The question “how to be rich” is probably one of the most generic questions you’ll ever find. Parents often tell their kids to study hard and get a good grade so they can find a profitable job, but how many people from the working force have actually made a stable income out of their day jobs?
On the internet, you’ll find thousands of articles giving financial advice like investing at an early age, cutting expenses, excelling academically, and so on. The answer lies not in how early you start investing money. Rather it lies in where you invest your money. If that didn’t make sense to you, then you better read on.
The road to being rich
According to Robert Kiyosaki’s book entitled “Rich Dad Poor Dad”, to be rich, you need to ditch working for money.
What makes the rich different from the poor? Poor people help the rich people become richer. Rich people help poor people become poorer.
Imagine an office worker working for $20 per hour. And then imagine how much the owner of that corporation is earning while he’s resting at his house.
The difference between asset and liability
There’s more about being than simply investing your money in a bank or by simply putting up your own business. It’s not in how much money you make, it’s about how much money you keep. Maintenance is the key.
To be able to keep some sum of your money you need to know the difference between liability and asset. To make it easy, Mr. Kiyosaki defined it as follows:
An asset is anything that earns you money.
A liability is anything that takes money away from you.
This is the basic to being rich. To be rich, just spend your life buying assets, and minimize buying liabilities.
What your financial statement should look like
Your daily income should be greater than your expenses. That way, you’ll be able to keep some of your money.
The reason why some people belong to the middle class is because instead of having a financial statement that looks like this:
Income > Expense
Asset > Liability
They have this instead:
Income < Expense
Asset < Liability
People in the middle class focus so much on their education, believing that a high-paying job is a solution to their financial problems when in fact it’s the opposite. If you don’t agree then let me summarize how an employee’s money cycle looks like:
Employee works for 8 hours a day ->
The company computes his salary -> government deducts taxes ->
Employee receives his deducted salary ->
He pays for home expenses (electricity, cable, the internet, water, and so on) ->
He spends money on basic needs (food, clothing, and much more) ->
He spends what is left for transportation for work
We should only enter employment for the reason of getting out of it. Working for a company is something that Mr. Kiyosaki termed as the “rat race”.
As soon as you graduate from college, quickly look for a job, and work your way to get out of it.
The problem with being in the rat race is this: as your income goes up so do your expenses, leaving you with nothing for your keeps.
Mind your own business
This is really the ultimate secret earning loads of money: mind your own business. When you step out of the university, with all the enthusiasm to apply for your first job, you’re minding somebody else’s business. Here’s why:
An employee who’s either a car or homeowner is generally:
Someone who’s working for somebody else
If you ask someone from the workforce why they work, they’d tell you they work to feed their family or to send their kids to school, when in fact, all the efforts that they put in their work actually go to the company owner. When you work for a company you’re making the owner of that company rich.
You don’t even get a third of what the company is actually earning. That being said, you don’t get to keep what you deserve.
Someone who’s working for the government
When you work for someone, the government already gets a share of the little sum of money you earned before you even get a hold of it.
With what’s left of your money, you still give them a share of it if you own a car or a house.
Someone who’s working for the bank
After paying your taxes, assuming that there’s some left, your next expense goes to your bank loan which you used to purchase your home or car.
To mind your own business, you have to start working for yourself, and stop working for other people. This means your efforts should benefit you. Start working on things that will bring you more money.
Here’s what you need to do:
- Enter the rat race
Finish your degree, get a job, and then earn. Limit your liabilities.
- Exit the rat race
When you earned just enough then it’s time to say goodbye to your day job, and exit the rat race.
- Invest in stocks
Start by buying a small stock, but don’t make random guesses when investing. Educate yourself about investing. On the internet, there are countless articles about investment.
Chances are if you invest in the wrong company you’ll end up spending more than you earn.
- Let the stocks make money for you
Instead of being a slave to money, this time money is what works for you.
- Use the money to buy more assets
The more you get into investment, you’ll soon learn other kinds of investment that’ll win you more money than you’ll ever earn in stocks.
The problem here is that when people enter the rate race, it becomes difficult for them to get out of it because of the inability to decide.
As soon as they start earning and buying the things they want, they start to disbelieve that there are other ways of earning money other than working.
So, before you enter the rat race, write your financial objectives onto a piece of paper.
Investing on assets
- Enter the rate race
- Buy assets
- Let assets make money for you
- Use the money to buy more assets
Then it’s all about practicing it to an extent that the sequence becomes your habit, something that will get done anyway.
About the author: Wade is an essayist at WeDoEssay He incorporates nature’s beauty in his writing. Besides excellence, he puts his lovely wife and two kids at the center of his craft. He is fond of physical contact sports and considers South America as a haven for tourists.