6 MONEY LESSONS YOU MUST LEARN

 

After completing Rich Dad, Poor Dad, I found it’s lessons to be extremely valuable. The six lessons I learned revolutionized the way that I feel about making money.

For those who have never read Rich Dad, Poor Dad, it’s a story of a man who says he grew up with two fathers. His real dad, was a very educated man who taught his son what most kids learn when they grow up. “Get your education so you can find a nice, secure job.”

The other dad was his best friend’s dad. This dad never graduated from high school. He said to never have a job. "Instead of working for money, find ways to have money work for you."

And believe it or not, it’s the dad that didn’t have a high school education whom he considers the “rich dad.” And his real dad, the educated one, whom he considers his “poor dad.”

So what is it that the “rich dad” taught him that the “poor dad” did not? Whether you have read the book or not, you will be sure to find these six lessons extremely helpful for your quest towards wealth…

1. Build Your Mental Wealth Muscles

This is my absolute favorite lesson from the book. The author would constantly hear his poor dad saying, “I can’t afford that.” However, his rich dad said that instead of saying you can’t afford something, ask yourself…

“How can I afford this?”

The first statement requires no thinking. You want something. You don’t have enough money. Therefore, you can’t afford it.

The second statement is so much better. You want something. You don’t have enough money. So, let’s find some way that I can create enough money to be able to afford it. The difference between these two statements is incredible!

“Forcing yourself to think of how to make extra money is like going to the gym and working with weights. The more you work your mental muscles, the stronger they get.” - Robert Kiyosaki, author “Rich Dad, Poor Dad”

So, let’s say you wanted to buy a new big screen TV, but you don’t have enough money. What can you do to be able to afford it? Let’s come up with a plan…

I don’t know you, but I bet one thing you could do is find some unneeded junk around the house and sell it on eBay. With that alone, I bet you would have enough for your big screen. Or, at least half of it anyways!

Another thing you could do is start a savings plan for it. I bet you could easily save five dollars here or five dollars there. Cut back a little on your usual spending habits. Then, use those savings to help pay for the big screen.

The point is, next time you want something you can’t afford, use your mental wealth muscles to find ways that will make you be able to afford it. The more you use these muscles, the better they get. And the more money you will find yourself accumulating.

2. Increase Your Financial Intelligence

It’s a fact, schools don’t teach students nearly enough about money as they should. You learn history and you learn how to find what x is equal to, but you never learn what financial options that you have.

I’ve learned that increasing your financial intelligence is a self-study. High school or college is never going to teach you as much as you should know. You’re going to have to pick up the books and learn it yourself. So…

What areas of financial intelligence do you need to learn?  

They are

1. Accounting - You’ve got to be able to read financial statements.
2. Investing - You have to learn to grow your assets until you are financially free.
3. Understanding Markets - You have to know supply and demand and how to take advantage of it.
4. Law - You need to learn to protect yourself. And also know what you are and aren’t allowed to do.

Being heavily schooled in these four subjects is essential towards wealth. You’ve got to go to the library or go online and find books on these subjects.

One thing is certain, you can never learn enough about these subjects. It should be a lifetime study. Each book you will read will hopefully give you one more piece to the financial puzzle. With each book you read, you will learn something new that will help you on the road towards financial independence.

It doesn’t matter where you are at financially right now. Get started learning what very few people know about acquiring wealth.

3. Spend More Money On Assets, Less On Liabilities

Rich Dad, Poor Dad talks heavily about distinguishing between an asset and a liability.

In case you don’t know, an asset is something you buy that grows in value over time. A liability is something that loses value over time.

The best example of a liability that I know of is your car. With every time you drive it, it loses value. The mileage that it accumulates makes it worth less and less, should you ever decide to sell it.

Most people spend a majority of their income on liabilities. Whether it be a car, a nice new TV, video games, etc. You should spend as much as you possibly can on assets instead of liabilities. So, what are some examples of assets that you can buy? Well, there are basically four main categories…

1. Investing - Whether it be in stocks, bonds, or anything else. A smart investment will grow largely in value for you over time.

