The 3 Mindsets That Build Wealth

Stop playing not to lose, and start playing to win

Robert Kiyosaki says he had two dads as a child: His own father and the father of his best friend.

While he loved both, they were very different when it came to dealing with finances. Robert learned what not to do from his own dad and what to do from the other. One helped him avoid staying poor, the other helped him get rich.

I know it’s controversial and often heavily criticized, but Rich Dad Poor Dad is a modern classic of personal finance. It’s one of my favorite finance books. The story through which Robert Kiyosaki delivers his lessons is captivating. If it weren’t, the book wouldn’t have sold 32 million copies.

Here are three lessons to help you escape poverty and build wealth.

1. Fear and greed are keeping you in the rat race, education will get you out of it

Many of us are afraid to exit the rat race because we think people will brand us as “weird.”

We let two primary emotions dominate our decisions: fear and greed.

That’s why we still stick to the outdated mantra, “Go to school, get a job, play it safe.” when in reality, no job is safe anymore.

When you get a raise at your job, a wise choice would be to invest the extra money in something that builds wealth like stocks or bonds.

Maybe you find a good stock with a 60% chance to double your money within a year, but a 40% chance of losing it all. However, most likely, your fear of losing the money altogether will keep you from doing so.

When your greed takes over, you might spend the extra money on an improved lifestyle, like buying a car, and the payments eat up the money — this way, you’re guaranteed to lose 100%.

This shows how important it is to educate yourself financially. Sadly, we receive no financial education in school or college, so this is up to you.

Look around, and you’ll see plenty of financially ignorant people in your own life. Just take a look at local politicians. Is their city in debt? Your mayor might be great, but no one ever taught him how to deal with money.

For the same reason, 38% of Americans don’t save anything for their retirement.

The only way for you to counteract this is to start now. Today is the youngest you’ll ever be, so take a close look at what you can and can’t afford. This way, you can set realistic financial goals, even if it means waiting a few more years for that shiny new BMW.

2. Adopt the mindset of “work to learn” instead of “work to earn,” and be smart with your money

Take a job in a field you have no clue about, such as sales, customer service, or communications, to develop new skills — you never know what they might be useful for.

Set aside 5% of your income each month to buy books and courses and attend seminars on personal finance to start building your financial IQ.

The first step towards building wealth lies in the mindset of managing risks instead of avoiding them. Learning about investments will teach you that it’s better not to play it safe because that always means missing out on big potential rewards.

Don’t start big. Just set aside a small amount, like $1,000 or even $100, and invest it in stocks, bonds, or even tax lien certificates. Treat the money as if it’s gone forever, and you’ll worry less about losing it.

As soon as you start your journey towards wealth, you’ll realize that it’ll be quite a long one. That’s why it’s crucial to stay motivated. Kiyosaki suggests creating an “I want” and an “I don’t want” list, with items like: “I want to retire at age 50.” or “I don’t want to end up like my broke uncle.”

You also want to have the habit of paying yourself first each month. Take the portion of your salary you want to spend on stocks or your financial education, invest it, and pay your bills afterward. It’ll create pressure to be creative in making money and show you what you can afford.

3. Use your money to acquire assets instead of liabilities

Assets are stocks, bonds, real estate that you rent out, royalties, and anything that generates money and increases in value over time.

Liabilities can be cars or electronics with maintenance costs and monthly payments, a house with a mortgage, and of course, debt. Anything that takes money out of your pocket each month is a liability.

There’s no rush. Just stay at your full-time job and “mind your own business.” In this case, your job is what pays the bills, and your business is what makes you wealthy.

Build your business on the side and use it to invest in assets until your assets eventually become the primary source of your income. You can even file a corporation to be taxed only after you’ve earned and invested, instead of being taxed before investing as an employee and trying to live off what’s left.

The most important thing is that you start today. You are your own biggest asset, so the first thing you should put some money into is yourself.

Summary

Rich Dad Poor Dad tells the story of a boy with two fathers, one rich, one poor, to help you build a life of wealth and freedom.

My three favorite lessons are:

  1. Living in the rat race is no fun, but you can escape it.

  2. Early in your career, learning is more important than earning.

  3. Assets are income streams, not things, and you should learn how to get more of them to become financially free.

“Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.”

— Robert T. Kiyosaki

-Nik

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