Excerpts from: Rich Dad, Poor Dad
There is a difference between being poor and being broke. Broke is temporary and Poor is eternal.
While you may console yourself with the fact that for your friend, it was a sheer ‘stroke of luck’, the truth behind his success and your current status is much more profound – the truth is though your friend is being the ‘rich dad’, you may not be making adequate efforts to move out of the ‘poor dad’ zone.
Here are five reasons why it is taking you so long to be the ‘rich dad’ and why many like you are unable to break out of the ‘middle-class’.
1. Create multiple sources of income
Millionaires, on an average, have at least seven sources of income. While extracting more juice out of a single source may not be an easy task, the easier way to get more juice is by increasing the number of sources. Sources of income other than your regular salary can include income from mutual funds, freelancing and similar.
2. Make your money work for you
While the middle-class always strive and work extremely hard to ‘earn’ money, the rich make every penny work for them. While the middle-class slog for typically nine hours a day, five days a week to earn a nominal salary only to later squander it over ‘liabilities’. At the same time, the rich ensure that every penny that they hold is invested well enough to fetch returns for their fortune – investments are not just limited to financial products; investing an amount to upgrade knowledge is also a prudent investment.
3. Failures inspire winners and defeat losers
Every failure should be taken up as an opportunity to introspect and learn from the experience. Mistakes and failure do not make you a loser but failing to learn from the experience is a sure way to lose.
4. Risk is to be managed, not avoided
At the cost of sounding cliché, risk and returns move in the same direction. Risk is different from uncertainty – risk can be managed and calculated to certain degree. Risk emanates from one’s lack of knowledge and awareness and not because of the system per se. As Kiyosaki puts it – “I have never met a rich person who has never lost money. But I have met a lot of poor people who have never lost a dime…investing, that is.”
5. Stop buying liabilities assuming them to be assets
It is important to understand what an asset is, and then buy more of it. Although many feel that it is simple to identify an asset from a liability, many tend to repeat the same mistake – buying liabilities, assuming them to be assets.
An asset is something that can yield economic benefits for the owner in future while a liability is something that needs consistent expenses.
A car, for example, may seem to be an asset but in reality, it is a liability – you need to pay for maintenance, insurance and other ad-hoc expenses while the value of the car is continuously depreciating.
Pride says, “impossible”
Reason says, “pointless”
Experience says, “impractical”
Doers ask, “When do we start?”
You will never be as young as you are today; the best day is today, and best time is now.
If you continue being the average middle-class guy, it is only because you chose to be that guy.