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Creating movement and gaining multiple uses of your own money is what creates benefits and reduces your exposure to loss.

Robert Kiyosaki once stated that he was less concerned about the amount of his money and more concerned with the velocity of his money. In that statement there is profound truth.

The best way to understand the principle of velocity is to consider a grocery store.  A grocery store buys goods and places them on shelves. However, that isn’t the final objective of the store.  Its objective is to sell everything on the shelves, take the money earned and buy more. Stock the shelves again and sell them again.  This process is performed over and over. Grocery stores call this velocity “turnover”. An owner of a grocery store understands that he is not in the business of accumulating goods on the shelves.  He understands that his real business is one of creating velocity of money.

Velocity of Money Multiplier is an economic term meaning the movement and multiple uses of the same dollar.  This is a principle that all successful financial institutions in the world use to create wealth. Ironically, financial institutions teach us one thing, but practice another.  They teach us to accumulate our money in their accounts (stack goods on the shelf). They teach us that we should never touch the money, and that we’re “in it for the long haul”.  In other words, they are teaching us not to use our money. If financial institutions can convince us to stack money on their shelves to let it “compound”, then they will have gained the use and velocity of our money.  

A quick example of this is the banking system.  Banks rely upon us believing our money is always there, ready for us to withdraw at any time.  The truth is, our money is not there. Only a small portion is. When we deposit money in the bank, the bank turns around and leverages the majority of our dollars by borrowing more from the Federal Reserve (the bank’s ability to borrow is based upon amounts of deposits – which we increase their ability to borrow every time we deposit more).  Then the bank turns around and lends our dollars, as well as leveraged dollars from the Fed, to borrowers. As banks get payments from borrowers, they borrow more from the Fed. They then lend more to more people. This cycle creates extremely high rates of return (“margins”) for the banks and lending institutions because of the number of uses they get, or the velocity of money.  The bank’s overall return is not as dependent upon the percentage they charge each individual borrower, as it is upon the number of times they can lend the same dollar.

You can create a similar process of velocity in your own finances.  We’re not necessarily referring to the borrowing and lending that banks do, but to creating movement and gaining multiple uses of your own money.  Money moving and its use is what creates benefits and reduces your exposure to loss (such as inflation and market fluctuation).

No Velocity Plans

Contrary to velocity of money are plans such as 401(k)’s.  401(k)’s and other “retirement accounts” create stagnation in your money by limiting your freedom of movement, making the money more vulnerable to financial predators, such as management fees, losses in financial markets, and inflation.  These plans are designed fulfill the financial institutions’ deepest desire, which is to get your money, use it to create more money, and never give it back. These plans are marketed as a key part of the “nest egg” idea. The idea is that a person should put away some of their money into long-term savings accounts (i.e. IRA’s) and leave it there to compound over long periods of time, to build a nest egg.  All the while the money in the accounts never produces any income that can be paid out to the investor (another point for the financial institutions). Then, supposedly, at some point, an investor will know he has “enough” money in his account to live on for the rest of his life. This seems to me to be a very scary jumping point for the individual. How does he really know he has enough? Has he ever received income from the account that he will depend upon for the rest of his life?  No. There is no velocity, no use, and no income from IRA’s and other retirement plans until the retiree moves it all into something that will produce income. Unfortunately, the retiree can’t move the money into something that will produce income until he retires, which seems a little backward. And even then, the retiree has to do something he’s never done up to that point, turn a block of money into an income stream.

If the investor invested in assets that produced streams of income throughout his working career instead of “retirement plans” and the nest egg idea, then knowing whether or not he has invested “enough” will be clear.  He’ll know because the streams of income that he HAS BEEN RECEIVING up to that point are more than enough to continue his lifestyle even if he stopped working for pay.

The flow of money should be: Money saved, is then invested (except for the six months of savings).  As investments produce income, the income goes back into the account. We encourage investments that provide income, where the income is paid out to the investor.  

Robert Kiyosaki stated that “investors receive money from their investments on a regular basis.  Until you begin receiving money, you may be investing…but you’re not an investor”.  Why is “receiving” so vital?  When income/interest is compounded in the account that produced the interest, there is no velocity.  No additional uses or benefits are created without the money leaving the account that generated it, and returning to you.  Compounding is exactly what the financial institutions want you to do with your interest. Compounding allows the financial institutions to continue to velocitize your money and the interest it creates, for their benefit, not yours.

Striving to get multiple uses and movement on your money will accelerate your ability to create and enjoy the maximum wealth.  


In conclusion what people need are not “investment ideas”. They need principles that they can follow, ones that work under any circumstance.  People need the ability to become experts at something in the investment world, and therefore create greater control and use for themselves and those they care about, versus giving that control away.  People need to realize that the best investments, the ones that actually work, are ones that require effort and specialized knowledge. The idea of being taken care of by someone else and not needing to know much is a failed strategy.  

The focus of financial planning should be based on helping peoples’ plans become more efficient and effective, as well as increasing their protection from financial predators and erosion. People need a team of advisors that are on the same page with them, who communicate with one another and are all working towards helping the client fulfill his/her agenda, not the advisors.  People need advisors that they can trust and can call anytime with their money decisions, without being inhibited by fees.

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