Let’s talk about the velocity of money. This isn’t velocity in the sense of the physics term – we’re not looking at how fast a 50 dollar bill can fly through the air if you wad it up into a ball or make it into a paper airplane, no matter how fascinating that experiment may be. On the most basic level, the velocity of money is how quickly it changes hands.
Now, you may be thinking, “Dustin, why should I care about the velocity of money?” The answer to that is nicely summed up in one of the principles of prosperity, which states that the velocity of money is exponential. For instance, when an entire economy has a high velocity of money, that generally means that it’s growing and doing well. Similarly, if you personally have a high velocity of money, chances are you’re growing in success.
For example: my wife and I have been saving money for a long time, and we eventually decided that just putting more money in the bank wasn’t doing us any good. It was just sitting there. Instead, we decided to invest it, and we bought some short-term rental properties. If our mortgage is $3500 a month, but we get $5500 dollars a month in returns, that’s a couple thousand dollars that can further be invested to start turning a profit. It may seem counterintuitive to some, but learning how to make money work for you is an important principle of prosperity. Just like spending every cent you earn isn’t a good way to handle your money, neither is choosing to just save it. Money is meant to be used, so use it to your advantage!
For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: