Rich Dad's Guide to Investing

I am glad that I've managed to start reading again recently. I walked, unintendedly, into Borders and came back out with more than a hundred dollars worth of books. Of the books I bought, one of them was Rich Dad's Guide to Investing. Having read Robert Kyosaki's Rich Dad, Poor Dad some years ago, I knew that he would do me good and I wasn't disappointed.

To prevent a repeat of his story; forgetting what his lessons were in the first book, I've decided to write down what I gathered from his third book.

The central idea driving his book is the 90/10 Rule; the notion that 10% of the world's population controls 90% of the wealth. The objective of his book is therefore to help the 90% join the 10 and change the balance of wealth in the world.

One of the most important thing is to first want to get rich. It is a problem of mentality. Very often we are unable to get rich because we think like poor people. The rich looks very differently at the world and one must start thinking like the rich in order to get rich.

However, having understood the issue with mentality, it is not necessary to pen it down here. I intend instead to make this post a reminder in the future of what I should do in the future should I forget the more practical steps to get rich.

More practically, here is what I think he taught us to do:

1) Get more financial education. All the riches in the world is useless if one does not know how to harvest it. Financial education allows the person to learn more about the avenues to get rich and the ways to grow wealth. Financial education also equals control. Having more financial knowledge ensures that all endeavours are calculated risks and going blindly into investment makes the so-called investor a gambler and nothing more. Hence, the chance of winning or striking it rich is no higher than buying the lottery every week. Almost zilch.

2) Know the difference between asset and liability. Anything that makes you more money is an asset and anything that makes you lose money is a liability. Before buying anything, make sure that it will make you money. Do not waste money on anything that does not bring in an income, like a yacht, or a car, or a million tons of other luxury items. However, keeping this point in mind, it is entirely possible, I realise, to make a liability into an asset. For example, we often say a car is a liability. However, if that car is a useful tool that allows one to make more business and clinch more deals, then it is not a liability but an asset because one was not able to make those money without a car.

3) Know good expense and good debts from bad expenses and bad debts. Money spent is not a bad thing if it is money well-spent. Do not be unduly attached to money because it is only a tool that should be working for you. Too much importance placed on money makes one a slave to it and lose the bigger picture of being rich. If one earns $1000 and half of it is put in a business and other investments and one is left with barely enough to spend every month, one could still be getting richer. For me, this means that I need to very soon go and start investing my money in stocks and shares and other vehicles even if that would make me seemingly very poor.

4) Prioritise properly. To be rich, one must put in order of importance this way:
a. To be rich
b. To be comfortable
c. To be secure
However, to carry out the plan, first make oneself secure. Buy insurance to cover all areas of need such as accident, hospitalisation, illnesses, disability and death. Insurance is something necessary to have but hopefully never to need. Do not see it as an unnecessary waste of valuable money. After that is covered, make plans to be secure, put money with financial advisors and fund managers to ensure a reasonable return on money put in that could guarantee a comfortable retirement and life in case of inability to work due either to old age or other reasons. Again, these expenses are good expenses.

After these grounds are covered, now make plans to invest. Here it is the best to start a business. One does not have to be able to afford more assets if his business can afford it for him. Start businesses or investments which will yield income and use the money earned to buy more assets and let the money roll itself in.

5)Make plans. Always make plans. Make plans to get rich, make plans for if those plans fail, make plans for if those plans succeed, make plans for when you suddenly become poor and make plans for when one suddenly becomes rich and think of how to re-channel those money into making more. When there is a plan, one will also be able to become richer and richer.

6)Money is not needed to start rolling in money. Ideas, rather than money, are what earns money, and ideas are free. With the advent of the Internet, it has become ever so easy to start a business.

After writing so much, I still think the points are not empirical enough. Even more concretely, this is what I am going to do.

1) Watch out for any financial classes I can join and attend them. Learn more, the more I learn, the more I know, the less risk I have, the more I can adapt to ever-changing ideas and economics.

2) Call my financial advisers and insurance agents and make sure I have all my bases covered in terms of insurance and security coverage.

3) Ask those same people to suggest financial and investment plans. Look at all of them, listen to what each has to say, and start buying. And when the next income tax comes, make sure I know which ones can be used for tax deductions. The rich use their money to buy investments and then get taxed on the remaining income which usually is not much. That's why they get richer. The poor gets taxed and is left with little before they can even think of buying anything, that's why they remain poor.

4) Work full-time but start a business part-time. Think of an idea or improve something that someone else is already doing. Ideas don't make to be new, they just have to be better. Save on start-up cost by thinking of something that can be done using the Internet. Find my friends and join forces.

Consumption

For the past year and more, I have been consumed by one thing, and one thing only.

I no longer write about other areas of my life; that, is not right. We must never be consumed only by one thing.

I must pick up my pen again.

The pen writes words.
Words express ideas.
Ideas come from thought.
And what is a man, if not his thoughts?
For Descartes has put it succintly: Je pense, donc je suis.
And from those thoughts, will arise actions.
From actions, we have the future.