Brooklyn rapper Jay-Z embodies the rags-to-riches dream. He pulled himself up by his bootstraps to become the reigning rapper of New York City.
His latest album “4:44” offers listeners insight on how to build and maintain wealth.
I’m a big Jay-Z fan so I bought a copy of his album on iTunes. I am grateful for the financial information he gives away to his listeners in the song titled “The Story of OJ”. Jay-Z raps about what he does to be super rich.
It’s good advice, and very replicable for those who are disciplined with their money. If you desire to build wealth, follow these tips from Jay-Z.
Lesson 1: Shift your Mindset from Consumer to Investor
“I bought every V12 engine, wish I could take it back to the beginin’
I coulda bought a place in Dumbo before it was Dumbo, for like 2 million.
That same property today is worth 25 million…guess how I’m feelin’, DUMBO.”
Jay-Z mentions buying high end luxury cars and hints that he regrets doing so. The lesson he’s teaching here is how he was wasting money buying consumer goods.
Cars, clothes, and other consumer items do not retain their value. They actually lose value from the moment they’re utilized.
Money should be used to buy things that will increase in future value. Real estate is usually a safe bet. Jay regrets not investing 2 million dollars in a Brooklyn property that grew 1150% in equity (25 million).
What you should do: Shift your mindset away from buying consumer goods for the sake of conspicuous consumption. You should focus spending your money on things that will increase in value in the future.
I purchased a single family home (real estate) in 2015 and now it’s worth over $40,000 dollars more than the price I paid.
Lesson 2: Use Credit Wisely to Build Wealth
“You wanna know what’s more important than throwing money away in a strip club?…CREDIT.
You wanna know how Jewish people own all the property in America?…That’s how they did it!”
Jay-Z stresses the importance of credit. Finance in America is based on a Lender/Borrower system.
The money cycle is simple: Banks act as the financial intermediary between lenders and borrowers. Investors put their money into a bank.
Banks let people borrow investor’s money.
It’s in the bank’s best interest to get you to borrow money. That’s because you need to back back the money you borrowed with interest.
Investors and banks earn money from the interest you paid. So how do you get a loan?
Typically, you need to have a good credit score. You can establish a credit history by borrowing small amounts of money and show lenders that you can pay them back on time.
And Jay-Z is basically telling you to build your credit. If you’re trying to build wealth, credit can be your friend.
You can use credit to buy real estate to turn around and flip for a profit. My first piece of real estate is worth more than what I borrowed to purchase it.
I know I can make a nice cash profit if I decided to sell it tomorrow. Getting my first piece of real estate would have been impossible without good credit (My mom wasn’t going to co-sign that mortgage).
What you should do: Stop throwing your money away on useless things! Take care of your credit score. If you don’t have a credit history, start one.
Get a credit card and start using it regularly. Pay your credit card bill in full every month.
Do not carry a balance on your credit card. If you have good credit, buy some real estate and rent it out (My property generates me an additional $15,540 a year in revenue).
Even if you don’t want to buy real estate, you should still take care of your credit score. Maybe you’ll need a loan to start or grow a business one day.
Lesson 3: Strive for Financial Freedom and Focus on Compounding Your Dollars
“Fuck livin’ rich and dyin’ broke
I bought some artwork for one million
Two years later, that shit worth two million
Few years later, that shit worth eight million
I can’t wait to give this shit to my children….
I turned that two to a four, four to an eight”
Jay-Z is clever with his lyrics and tells how he invested in some high value artwork (I personally would not invest in artwork because I simply don’t understand how it grows in value, but the point is to invest in something thats going to be worth more than the price you paid).
His investment grew a substantial amount in a matter of years. Jay-Z relies on the power of compounding to stack his dollars. That’s what he means by turning a 2 to a 4, and 4 to an 8.
What you should do: Accept that you’re trying to gain financial freedom. If you start making a lot of money, don’t change your spending habits to “look rich” because you’ll run out of money and go broke.
Instead, use that extra money to invest and make more money. Compound your dollars. Turn $200 into $400. Compound $400 into $800.
You Don’t Have To Be from The Hood to Be Smart Like Jay-Z
Let’s face it. Jay-Z’s story is unique. But aren’t we all unique? I know you have your own story. Jay came from poverty and became ultra successful. It was all possible through determination, hard work, and discipline. None of this is impossible.
Take these lessons from Jay-Z and apply them to your personal finance management strategies.
Do you agree or disagree? Sound off in the comments. I want to read your opinions.