Create a Gold-Laying Goose.

A man and his wife had the good fortune to possess a goose which laid a golden egg every day. Lucky though they were, they soon began to think they were not getting rich fast enough and imagining the bird must be made of gold inside, they decide to kill it in order to secure the whole store of precious metal at once. But when they cut it open they found it was just like any other goose. Thus they neither got rich all at once, as they had hoped, nor enjoyed any longer the daily addition to their wealth.“ (Dwight Edwards Marvin, The Antiquity of Proverbs, (New York: G.P. Putnam’s Sons, 1922) p. 188)

Lottery winners are a great example of killing the gold-egg-laying goose. William “Bud” Post won $16 million in the Pennsylvania lottery. Among his purchases were a mansion, a twin”“engine plane, five cars and trucks, two Harley-Davidson motorcycles, two 62-inch Sony televisions, a luxury camper, and a $260,000 sailboat. As a result of his spending, he eventually declared bankruptcy and lost everything. Mr. Post now lives on food stamps and a Social Security check of $450 a month.( Patricia Sullivan, “William “˜Bud’ Post III; Unhappy Lottery Winner,” Washington Post, January 20, 2006, page B08) Mr. Post had a $16 million-dollar goose that could have produced an abundance of gold eggs. Had he simply put the $16 million into a CD and lived on the 6 percent interest it produced, he would have received a golden egg of $80,000 every month forever without ever touching the $16 million. Instead, he wanted the riches all at once and spent his gold-egg-laying goose, which resulted in a life of poverty.

Benjamin Franklin died in 1790 at the age of 84. As part of his will, he gave 1,000 pounds (approximately $4,400) to the city Boston and another 1,000 pounds to the city of Philadelphia. To prevent the cities from killing the gold-egg-laying-goose by spending the money, Franklin required that the money be placed in a trust fund and then invested and used to provide loans to “married tradesman under the age of 26″ to get them started in business. During the two hundred years of the trust, money was loaned to hundreds of individuals. The trust fund in Philadelphia grew to $2.25 million, and the trust fund in Boston grew to $5 million. (Clark DeLeon, “Divvying up Ben: Let’s Try for 200 More,” Philadelphia Inquirer, February 7, 1993, page B02) They received very modest average annual returns of 3.1 percent and 3.5 percent respectively. A slightly higher average rate of return of 0.4 percent yielded the city of Boston $2.75 million more than the city of Philadelphia. If the cities had received 7 percent average annual returns, after 200 years the funds would have each been worth $5 billion. Benjamin Franklin understood the value of creating a gold-egg-laying goose and the power of compounding interest. Hopefully, the trusts will continue for another 200 years. If the city of Boston now simply puts the $5 million in a savings bond at 5 percent interest, they would receive interest payments of $250,000 a year””$50 million over the next 200 years.

To become financially independent, you need passive income to exceed your monthly expenses. The prosperous create a gold-egg-laying goose (assets with passive income) and then live on the eggs. The poor only receive income from their work and if they don’t put some of this money toward buying assets and investments, they will never join the ranks of the financially independent. The average American makes $1.8 during a 40-year working career, yet most never create a gold-egg-laying goose. Like many of the lottery winners, Americans spend all of their $1.8 million and often even more on credit to buy homes, cars, boats, etc. They spend their golden goose and thus remain in the poor and middle class.

Those who have reached the ranks of prosperity have learned “that money is of a prolific generating nature. Money can beget money, and its offspring can beget more, and so on.” (Benjamin Franklin, Essays and Letters, Volume 1, (New York: R. & W.A. Barton & Co., 1821) p. 91) In summary, the prosperous buy more assets””things that create money””and the poor buy more liabilities””things that cost money.

Guest post by Cameron C. Taylor, author of the book Does Your Bag Have Holes? 24 Truths That Lead to Financial and Spiritual Freedom. www.DoesYourBagHaveHoles.org

Like this article? Please consider subscribing to my full feed RSS. Or, if you would prefer, you can subscribe by Email and have new posts sent directly to your inbox by entering your email address in the box below. Your email will only be used to deliver a daily email and you can unsubscribe at any time.

Comments (3)

Trackback URL | Comments RSS Feed

  1. Enrique S says:

    I think a lack of both patience and discipline plays into these spending binges. People who realize a windfall usually don’t have the money-management skills of a person who’s built their wealth slowly over time. Maybe the state lottery should hold mandatory classes for the lottery winners as a preemptive strike to their spending sprees. This would give them some knowledge to go along with their new-found wealth.

  2. TStrump says:

    I couldn’t agree more!
    For years, I was taught that you should go and get a great job and then work until you retire.
    Obviously, a good job is important because it can help you set up passive income, but I wish I learned this lesson in my 20’s.

  3. david says:

    It’s still something I am working on. After thinking you had to just graduate college and work for the next 40 years, it’s nice to finally be on a path I enjoy and will hopefully keep paying dividends for years to come.