Who wants to be wealthy? I believe everyone does even if they will admit it or not. Even if not wealthy at least financially free. According to the author, the only way to achieve this is by understanding business, taxes, and laws that are apart of entrepreneurship. Many will not take the leap because of the fear of new challenges, but it is better to face a new challenge than being tied to down to an old one. As we expand, there will be new problems, but if we can have courage we can handle whatever is thrown our way, as long as we learn from our mistakes and become better on the other side of it. Do not fold to the pressure of owning or starting your own business, just get smart and learn as much as you can plus align with others that can save you time and energy. The only way to wealth is through risk and the more risk you can tolerate the more abundant you can become.
Wealth Secret #3: Mind your own business
The wealthy work for themselves, the non-wealthy works for everyone else. It is important to have a business and even more paramount that you understand what business you are in. When Ray Croc the founder of McDonald’s was asked what business he was in, he responded, “I am in the real estate business.” Most people believed that he was in the burger business but on the contrary, he was not. The burgers are what attracted the customers and made the land valuable, but Roy knew that he was becoming the largest real estate owner in the country. Knowing what business your in, is paramount in creating wealth for yourself and your family because it helps you focus on what will take you to the next level versus the day to day of the business. The employee mindset is to focus on the day to day tasks, the wealthy mindset is on the bigger picture. A business can be the vehicle on where you can produce more assets, plus generate more income but always remember it is not the amount of income but what we do with it.
In creating a business or a multitude of businesses places a person in a position in acquiring what Robert Kiyosaki calls “Real assets.” Understand, the author considers a real asset a vehicle that produces income that can lead to financial freedom, such as:
A business that produces without my presence: A business that can run without you having to be there such as having employees that earn for you, a partnership that has the individual doing the day to day task or even a business model that helps you duplicate yourself.
Stocks, bonds and mutual funds: Investing in a vehicle that will increase your income by paying you interest on your money or pays back dividends.
Income-producing real estate: A piece of property, which could be land, house, village, hotel, mall etc. that generates income just by you owning the property.
Notes and IOU: Owning a deed, a lien or even a domain can pay you, if you own something that someone else is paying you to hold, like a bank or the government.
Intellectual property: Property such as a song, a book, a movie, a brand or even a logo. Anything that is yours and copywritten, can produce income while you sleep.
In reviewing the list, understand you do not have to do all five, you can become a master of one and produce excellent results even better results if you like what you are doing. If you do not like any of the 5 do not do them, it is better to do one thing you love than four things you hate. Poor Dad says, a person should find a secure asset to invest in, such as a mutual fund or 401k, while Rich Dad says, invest in assets you love. When you love it, you will be better attuned with it, you would like to learn more about it, you will do more research on the subject, you can teach it to others and most importantly, you will take good care of it. In either case, it doesn’t matter what you invest in, you still must be a good money manager and always keep the big picture in your sites because wealth is created on how you manage money. In simple terms, the rich buy their luxuries, their homes, their cars, their toys last, while the poor buy their luxuries first, through credit cards, bank loans or spending instead of saving and investing.
Wealthy Secrets #4: Taxes, Business, and Corporations
The biggest chokehold in reaching financial freedom is taxes, but instead of being upset, angry and frustrated by them we must take our time to understand them in order not to be affected by them in a negative way. The ugly truth is that people who are in the middle class are taxed the most. The poor are not as taxed because they do not produce as much, while the rich are taxed very little or not at all. Many would refer to this as appalling claiming that the rich should pay more but the issue is a lack of understanding about how taxes work. The wealthy through owning businesses and investment can depreciate or write off many of their tax payments because the tax laws reward those who own businesses and invest but penalize those who do not.
When you have a corporation you are able to defer taxes and depreciate assets that allow the rich to pay less in taxes or not at all. Poor dad encourages people to move up the corporate ladder while Rich Dad encourages us to own the ladder. In other words, when you own the company, you make more and you pay less in taxes. Now, I know you may be thinking, “Rich, if this is so, why don’t more people own more business or invest?” The answer is because they were never taught too. They were taught to get a job. Why don’t employers encourage their employees to mind their own business? Because employers think it would be bad for their business.
