If you’re looking into getting in the right mindset whether it be starting an affiliate marketing campaign, a dropshipping website, crypto, stocks or any other online business you came to the right place. One of the first things you absolutely need before getting into these ventures is the right mindset.
Without mindset you will start many different ideas, yet never get to finish them because that discipline and structure that’s necessary to succeed is just a thought.
Do you ever find yourself inspired and fired up after seeing a couple of inspirational tutorial videos of a new program like affiliate marketing or dropshipping or SMMA that will “Get you $2,345 within 24 hours!” You’re motivated and ready to go off of simply the idea that money will be guaranteed with these “Foolproof technique” videos but how long will that last? A week? A month?
Maybe you reach the milestone of 3 months of consistent effort and work, yet can’t quite seem to get anything to work. What you lack may be the financial fundamentals needed to not only create but keep profits consistently. But don’t you worry friend! That is exactly what we will be going over today.
Today I’m going to be going over the book the 4 Most Important Lessons in Financial Literacy as written in “Rich Dad, Poor Dad” by Robert Kiyosaki which detail the fundamental mindset lessons that separate those with wealth and those without.
If you’re tired of being like those without wealth and you aspire to have an abundance and wealthy mindset, well keep reading along.
Kiyosaki prefaces the book with describing his biological dad or “Poor Dad ” as a highly intelligent man who believed in studying hard, getting good grades and finding a job that paid well. (Looks like we were both finessed, “Poor Dad”). His “Rich Dad” was the father of his best friend growing up yet he was the boss of his company who understood that financial literacy was important and money should work for you and not the other way around. “
”Rich dad goes on to say “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 to money – and then get angry at their boss.”
Many of us can relate because this is exactly how our system is set up to be. This leaves us with two options. Quit and reject the system and play it safe, or take it on full steam ahead and conquer it. “Life pushes all of us around. Some give up. Others fight. A few learn the lesson and move on. They welcome life pushing them around. To these few people, it means they need and want to learn something. They learn and move on. Most quit, and a few like you fight.” – Rich Dad.
Lesson 1: “Use your emotions to think, don’t think with your emotions.”
“The poor and middle class work for money. The rich have money work for them.” Kiyosaki argues that it is fear that motivates many to go to school to have enough to pay the bills. This leads to the fear of being fired, starting over, and being viewed as a failure. What many fail to realize is true learning takes passion, energy, and a burning desire. It is not until you get angry with your situation that you actually decide to make a change.
In the book, Rich Dad tests Kiyosaki and his best friend by having them work at his job for very very little pay. They do this for weeks until they are fed up with his underpayment and he begins to explain that like them, many adults eventually grow angry with their situation but instead of analyzing the situation they blame the boss, ask for a short term raise, or outright leave to another company. They never quite figure out that it is ultimately in their own hands to create their own wealth and opportunity.
Rich Dad’s next test is offering the kids multiple exponential raises until they finally take them. He tells them that like them, many adults also fall into desire which is what keeps the perpetual pattern set in the rat race. Initial fear of not paying the bills, then desire of spending our entire checks once we have them. If you are like me you’re absolutely tired.
You’re fed up.
Car payments, gas prices, monthly subscriptions, not having enough to make it through the next check.
You overspend for a day and you’re left with crumbs to live for a week. Rich Dad explains it’s due to falling victim to both the emotions of fear and greed that we continue the pattern.
The rich understand that money is an illusion kept real by these two emotions. Money today is being printed off the gold standard, meaning in reality the government is just creating it out of thin air. “A job is really a short term solution to a long term problem” What Kiyosaki really means when he says rich people have money work for them is rich people buy assets while poor and middle class only use time to earn money within a job.
Rich Dad recommended they work for free until they were able to identify a way to make money work for them. They then created a business in which they lent out comic books for a price and averaged triple than what they made working there. Rich Dad could continue with his next lesson.
Lesson 2: “Your financial education is a far better asset than money.”
Rule 1 and the only rule. “You must know the difference between assets and liabilities and buy assets.” “Assets put money IN your pocket. ““A liability is something that takes money out of your pocket.” Money does not solve problems, in fact it may actually accelerate them.
If a poor person were to suddenly win the lottery it is common they usually return to the same baseline as they spend the money carelessly. If your mental pattern is to spend all the money you get, most likely an increase in money would just lead to an increase in spending.
Below is what is known as a cash flow balance sheet.
The poor receive an income based on a salary or fixed wage and use it all on expenses such as taxes, rent, food, anything they may buy.
The middle class receive a higher income and buy liabilities Picture this, an educated couple move in together. They begin to save money for a house as they realize they have 2 well earning incomes. With their increase in incomes comes the increase in expenses as they begin to pay more in taxes. They buy a new house which creates new property tax, buy furniture with credit for the house, and eventually have a kid.
They are now in the rat race.
The rich invest into assets that make well over their expenses and repeat.
Rich Dad argues the point that although controversial to some, buying a home that will take 30 years to pay off may not be an asset as many view as other assets would be able to make much more money in that time, their is a loss of high maintenance capital which could have been used to pay for expenses related directly to a home, and they lose education time as many only spend their money on this asset taking away from learning to manage other assets.
Your assets should always be making more than your expenses, a formula that will never let be apart of the rat race again. Once your assets make enough to cover for your expenses, you reinvest your income back into those assets and repeat the cycle.
An example of assets are seen below such as: bonds, selling real estate, stocks, a property rented that does not exceed expenses, your own business that does not require for you to be there, Notes (IOU’s), royalties, or anything else that has value and actually appreciates.
Concentrate on buying assets and keeping expenses and liabilities to a minimum. Don’t take on more debt unless you have an asset that makes more money than it. “If you have dug yourself in a hole,– stop digging.”
Lesson 3: Mind Your Business.
“Financial struggle is directly the result of people working for someone else.”
The mistake people make is only focusing on their profession which is working for someone else. Many fail to mind their business which is directly growing their assets column and tend to only focus on growing their income statements i.e raises and bonuses.
Rich Dad recommends keeping your regular income job but also buying assets that will grow, not liabilities that have no value in the long run. He knows the rich buy luxuries last and the poor buy them first. A true luxury is when your assets column could buy it for you. This may mean waiting a long time, but this is better than using your income when you still have many expenses to take care of.
Included in minding your own business is discovering your own why as I detail in another blog post you can find here. Rich Dad knows many want to be rich but don’t want to struggle. Many times when starting a business you will find yourself losing motivation and it is that motivation or “why” that will keep you going. Your why should be generally implemented into your assets column because this is where your burning passion to continue stems from.
Lesson Four: Pay yourself first.
One of the most important strategies taught in the book that would really sharpen your financial IQ is to pay yourself first. Contrary to what you may think this means this does not mean buy luxaries right when you are paid. It actually means the opposite.
When you get paid, automatically invest this money into anything that could be classified as an asset. Do this before paying your actual bills.
This does not mean don’t pay your bills at all but learn to manage your expenses and assets this way as to make yourself think of another way to make income. You will never learn to grow your financial IQ if there are no actual risks involved.
That is why the taxman collects taxes right when you are paid and not at the end.
They know many of us do not have the financial responsibility to save it until the end. So don’t be afraid to challenge yourself and grow that creative and money making muscle.
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