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How to become rich? It is most frequently asked questions with no definite answer. Before few days I read a book by Robert Kiyosaki – Rich Dad Poor Dad. This book clearly defined a way to become rich.
Become Rich via Robert Kiyosaki Way
Robert Kiyosaki had two dads. His real dad and his friend’s dad. His real dad had Ph.D. and the other didn’t even finish high school. His real dad would say things like I can’t afford it and the other would say how can I afford it? They both supported education. The one supported studying career and the other focused on studying money. One of them dies struggling financially and the other dies as one of the richest men in Hawaii.
Kiyosaki Decided to learn from his friend’s dad instead of his own dad. It is important to learn from the people who know the subject very well. He called his friend’s dad as Rich Dad. Rich Dad taught him how to become rich.
Why everyone can’t become rich? The reason is their thinking is like Poor Dad.
They are programmed to become poor so they can’t become rich.
Confused? Let’s try to understand with an example.
From the childhood days, they are programmed with the flow.
Go to school –> Get good grades/results –> Get a good “JOB” –> Work hard –> Maintain good credit
Rich Dad used to say you cannot become rich by doing Job.
It is not your boss’ / employer job to make you rich. Their job is to give you a paycheck for the work you have done & nothing more. You have to decide what you want to do with this money to become rich.
Let me ask you something. What is the first thing you would do if you got a pay raise in your job to $5000 per month starting today?
- Would you buy a new car?
- Would you buy a New House?
- Take a trip to Vegas to celebrate.
This is actually the action most people have. They make more money so they spend more.
Now, I am sure you must have understood that money alone cannot make you rich.
In order to become rich, you need to understand only two things income statement and a difference between assets and liabilities.
We are going to define them in very simple terms.
- Assets are something that brings money to your pocket.
- Liabilities is something that takes money away from your pocket.
If you own a house and it takes money out from your pocket it’s a liability but if you rent out that house & it makes money it. Then it is an asset.
The difference between the poor, middle class and rich is that.
How Poor Lives?
Poor have small incomes and small expenses. Assets are zero and liabilities are zero.
How Middle Class Lives?
The middle class has a stable income but they buy expenses and liabilities by thinking that they are buying assets. Expense and liabilities are more and assets are less.
How Rich Lives?
Rich spend their time and money in buying assets that produce more money. They use that money to buy more asset. That’s why rich get richer and poor and middle class stays the same.
It doesn’t matter how much money you are making. If you have a job and you make $10000 per month and you buy cars and expensive gifts, luxurious items and a lot of other things and spend all of your money at the end of the month you have poor person mentality.
On the other hand, if you have only $2000 per month income and you spend only $500 and rest you use to buy assets, eventually those assets will bring you more money to buy more assets and yes if continue doing this, you won’t be needing your job anymore you can become rich.
Assets can be a thing like real estate, business, paper assets, stocks and bonds, a product you made etc.
Cash flow Quadrant says, In a world, we have four types of people. Employee, Self- Employed, Developer and Investor.
If you are an employee or self-employed you have job security or financial security today but maybe you are not securing tomorrow and you are rat race side you may become rich but chances are less. What you need to do is start your journey towards becoming either developer or investor to become rich.
If you are developer or investor who owns up a system or if your money works for you, you are at a correct side and your chances of becoming rich are very good.
Ultimate essence of becoming wealthy is work towards continuously increasing your asset and passive income. It’s not how much money you make, it is about how much you keep.