The misconception is that an educated employee would be a bad employee but quite the contrary. An employee that has a purpose and is working toward something will work harder, more diligent and be more focus. When people have a goal they tend to stay the course, though this employee might not stay in the organization forever, while they are there they will give their best. Though this may be true, most employers will not educate or encourage them to educate their employees so we have to educate ourselves.
Keys to gaining a good financial IQ:
Accounting or financial literacy (left side brain): I would guess the majority of people do not like doing a lot of math better yet do accounting but it’s of huge importance. Even if you don’t want to do it yourself, hire someone or at least have a partner that can do it for you. Either way, it is something that just can’t be ignored. Accounting is using the analytic left side brain to analyze where your money is going versus how much money is coming in and more importantly how much is being kept. Keeping on top of your own spending and saving habits is of paramount importance.
Investing money makes money (right brain): Understanding investing and rates of return is the height of wealth creation. This is more of a right-side brain because there are no rules. You can create clever ways to work a deal in all aspects. As you can make deals and invest your money in items that make money you are on your way to being truly rich.
Know the law (tax advantages): Taxes are another boring subject but if you are serious in creating wealth you will take your time to read and try to understand taxes and the laws that govern it. I myself purchased a set of tax books for $150, but that $150 returned to me thousands of dollars. When you know the laws you can maximize your potential for high returns and advantages.
Wealthy Secrets #5: The Rich Create Money
It’s not the smart that get ahead but the bold.” -Robert Kiyosaki
In order for anyone to become wealthy or financially free, they must be willing to take risks. As scary as it is to invest, or own business is the only way to sustain wealth for a long period of time. Most people would rather play it safe, stay on the sidelines and just be a spectator but those are the attitudes of the poor and middle class. If wealth is your desire you must be able to move with confidence and get used to taking risks.
Why become more financially literate?
We are currently in the Information Age of knowledge and whoever owns the knowledge owns the wealth. If they know the right investments, how to invest, what’s the difference between an LLC and an S Corp, or better yet what is the market doing or not doing? What are the shifts in technology or customer desires? Having awareness of what is happening around you will help you make decisions that will help you reach your financial goals.
During this Information Age, a surplus of new millionaires will surface while others will not reap the benefits of this age or bear fruit because of a lack of knowledge. Appalling to lack knowledge in an informational age, but people do and will, left to wonder why they never achieve financial success.
Old ideas are people's buggiest liabilities. It limits options, creativity, and drive. Perpetrating concepts of others taking care of them versus them creating the initiative to take care of themselves.
The best way to gain financial literacy is by playing games. Games such as Monopoly and Cash flow are great indicators of how we subconsciously think about money and more importantly how we use money. In order to win in those games, we must understand simple wealth building principles such as four green houses and one red hotel or buy low and sell high. Playing these games helps us get our minds attuned to how to handle real money while using fake money.
Another way to teach ourselves about money is by making lists. Create a list of how many financial solutions can you come up within your current financial situation. If you want to double your income, ask yourself how can this be done and write down some answers that would help. This may help you discover that reaching those goals won’t work with your current employer, location or occupation which is very vital to know. This also helps us think outside of the box on our own financial problems.
In order to reach your goals, you must shift your paradigms about money, again many ideas that were taught to us in school or from our parents is not conducive to wealth creation but quite the opposite, so here are a few myths that must be busted for us to be financially free.
Bad Economy means to save: This is false! A bad economy is the best time to buy while a good economy is the best time to sell or save. Why? When the economy is good, most people are spending meaning you are collecting a larger portion of money so this should be saved because interest rates are high in returns. Since the economy is going so well prices are usually high but when the economy goes down prices are usually low, which is the best time to buy real estate or stocks because history has shown us in time the prices will go up again and you just doubled or tripled what you spent in returns.
Money is real: Money is not real it’s a piece of paper. In reality, the longer you hold your money the less it is worth meaning, because of inflation the value of the dollar decreases while the prices increases. The average inflation is 3% a year, in other words, the value of the dollar drops 3% a year. The more someone values the paper the harder they will work for it and the more anxiety it will cause but those who understand real money are digits, will take more risks and be more at peace when it comes to dealing with finances.
