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Two emotions that keep people in Rat Race: fear and greed. Assets put money into your pocket, liabilities take money out from it. Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets. Raise your financial IQ by learning accounting, investing, understanding markets, and law. If you want to be a successful business owner and investor, develop three main skills: 1) find opportunities that everyone else missed, 2) raise money, and 3) organize smart people.
One of the reasons the rich get richer, the poor get poorer, and the middle-class struggles in debt is that the subject of money is taught at home, not in school.
Most of us learn about money from our parents. So what can poor parents tell their child about money? They simply say, “Stay in school and study hard.” The child may graduate with excellent grades, but with a poor person’s financial programming and mindset.
There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.
Life is the best teacher of all. Most of the time, life does not talk to you. It just sort of pushes you around. Each push is life saying, “Wake up. There’s something I want you to learn.”
The poor and the middle-class work for money. The rich have money work for them.
Buying or building assets that deliver cash flow is putting your money to work for you. High-paying jobs mean two things: you’re working for money and the taxes you pay will probably increase. Learn to put your money to work for you and enjoy the tax benefits of generating income that doesn’t come from a paycheck.
It’s fear that keeps most people working at a job: the fear of not paying their bills, the fear of being fired, the fear of not having enough money, and the fear of starting over. That’s the price of studying to learn a profession or trade, and then working for money. Most people become a slave of money—and then get angry at their boss.
Most people have a price. And they have a price because of human emotions named fear and greed. First, the fear of being without money motivates us to work hard, and then once we get that paycheck, greed or desire starts us thinking about all the wonderful things money can buy. The pattern is then set.
The pattern of get up, go to work, pay bills; get up, go to work, pay bills. People’s lives are forever controlled by two emotions: fear and greed. Offer them more money and they continue the cycle by increasing their spending. This is what call the Rat Race.
Never forget that fear and desire can lead you into life’s biggest trap if you’re not aware of them controlling your thinking. To spend your life living in fear, never exploring your dreams, is cruel. To work hard for money, thinking that it will buy you things that will make you happy is also cruel. To wake up in the middle of the night terrified about paying bills is a horrible way to live. To live a life dictated by the size of a paycheck is not really living a life. Thinking that a job makes you secure is lying to yourself. That’s cruel, and that’s the trap you should avoid.
Many people are too focused on money and not their greatest wealth, their education. If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer despite tough changes. If they think money will solve problems, they will have a rough ride. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.
You must know the difference between an asset and a liability, and buy assets. Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.
The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.
An asset is something that puts money in your pocket whether you work or not. A liability is something that takes money out of your pocket.
What is missing from their education is not how to make money, but how to manage money. It’s called financial aptitude—what you do with the money once you make it, how to keep people from taking it from you, how to keep it longer, and how to make that money work hard for you. Most people don’t understand why they struggle financially because they don’t understand cash flow.
Cash flow tells the story of how a person handles money.
Without a financial statement, you don’t really know where you are in life’s financial game. Like it or not, money tells the score of your “game,” and a financial statement is your scorecard. Banks want financial statements—Income Statement and Balance Sheet—to know how well you’re scoring in your life’s financial game.
The rich focus on their asset columns while everyone else focuses on their income statements.
Mind your own business. Financial struggle is often directly the result of people working all their lives for someone else. Many people will simply have nothing at the end of their working days to show for their efforts.
Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home. Keep expenses low, reduce liabilities, and diligently build a base of solid assets.
Once a dollar goes into your asset column, it becomes your employee. The best thing about money is that it works 24 hours a day and can work for generations. Keep your day job, be a hardworking employee, but keep building that asset column.
Financial IQ is made up of knowledge from four broad areas of expertise:
A corporation is simply a legal document that creates a legal entity. It is not really a thing, not a factory or a group of people. But it offers a lower income tax rate than individuals have, and certain expenses can be paid by a corporation with pre-tax dollars.
We all have tremendous potential, and we all are blessed with gifts. Yet the one thing that holds all of us back is some degree of self-doubt. It is not so much the lack of technical information that holds us back, but more the lack of self-confidence.
