Personal Finance in WoW: Rich Dad Poor Dad Edition

Posted by Warcraftecon | November 30, 2009 .

While doing some research on personal finance in real life, I have come across many articles and books that deal with the matter. It is like when a player goes out and reads the blogs, forums, and gold making guides to improve their income of gold. We had come across a well known book called Rich Dad Poor Dad, which talks about financial independence and various aspects of personal finance. Although we are not here to discuss the validity of it, review the book, or even promote it, there is an aspect of it that can relate to being rich in the World of Warcraft. A commenter on the personal finance blog I read regularly, The Simple Dollar, writes:

I’ve read the book twice and my favorite part is how he explains that wealthy people buy assets while the poor and middle class buy liabilities. Its a tad oversimplified but it explains so much about the outcomes of each group and makes for a strong motivation to change one’s habits.

Before we explain, lets talk about the difference between assets and liabilities. Assets are things like the amount of gold you have, various materials, professions that you use to bring in gold. Liabilities are things that do not contribute to that income like vanity items, extra mounts outside of that first one, and gear. Now ask yourself if you are broke/poor because you have been spending your gold on liabilities outside of the basics for survival. That is, you are buying mini-pets, mounts, vanity items, achievements, ect. Now to put things into perspective, that gold-capped player you see riding their 16,000g mammoth around have obviously spent gold on something that is considered a liability. However what we don’t always see is that through their research, patience, work, and investing their gold on assets, they have the wealth to pay for such things.

A while back we wrote a very simple article on Income vs. Spending. Where if you want to have gold in the bank, you should spend less than you earn. This difference or the gap between the two is called “Savings and Capital”. So if you are on your quest towards the gold-cap or just wanting to make some extra gold, figure out how large this gap is and if you are using it to invest in materials and items that will generate income or more assets. Taking a look back at our own spending, even though we didn’t keep track of every single piece of gold, we realized we spent about a quarter of a million gold(250,000g) on various vanity items or what is considered liabilities. These numbers were also in the Wrath of the Lich King expansion only and doesn’t include certain mandatory expenses like training skills. However our income also exceeded these expenses as well, but this also explains why we ourselves have not hit the famous gold cap number. While the gold cap has never been much of a goal of ours since we were ok with just having enough to pay for whatever we wanted, even though the next expansion. The concept of re-investing your profits in order to make more profit is really nothing new to gold-capped players, though some have never though of it that way like those who have their Jewelcrafting/Disenchanting or Inscription business on auto-pilot.

So now we are asking what our readers think about this topic and how it has related to their gold making strategies. What are your Assets and Liabilities in WoW?

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9 Comments so far

Gevlon December 1, 2009 5:16 AM

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I don’t see sure investing methods in WoW (actually I don’t see any in the real world either), so I kept to producing glyphs, bags and other stuff and leeching on morons who bought vendor stuff or crystallized fire for nice premium.

I also like how much money you made on 43. Jan (on the chart).
Warcraftecon December 2, 2009 12:28 AM

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@Gevlon – The picture was just an example from The Simple Dollar blog we mentioned.
BD December 2, 2009 5:44 AM

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I really enjoy your site, but the book that you refer to is a big fraud. It has some interesting discussions but that’s it.

The important thing with WoW is that it’s just fictional money and lots of teenagers playing. That’s why the possibilities to make easy gold are quite good.

Thanks again for a nice site.

/BD
Raddom December 2, 2009 8:55 PM

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Nice post. I see what you mean with the whole personal financing (warcraft version).

A simpler definition of Asset would probably be something that you own that is either worth money (you can sell it) and/or puts money into your pocket. A liability on the other had is when you owe someone money, or when you lose money on something.

For example if I buy item X for 5g, I have an security (something that secures my money), which is item X, which I value at 5g. Obviously since prices in the Auction House fluctuate, I decide to take advantage of that volatility and sell item X for 10g. Thereby making item X an asset and allowing me to net 5g. If however, I sell item X for 2g, item X becomes a liability because in the end, it took money out of my pocket.

So the idea would be to invest into securities that eventually become assets and put money into your pocket. I have read Rich Dad Poor Dad and one of the points he emphasizes is financial literacy and financial education. The idea is that you need to be financially educated in order to diffrentiate between securites that will become liabilites, and securites that will become assets, and then buy those securities which are assets.

A mount is an instant liability, you can’t profit from the resale of a mount, while herbs and metals are securities which have greater potential to becoming an asset.
Dugrok December 6, 2009 8:38 AM

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However, a mount, if you don’t already have one, is definitely an asset and not a liability.

Even if all it did was decrease your time running to and from the AH, mailbox and bank, it’s still time you can invest elsewhere; allowing you to further increase your income.
Kermonk December 6, 2009 11:08 AM

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My brain is a constant liability
Zerohour December 8, 2009 7:26 PM

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Assets – I has chicken and bought 310 on several toons from the best guilds for my alts.

Liabilities – NONE! I owe noone and everyone owes me. Sad panda.
Bernard Ng December 8, 2009 9:22 PM

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Interesting. Applying what was mentioned in Robert Kiyosaki books into the WoW! Cool!
din December 12, 2009 1:09 AM

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ye i love kiyosaki its one of my favourite books;)
but here u just post graphs and not much info, just some water;)
if u trully read kisoyaki then its obvious he saied make actives never passives, and dont work so dont farm , hire farmers and hire workers who will work with raws and here is income:d