The point is this you can purchase a better deal via bankruptcy of businesses or foreclosures in real estate than you could ever find in a hot market. Furthermore, when you invest properly you are buying and using resources that are pre-tax or tax-deferred which means you don’t have to pay taxes on that loan or funding so the price of the barrows money holds more value.
Financial intelligence is based on 4 major skills:
Financial literacy: Our ability to read numbers and financial statements.
Investment strategies: Our ability to make smart investment decisions.
The market: Our ability to understand market supply and demands.
The law: Our ability to understand the tax laws and business laws. It’s benefits and pitfalls.
Wealth Secrets #6: Work to Learn
In the book, the author illustrates a story about an interview he did with a journalist overseas. She discussed with him that she was an aspiring author and after he read her work, he came to the conclusion that she was a very prolific writer. Though she was talented and skilled she was not making much in her writing career so Robert suggested she take a sales course which offended her immediately. She claimed to be a great writer, not a saleswoman which Robert then brought to her attention that he himself was a “bestselling” author, not a “best writing” author. Many people have tons of skills but if they do not learn how to sell they will not get be able to show off their skills to the masses. Many of the most intelligent will suffer financially because they learned skill but never learned about money or selling.
Poor Dad's advice: Get specialized knowledge and become a master in one thing in one.
Rich Dad advice: Learn a little about a lot!
The point is that in order to be wealthy, you must. be well rounded, to see the big picture while hiring or partnering with others that you are experts in the areas you lack expertise in. We must work to gain more skills and knowledge about different areas that will help us in our long term goals rather than go for an opportunity because of the wage or high paying salary. According to the author, this is a trap. In conclusion, the more skills the more income you can generate.
The unfortunate truth is that most people who get a job are living the acronym J.O.B meaning just over broke, making enough just to service while others in the world are making more to thrive. In order not to fall for the trap of one job and one wage, we must venture off and take risks. The earlier the better so you can bounce back enough in your older age but the risk has to be taken to reach the financial pinnacles that you are meant to have. When the author was faced with the choice to stay with his salary at Zerocks or take a major risk and start his own company he took the ladder versus the former. It did cost him some stressful days and long nights but he made it and retired at age 47. 18 years before the average American can even think about it.
Most people believe working or going from a company to company is negative while Rich Dad sees it as a positive. He claims that you learn to deal with different types of personalities, be well versed in different avenues and you can own more companies in different industries this way as well, while most don’t. They learn one skill but when that skill is obsolete or a younger person can do it for less money they lose the only income they have. Most people with jobs think day to day while the rich thing in long term increments.
Education is more valuable than money:
It is in our upbringing, our conditioning, and our emotions to go for the higher price tag. I did it myself, going for an industry or job, not for the love of it but for how much it can pay me. Selling, my integrity for wages, versus learning a lot of different things, but once I did, I was able to earn from multiple sources than just one. If you do have a job, don’t be discouraged, this is a great opportunity to work to learn not just for how much the paycheck is. Go to different departments in your company and learn what they do and how they operate. Watch how your company markets and advertises. See how they monetize and what their rates on investments are. Ask questions and be curious so you can gain knowledge to one day leave and start your own.
How to awaken your financial genius:
In order to be financially free, we must free our minds from traditional thinking. Just because something worked in the past doesn’t mean it is applicable in the present day. Times are changing and so should our way of viewing the world. As I paraphrased Albert Einstein's quote, “This thinking that causes the problem, can not be the same thinking that will be a solution.” The only way to bring financial success is to provoke your own financial genius to the forefront but this is only done by letting go of old views and using our imagination to create abundance.
The 10 steps to awaken your financial genius:
I need a reason greater than reality: It was Eric Thomas who said, “When you find your why, you find a way to make it happen!” When you have a deep reason to become financially successful it can catapult you to do things that successful people do that unsuccessful won’t do.
