“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).
Some continue to make the mistake of killing their goose by spending tomorrow’s resources for today’s pleasures. Some spend beyond their income during Christmas putting their purchases on credit cards. A $1,000 Christmas shopping spree—with a credit card that charges 18 percent interest and requires a minimum payment of interest plus 1 percent of the balance—will take 13 years to pay off. With interest, the $1,000 shopping spree will cost $2,129. Those who understand interest earn it and those who don’t pay it.
Lottery winners are also 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 work to create a gold-egg-laying goose (assets with passive income) and then live on the eggs. The average American makes $1.8 million during a 40-year working career; however most never create a gold-egg-laying goose. Like many of the lottery winners, they spend all of their $1.8 million and often even more on credit to buy homes, cars, boats, etc. They spend their golden goose to death and thus never receive the many gold-eggs that could have been theirs if they had live below their income, saved, and invested.
Those who have reached the ranks of financial independence 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). The financial independence have learned to buy assets (things that create money) while most focus on buying liabilities (things that cost money).
About Cameron C. Taylor
Cameron is the author of several books including Does Your Bag Have Holes? 24 Truths That Lead to Financial and Spiritual Freedom, 8 Attributes of Great Achievers, and Twelve Paradoxes of the Gospel. Learn more at his website www.DoesYourBagHaveHoles.org
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