The Money Machine

“Have I got a deal for you?” He said with a glint in his eye. “This little machine will change your life.”  It was a small machine just bigger than his hand covered in gold paint with lots of gears.

“What is it?”

“Why it’s s money machine? It will produce a new dollar every three months forever.”

“Oh, that sound cool.  How much?”

“It’s only $100.”

“Pardon?  You want me to pay $100 for something that makes only $4 a year.  Why that would take like 25 years for me to get my money back.  Are you crazy?”

He frowns, “No, but with enough of these machines you won’t have to work.”

I frown and do the math in my head “Ya, if I buy like 10,000 of them. That would take like forever. No thanks.”

While the above story is a complete fabrication, it does point out something very key about people: they don’t like to wait.  Of course the real irony of it all is the money machine is real.  It just goes by another name called “investing.”

I suppose that is why so few people actively try to reach an early retirement, they aren’t willing to put in the effort into buying their money machines and keep them running.  Or they do buy one and then freak out when it fails for some reason and assume all other money machines are bad and should be avoided.  Goodness knows that I’ve had a few failures myself, but I keep buying.  Actually, most of them run just fine with little work required by yourself.

My personal money machines comes in two types: index funds and dividend paying stocks.  Neither takes that much time after I got them up and running.   The index funds are in our RRSP accounts in index exchange traded funds (ETF) take 15 minutes a year of work to keep up.

The dividend paying stocks are mostly in our TFSA accounts and after the initial research to buy the stock it really only takes me a few hours a year to skim the annual reports and do the occasionally adjustment (like sell one of my bad picks and buy something else).

Yet in the end, our investing has paid off.  It does take a LONG time and it will feel like you are going no where until you break the $100,000 barrier in investments but then it all gets better.  The compounding starts to work for you and you realize that after you have 100 money machines, it will buy the next one for you with no further money required from you.  So hence my point early, if you can wait a bit and get the ball rolling with compounding buying money machines (or investing) can pay off.

So what’s your favorite type of money machine?  Real estate, stocks, bonds….really they do come in a rainbow of colour options? 😉

9 thoughts on “The Money Machine”

  1. One problem with the money machine is that you buy it but after taxes your profit declines substantially (especially in Canada). And your accumulations can put you a position, if a wealth tax is ever instituted which seems likely, that you will be paying more for services. I wonder if in the future your receipt of pension plans/old age security will be reduced commensurate with your private accumulations. (you can tell I just paid extra taxes recently!)

  2. My fav money machine is a basket of indexes – diversified among, Canada, International, US and aggregate bond index. Fixed allocations with rebalancing twice a year. Its working great!

    So great that at 44, I can walk away from working forever.

  3. Roommates have been my best way to make money. When I was starting the large amounts of cash from renting out rooms made a large difference to paying off my house.

    Of course stocks are still better long term. Different stages of my life have had different money machines.

  4. My own money machine is the big blob of money I took when I cashed out my company stock in 2008 and invested in a good bond fund. It provides me with nearly all of my monthly income needed to cover my expenses. Every month, the monthly dividend magically appears in my checking account like a money machine. And I don’t have to work for it!

  5. I love this little story. You should consider padding this out into a short story to communicate the benefits of compound interest.
    All the best!

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