I choose daily: Take your responsibility back by using your power of choice. Understand wherever you are now, you chose to be there. Consciously or unconsciously. When you live by the motto, I choose daily, you begin to become conscious of every choice you make and conclude if your choices are made by fear or by faith.
Choose friends carefully: You are the 5 people you associate with the most. If they struggle and striving for nothing then you are doing the same even if you are unaware of it. Associate with those who think in the realm of prosperity and integrity. Talk, learn and spend your energy with those who are going somewhere in life and not staying on the road to mediocrity.
Master a formula then master another: Find a way to make income outside of a job and work to become profitable at it. Once you have mastered the formula, duplicate it and duplicate it again. For instance, if you are a barber, get so good at it that you can teach someone else and have them cut for you until you can open up a shop. Once the shop is successful, open up another, etc. First, duplicate yourself than duplicate your business.
Pay yourself first: Always pay yourself first, it is the golden rule of the wealthy. Before you pay the clothing maker or the bank or even the government pay yourself first. This will take discipline on your part to stay the course to be unmoved by distractions. Little sidetracks out to steal your financial future. Be responsible! Take 10% of any income you receive to be it, paycheck, returns on investments, gifts or lottery. Take it and save it to invest in yourself or anything that will appreciate or give you cashflow on a consistent basis.
Pay your brokers well: Pay all of your partners well. This is so huge and very important but unfortunately, most miss the boat on this. Understand it is better to make less on a consistent basis than it is to make more once. Many get greedy and expect larger returns while looking at the price tag than looking at making relationships. If someone is bringing you to work, investments or is doing the majority of the work so you can relax more, than this person deserves to get paid for their efforts. Now, if they feel that they are getting paid well and treated well, they will put forth more effort to find you more deals, but if the relationship is toxic, unresponsive, nickel and diming, this person will leave to find another investor while letting your operation become a revolving door which turns out to be more expensive than if you just paid the person a good wage or commission.
Be an Indian giver (The Art of getting something for nothing) — Learn how to invest with the mindset of all money that leaves my hands will come back to me. When you are a business person, you should always be thinking about ROIs (Rates of Returns), meaning whatever you put in, should return to you multiplied. If you are going to spend your money spending it on things that will return with its friends, that is the mindset of the wealthy. Be frugal in liabilities but spend most on assets that payback.
Assets buy luxuries: It was many wealthy men who said, “The Rich act like their broke while the poor act as if they are rich.” The poor and middle class spend their hard-earned money on luxuries, nice cars, nice house, nice boat or nice vacations, just to show their friends that they are keeping up with the Jones. While the Rich, save most of their money and cut costs wherever they can. Until they have enough to purchase an investment that pays them back dividends, cash flow or appreciation, which they can use to purchase luxuries. The Rich let their assets buy their boats and planes, not their income.
The need for heroes: Have an idol to emulate. If you want to be a great business tycoon, find someone that has done what you want to do and copy them. Their style, their philosophy and in some cases even their mannerism. When there is someone who is doing what you want to do on a high level, study them and let them be your guide. The successful leave clues.
Teach and you shall receive: Whatever you want in life give it first. If you want more knowledge on investing, find what you can find out and teach it to others. There’s a power in the Universe that keeps a balance sheet and for whatever you give out you tend to receive in return. If you want money, give money, if you want knowledge give knowledge, and if you want good relationships to be good to others and yourself. This is a major law of the Universe, in order to get you must give.
In conclusion, be smarter than money, because if money is smarter than you, you will always be working for it but if you are smarter than money, it will be working for you. Get financially literate by reading blogs such as this, picking up the book for purchases, reading other financial books, taking a class on finances, listen to a podcast, explore Youtube, read newspapers or even watch how the market moves and see if you can figure out the patterns. Either way, we must all become financially literate if we expect to be financially free. Also, remember that income is based on service, if you want to increase your income you must increase the service you provide, this is in a job or in business. The more valuable you are to the market the more they are willing to pay you. Lastly, you must take action, thoughts will attract the people, places or circumstances that can make the dream a reality but the only action will solidify it. There is no better time to become wealthy, but the question is will you try to do it, listening to your Rich Dad or your Poor Dad.
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