2. Business - You can save up money to start your own business. This is a great asset that can earn you a ton of money. You can even hire other people to run the business for you, you just need to have the money to get it started.

3. Real estate - The fact is that many people make a fortune through real estate. It’s a high-risk, high-reward kind of business.

4. Other - Anything that you think will grow in value over time, and you enjoy buying, is a great asset for you. For example, if you love collecting baseball cards, they will be worth a lot more 40 years from now than they are today.

Do everything possible to set up multiple streams of income. By having as many assets working for you as you possibly can, your money will start to grow for you exponentially. The more you have invested, the faster it will grow.

Be smart and make it a habit of spending as much as you can on assets , and as little as you can on liabilities.

4. Why You Should Own A Business

There is a big difference between owning your own business and working for one. This big difference, for the most part, deals with taxes.

Taxes are the largest expense for a majority of people. It can easily cost you 30% if your income. Meaning that you are working 3-4 months out of the year just so you can pay for taxes.

When you work for a company, there is very little you can do about this tax situation. It’s basically inevitable that you are going to have to pay the maximum in taxes. However…

If you have your own business, you have many more options!

The greatest loophole there is when it comes to taxes is tax deductions. When you have your own business, anything that is considered a business expense can be put as a tax deduction, which further decreases the amount of taxes that you have to pay.

From my own experience with building websites (a home-based business), tax deductions have done wonders for me. All of my hosting fees, my high-speed Internet, and all of the personal development books that I purchase are all tax deductible!

Many of these things I would purchase even if I didn’t have a website to run. But because I do have an income-producing website, it makes these things tax deductible! Saving me lots of money whenever tax time comes around.

Even if you own a business, you are still probably going to have to pay some taxes. But the percentage that you are going to pay will be far lower when compared to what you would have to pay if you worked for a business instead of owning one!

5. Get A Job To Learn

Most people get a job to earn a paycheck. But a better way to think about getting a job is what you will learn from it.

Having a job is an opportunity to get first-hand experience learning and applying new skills. By having a job, you get to learn time management so you can get as much done as possible. You also improve communication skills when you interact with other employees.

Everything about a job can be used as a learning experience.

Choose a job, not for how much it pays, but for what you will learn from it. If a job will teach you the skills that will help you make a fortune later in life, then don’t worry about how much it is paying you. It will work out in the end.

Basically, keep the long term future in mind when you are choosing a job. Is this job going to help you in the long term? If it isn’t, it’s time to go searching for something that is.

6. Why You Should Pay Yourself First

You’ve probably heard the term “pay yourself first” before. But if you haven’t, it basically means to set aside some of your income first, before you pay your bills and the other things you have to pay for.

So, if you decide to save 10% of your income, you first take 10% out of your paycheck, then you do your best to live off of the other 90%.

It’s easy to see why this is a great strategy. Especially if you use that 10% to buy assets that will help you become financially free. But what are some of the other advantages of “paying yourself first.” Well…

As we have already learned, it’s important for us to build our “mental wealth muscles.” And, as it turns out, paying yourself first is a great way to build those muscles.

You probably already have a strong motivation to pay all of your bills on time. That way you don’t have to pay any late fees, or receive phone calls asking where the check is. Well, when you pay yourself first, you have even less money to pay off those bills! So, the secret is you can use that motivation to help you find ways to be able to pay your bills on time.

Whether it be reducing your spending, or finding ways to earn more money, either way it works out very nicely for you!

By paying yourself first, you force yourself to be better with money so you can still pay your bills on time. And not only that, it’s nice psychologically when you know that a percentage of your income is yours to keep! I don’t know about you, but I like thinking that my money is mine and that nobody can take it from me.

Pay yourself first. Set aside 10-20% of your income and live off the rest. This will automatically force you to be smarter with money and also build your mental wealth muscles to find ways of earning yourself a fortune.

Refer: Rich dad, Poor dad

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Written by: Boaz Kipkemboi