Answering the Three Critical Questions
In the final installment of our “Understanding Interest” series, we’ll uncover essential insights into the nature of interest and the pivotal role it plays in your financial journey. In Part 3, George concludes the series by bringing everything together to answer three critical questions every investor should consider.
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The Two Sides of the Financial System
The financial world can largely be divided into two contrasting sides: the “paying” side and the “receiving” side. Understanding the difference between these sides and positioning yourself on the receiving end is key to moving closer to your financial goals.
The Paying Side
The majority of individuals fall on the paying side of the financial system. Here, people pay others to participate in the economy, including costs like banking fees, loan interest, taxes, and basic living expenses. When you’re on the paying side, wealth-building becomes challenging because your money is constantly being funnelled outward rather than working for you.
The Receiving Side
On the receiving side, financial entities and knowledgeable investors build wealth by utilizing other people’s money. Take banks, for instance: they use funds from depositors to lend money at higher interest rates, making a profit from what’s called a “spread.” Sophisticated investors adopt similar strategies, focusing on receiving interest and income through low-risk, stable assets to generate a steady stream of earnings without depleting their own resources.
This principle is what separates those who pay from those who receive—and by recognizing it, you’re already one step closer to gaining control over your financial destiny.
The Four Types of Investors
In Part 2, George introduced the four categories of investors based on how they interact with interest:
- Those who pay interest
- Those who receive interest
- Those who avoid interest altogether
- Those who pass interest on to others
Each category reveals a distinct approach to handling money, and only one category—the receiver—is effectively set up for sustainable wealth-building. By understanding your current position, you can aim to join the “receiving” category, thereby giving yourself the best chance of growing and securing your wealth.
The Three Essential Questions
To conclude the series, George encourages every investor to reflect on these three questions:
1. Which side of the financial system are you on?
Are you consistently paying out fees, interest, and taxes, or are you in a position to receive? Moving to the receiving side can dramatically impact your financial success.
2. Which type of investor are you?
By identifying your type, you’ll gain insight into whether you’re on a wealth-building path or falling behind. If you’re not currently in the receiver category, what steps can you take to get there?
3. How efficiently are you using your money?
Efficient money usage isn’t just about avoiding debt—it’s about ensuring every dollar works toward increasing your purchasing power. The highest cost many investors unknowingly pay is the opportunity cost of idle or inefficiently used funds.
These questions serve as a roadmap to realigning your financial strategies and ultimately staying on track toward reaching your goals. When you have a clear picture of your financial relationship with interest, you’re equipped to make better decisions that align with your long-term vision.
Don’t Be Left Behind—Take Action Today
Many investors, even those who believe they’re making smart financial choices, may unknowingly lose purchasing power over time. The most significant opportunity cost isn’t always visible but can be larger than all other costs combined. Take the time to truly understand where you stand and make the necessary adjustments now rather than later.