Excessive fear and self-doubt are the greatest detractors of personal genius.
Often in the real world, it’s not the smart who get ahead, but the bold.
The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth seemingly instantaneously.
If you want to be the second type of investor, you need to develop three main skills:
When it comes to money, the only skill most people know is to work hard.
In school and in the workplace, the popular opinion is the idea of specialization: that is, in order to make more money or get promoted, you need to specialize.
Seek work for what you will learn, more than what you will earn. Look down the road at what skills you want to acquire before choosing a specific profession and before getting trapped in the Rat Race.
The world is filled with talented poor people. All too often, they’re poor or struggle financially or earn less than they are capable of, not because of what they know, but because of what they do not know. They focus on perfecting their skills at building a better hamburger rather than the skills of selling and delivering the hamburger. Maybe McDonald’s does not make the best hamburger, but they are the best at selling and delivering a basic average burger.
The main management skills needed for success are:
The most important specialized skills are sales and marketing. The ability to sell—to communicate to another human being, be it a customer, employee, boss, spouse, or child—is the base skill of personal success. Communication skills such as writing, speaking, and negotiating are crucial to a life of success.
There are five main reasons why financially literate people may still not develop abundant asset columns that could produce a large cash flow. The five reasons are:
The fear of losing money is real. Everyone has it. Even the rich. But it’s not having fear that is the problem. It’s how you handle fear. It’s how you handle losing. It’s how you handle failure that makes the difference in one’s life. The primary difference between a rich person and a poor person is how they manage that fear.
Failure inspires winners. And failure defeats losers. It is the biggest secret of winners. It’s the secret that losers do not know. The greatest secret of winners is that failure inspires winning; this, they’re not afraid of losing.
If you have little money and you want to be rich, you must first be focused, not balanced. If you look at any successful person, at the start they were not balanced. Balanced people go nowhere. They stay in one spot. To make progress, you must first go unbalanced.
It often takes great courage to not let rumors and talk of doom and gloom affect your doubts and fears. But a savvy investor knows that the seemingly worst of times is actually the best of times to make money. When everyone else is too afraid to act, they pull the trigger and are rewarded.
Busy people are often the laziest. People who are too busy to take care of their wealth. And there are people too busy to take care of their health. The cause is the same. They’re busy, and they stay busy as a way of avoiding something they do not want to face. Nobody has to tell them. Deep down they down. In fact, if you remind them, they often respond with anger or irritation.
The problem I see today is that there are millions of people who feel guilty about their desire or their “greed.” It’s old conditioning from their childhood. While they desire to have the finer things that life offers, most have been conditioned subconsciously to say, “I can’t have that,” or “I’ll never be able to afford that.”
Invest first in education. In reality, the only real asset you have is your mind, the most powerful tool we have dominion over. Each of us has the choice of what we put in our brain once we’re old enough.
Be careful of what you learn because your mind is so powerful that you become what you put in your head.
Don’t get into large debt positions that you have to pay for. Keep your expenses low. Build up assets first. Then buy the big house or nice car. Being stuck in the Rat Race is not intelligent.
When you come up short, let the pressure build and don’t dip into your savings or investments. Use the pressure to inspire your financial genius to come up with new ways of making more money, and then pay your bills. You will have increased your ability to make more money as well as your financial intelligence.
If a person cannot master the power of self-discipline, it is best not to try to get rich. Although the process of developing cash flow from an asset column is easy in theory, what’s hard is the mental fortitude to direct money to the correct use. Due to external temptations, it is much easier in today’s consumer world to simply blow money out the expenses column. With weak mental fortitude, that money flows into the paths of least resistance. That is the cause of poverty and financial struggle.
Whenever you feel short or in need of something, give what you want first and it will come back in buckets. That is true for money, a smile, love, or friendship.
Finding a good deal, the right business, the right people, the right investors, or whatever is just like dating. You must go to the market and talk to a lot of people, make a lot of offers, counteroffers, negotiate, reject, and accept.
Shop for bargains in all markets. Profits are made in the buying, not in the selling.