Don’t work for money - make money work for you

Today's topics include:

1. Don’t work for money - make money work for you

   • Mindset and Education

   • Assets vs. Liabilities difference and

   • The Importance of Financial Independence

2. Meme of the week

3. Quote of the week

The key aspect of my newsletter is that I am ONLY interested in actions that are effective, produce results, and get me where I want to be.

Change the way how you think about money:

• Don’t work for money; make money work for you

• Don’t exchange your time for money and free up your time with money

• Conventional thinking: follow the rules within the organization; creative thinking: create your own rules and organization or create your own life

One of the most influential sources for shaping my approach to money was Robert Kiyosaki's "Rich Dad Poor Dad" book. The book introduces a dozen crucial concepts, and I want to emphasize three concepts as the most fundamental.

1. Mindset and Education

2. Assets vs. Liabilities difference and

3. The Importance of Financial Independence

1 Mindset and Education. 

Most educational institutions are designed to instill a mindset of following rules, obeying authority figures, and operating within established organizations. The traditional path of going to school, getting a degree, and finding a secure job may not always lead to success. In reality, a corporate "secure career" can be riskier, resulting in low income, killing your creativity, killing your ambition, kill your innovative ideas, and your ability to create something you might be highly capable of.

It is critical to recognize the distinction between traditional academic and financial education. While academic education focuses on following orders and fitting into a structure, financial education teaches about money and investing, empowering individuals to make informed financial decisions, be proactive about their money management, and strive for financial freedom.

" Get a job that is a secure job". This way of thinking can be highly detrimental to your life, success, potential, and future and will affect your career and business decisions. In reality, a corporate "secure career" can be more risky and kill your creativity and ability to create something you might be highly capable of.

What does that mean? The following explanation will showcase how to look at assets and liabilities is the best and first step to reframing it.

2 Assets vs. Liabilities

One of the core teachings is distinguishing between assets or things that put money in your pocket and liabilities, things that take money out. The rich focus on acquiring assets, while the poor and middle class often accumulate liabilities disguised as assets. The concepts below will require a basic understanding of income statements and balance sheets, which I won't cover here, but you can search and learn about them online. The main focus is understanding assets and liabilities, their difference, and what you should do.

You want to own assets. An asset's cash flow pattern is to provide income, such as real estate as a rental property, investments in stocks, bonds, notes, intellectual property, and alternative investments. Assets generate cash flow and financial gains.

You don’t want to own liabilities that don’t pay for themselves—the cash flow pattern of the liability. Liability is the opposite of the asset and generates expenses, such as a mortgage, car loans, debts, credit card debt, and school loans. A mortgage that is used for primary residence is a liability and not an asset as most people used to think.

The difference between the Cash flow patterns of poor, middle-class, and rich people.

The cash flow pattern of a poor person is represented by income primarily derived from employment or labor, which is immediately used to cover expenses. This creates a cycle where all the money earned goes towards living costs such as rent, food, utilities, and other essentials, leaving little to no room for savings or investments. This pattern traps individuals in a paycheck-to-paycheck lifestyle, making it difficult to accumulate wealth over time. See below.

The cash flow pattern of a person in the middle class.

It involves spending most of their income on liabilities, often mistaken for assets. These include mortgage payments, car loans, credit card debt, and other financial commitments. Despite earning more than poor people, middle-class individuals often find their income tied up in paying off debts rather than acquiring income-generating assets.

This results in a cycle where middle-class folks are burdened by debt and expenses, hindering their ability to accumulate true wealth. Their income is primarily used to service debts, leaving limited resources for investing in income-generating assets. See below.

The cash flow pattern of a rich person

It is centered around acquiring income-generating assets. Unlike the less affluent, who typically spend their income on expenses and liabilities, wealthy individuals use their income to purchase assets such as real estate, stocks, bonds, or businesses that generate passive income.

The main distinction is that the income generated by these assets covers their expenses and allows them to reinvest in more assets. This creates a self-sustaining cycle where wealth grows over time without relying solely on earned income from a job or salary. Wealthy individuals concentrate on building portfolios of assets, which ultimately provide financial freedom. See below.

3 The Importance of Financial Independence.

Kiyosaki promotes financial independence through investing in businesses, real estate, and other income-generating assets rather than relying solely on a job.

Financial independence is essential for personal freedom and long-term wealth. This implies having enough passive income from assets, such as real estate, stocks, and businesses, to cover living expenses without relying on a traditional paycheck. Many people are stuck in the "rat race," working for money without attaining financial freedom because they are tied to their jobs to cover expenses. Acquiring financial education, investing in assets, and understanding money will help to break free from this cycle. Attaining financial independence allows people to take control of their time, make better life choices, and not depend on an employer for their livelihood.

Essentially, financial independence enables people to lead a life on their terms without the stress of constantly working for money, which is the ultimate goal in Kiyosaki’s teachings on wealth-building and financial literacy.

Meme of the week

Quote of the week

“Earn with your mind, not your time.” - Naval Ravikant

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