask yourself “what valuable services can I offer?” Everyday is an opportunity to build character.
In the final analysis, whether it is owning a business, investing in stocks, property, or any other venture, the theology of wealth creation is to ensure your productions outweigh your consumption.
*Conduct a comparative analysis to discern the leverage that buying an investment property and collecting rental income has verses living in a property and paying off mortgage.