Step 5: Seek Mentors

Posted on by under Bibliophile: Cashflow Quadrant

Before starting the article, let’s know about mentors, who is a mentor in our life, then we try to understand why we require a mentor in our life?

Who is a mentor?

A mentor is a person who can support, advise and guide you. – Guider

Why do we require a mentor in our life?

They typically take the time to get to know you and the challenges you’re facing and then use their understanding and personal experience to help you improve. – Guider

So, from the above definition, we can understand that we need a mentor in each area of our life from starting learning to walk in childhood to the end of life. Our first mentors are our parents then we learn from outside of the world.

Similarly, financial education and growth in it require having a mentor. Mentors tell us what is right and what is wrong for us. They support us to learn about the B and I quadrant which helps us to become wiser and help us to make a rational decisions. He can guide us on building an asset column and generate more passive income in form of a dividend, rent, interest, etc.

As of now, we know that having a mentor in our life is important so that we have to be very careful with the selection of a mentor. The mentor should have already walked on the same path where we want to walk. “Professionals have coaches. Amateurs do not.” When we see a coach in cricket then coaches are those who have played cricket in their life, not those who have didn’t visited cricket ground even.

With having a mentor, we should have a reverse role model. These people teach us what not to do in life. They got broken down, stuck with debt traps, etc. so we should learn from them about what not to do. I have met both kinds of people. I have learned many things in my life from people who got broken in the investment field. I have prepared a checklist of what should avoid while investing.

The people with whom we are spending the majority of our time, are our future. If we want to change our future then we have to change that person with whom we are spending the majority of our time. Our surroundings have an impact on our thoughts processes and our decision-making abilities.

When we come to know about the person category, and we know our goal then we can change the group for our betterment. Also, we can join those who are similar to our goals.

If all person falls under the same quadrant where we want to go then we should be happy that we are surrounded by like-minded people. But if not then should think for change for the betterment of our journey towards financial nirvana.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

FALSE PROPHETS Forecast Illusion

Posted on by under Behavioral Finance

We get many predictions from around the globe daily. Many come true, many fall nearer, and many fail. ‘There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know

If these predictors are proven right then they get publicity but if they fail then there is no penalty to them. So, it’s a win-win approach for them. Thus, they are bombarded with lots of predictions.

Investment – We get many tips on a routine basis from the different analysts/agencies. If there does not have any penalties for failure then people keep on sending as many as possible predictions or tips. Any tips will hit the target and they become famous. As everyone remembers success, not failure. If their increments, incentives are based on how many times they achieve success so that they are remains in control.

But we do not know every time that is their tips providers have something to lose or not? So that we should not trust every coming prediction blindly. We need to study all the predictions with our knowledge and process before accepting them.

This entire series will be reviewed with various examples from books which are “Thinking, Fast and Slow” and “The Art of Thinking Clearly“.

Step 4: Decide What Kind of investor You Want to Be

Posted on by under Bibliophile: Cashflow Quadrant

Few investors require an expert to suggest to them what to do, when what kind of decision requires to make, etc. They entirely rely on the expert. So that if they have made a mistake for choosing their expert then their chance of winning get reduced and sometimes, very less chance or increases in the chance of losing. They are financially uneducated and not interested in investing in learning financial education which makes them helpless to rely on so-called experts.

Few are those who interviewed many stockbrokers, advisors, before making any investment decisions. They are busy with their works and do not find time to gain knowledge. So that they would like to delegate their investment decision to those who are good at it.

And remaining having a good knowledge about investment which help them to make more wise decision with their investment without relying on others.

For gaining a good grip into the B and I quadrant, we learn to solve bigger financial problems. We try to be a good business owner because a good business owner can understand the business part well and also has an excess cash flow to invest. If we do not have a proper financial education then we can do a blunder in the I quadrant. So that financial education is key to making a wiser decision as well as avoiding blunders.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

CONGRATULATIONS! YOU’VE WON RUSSIAN ROULETTE Alternative Paths

Posted on by under Behavioral Finance

Alternative paths are all the outcomes that could have happened but did not. When we reach somewhere with one path but there are different paths or possibilities which is invisible and that can happen. But did not happen. If any alternative paths have happened then it has a possibility that we might not reach a destination or ruin in a way or reach faster or reach slower.

There can be several permutations and combinations for the occurrence of any events. If one event out of those numbers of combinations happens then it does not mean that another event cannot happen.

Let’s try to explain the concept with an example of the “What If…?” series of Marvel Cinematic Universe (MCU). We all know that how Mr. Tony Stark has become the Iron man in an MCU movie after he was kidnapped.

Its “What If” series has shown that, if Tony Stark was not kidnapped then he might not come out as Iron Man. We cannot be denied the occurrence of alternative events.

So does not the occurrence of one event has changed the entire story of Iron Man. Similar way, our life also has many alternatives to happen.

Investment – When we have gained through investment, we need to understand that there can be many alternative ways that have not happened. And that does not mean that we have not taken the risk.

Risk is not directly visible. Therefore, always consider what the alternative paths are. The success that comes about through risky dealings is, to a rational mind, of less worth than success achieved the ‘boring’ way. People only think about success but there can be different possibilities that need to focus on.

I know a few of my friends who bet on the company where the occurrence of some event can help the company to earn revenue (earlier no revenue). But what if the event does not happen? We must have to be ready for the occurrence of an unexpected event. Do we have any substantial margin of safety when the assumed event does not occur? Do we have at least winter soldier (chance to not lose much) if Tony does not come out as Iron Man?

When we make any assumption about investment, we also should prepare alternative events which can happen. There should be a scenario analysis while making any investment decision. (What If Tony Stark do not become Iron Man ?)

This entire series will be reviewed with various examples from books which are “Thinking, Fast and Slow” and “The Art of Thinking Clearly“.