Some of us might have read the book : Rich Dad, Poor Dad: What the Rich treat their kids about money, that the poor and middle class do not!- by Robert T Kiyosaki (Apparently the book was Ghost written)
Those of you who have not or like myself, forgotten important elements of it,
here is an extract: relating to financial intelligence .
It is a lesson of minding your own business and building assets before rewarding oneself on luxuries….
As your cash flow grows, you can buy some luxuries.
An important distinction is that rich people buy luxuries last, while the poor and the middle class tend to buy luxuries first.
The poor and middle class buy luxury items such as big house, diamonds, furs, jewellery or boards because they want to look rich, but in reality they just deeper in debt on credit.
The old money people, the long-term rich built their asset column first.
Then, the income generated from the asset column bought their luxuries.
The poor and middle class buy luxuries with the own sweat, blood and inheritance.
A true luxury is a reward for investing in and developing a real asset.
For example, when my wife and I had extra money coming from apartment houses,
she went out and bought her Mercedes. It did not take any extra work or risk on her part because the apartment house bought the car.
She did, however wait for four years while the real estate portfolio grew and finally began throwing off enough EXTRA cash flow to pay for the car.
But the luxury, the Mercedes was a true reward because she had proved she knew how to grow her asset column.
The car means a lot to her as she used her financial intelligence to afford it.
What most people do is they impulsively go out to buy a new car, or some luxury, on credit.
Then the debt from the luxury becomes a financial burden, causing them to latter resent the luxury.’ Page 91
Real world assets fall into several different categories:
- Businesses that do no require your presence. You own them, but they are managed and run by other people.
If you have to work there, it’s not a business, its a job.
- Mutual funds
- Income-generating real estate
- Royalties from intellectual propety such as music, scripts, patents
- Anythings else that has value, products income or appreciate and has a ready market.
After you’ve taken the time, invested in and built your own business, you are now ready to add the magic touch-
The biggest secret of the rich. The secret that puts the rich way ahead of the pack.
The reward at the end of the road for diligently taking the time to mind your own business.‘
The next lesson: Working to learn and flow of money in “Financial Intelligence is a synergy of accounting, investing, marketing and law.”