Why I Am Crazy About Being Broke

"There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.” “Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth."

Wow - sounds profound, doesn't it?

Here's my way of explaining the difference between the two.

Being broke means not having cash in the bank.

Being poor is a lack of mindset.

How Much Money You Have In The Bank?

I remember when someone asked me this question, when I told them I am investing in the stock market.

He asked, "Wah so rich ah, how much money you have in the bank?"

I was puzzled.

I replied, "Why would I keep money in the bank...?"

Then I realised this - there are still people out there who think that having money in the bank is safe.

The idea of that is crazy.

Keeping money in the bank gives you a guaranteed loss to inflation. The interest rate of banks are less than 1%.

I told one of my friend, whom have been keeping tens of thousands of dollars in the bank - and I said.

"Rather than keeping money in the bank earning that puny interest, why not just put in a brokerage account and sell cash-secured puts at far out of the money strikes?"

And the screenshot below, is exactly what he did.

That's right, he sold a Sep 23 put (which is one year from now), and collected $207 from this trade.

In return, he is promising to buy $20,500 worth of S&P500 shares @ $205

That's a 1% interest.

Let me explain why this strategy is just so simple, that NO ONE should ever put money in the bank ever again.

Today's, here's the share price of S&P 500.

Can you see how far away the strike price of $205 is from the current share price?

It is almost impossible for the SPY to hit the strike price by the end of one year.

"But Gin, anything can happen in the stock market..."

Yes - that is very true.

But let me ask you this.

If you had the chance to buy SPY 500 at $205 today, would you not buy it?

I will buy it anytime of the day - after all, investing in SPY is a guaranteed to make money in the long term

Stop Putting Money In The Bank

This is why, I advocate this.

Stop being cheated and put money in the bank for puny interest rate of less than 1%. Your banks are just taking your money and loaning them out at a much higher interest rate.

You can easily replicate your 1% interest rate in your brokerage account.

This is exactly why, I am broke in my bank account.

This is why it is so important to start getting educated in investing and let your money grow for you.