Step 3: Know the Difference Between risk and risky

Business and investing are not risky, but being under-educated is.

We are always taught in our school, family that business and investments are riskier so that we should stay far from it. But no one taught to build wealth, manage risk, and financial literacy.

Proper cash flow management can help us to go out of the rat race and debt trap. People not going for investment by considering it risky but when we are financially uneducated then that creates more risk to us. We have to understand what actual risk is. After the proper education, we can generate income from our assets as well as build more assets from income also. This will help us to attract fortune and financial freedom in our life.

When we write down our fears and work on overcoming them, then it will help us to grow fearlessly. Knowledge is the only option to grow substantially from any of the situations. We should start with scratch, learn about the various assets class, experiment small portion in all of them to find out which assets class suits our temperaments. After that start learning about mistakes made by others which helps us to stay one step ahead. Be ready to make mistakes and learn further from them.

Kindly check out mistakes and learn from well-known investors.

Bibliophile: Big Mistakes

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

Wish you all a happy and prosperous new year. Have a healthy and wealthy new year.

Take Baby Steps

When we learn to run before it, we have to learn to stand up, to walk, to lift our weight. We cannot be directly born and start running from the very next day. It is like 1st day of the gym and the expectation of lifting 80kg of weight and coming out with 17 inches of biceps. Nature has created such a process of progress. We also have to keep it in mind. We started taking baby steps for shifting towards the B and I quadrant.

We have to remember that those who do something are much better than those who do nothing.

By looking at the financial statements of all three categories, we can understand what we should focus on and where we have to control.

The author has mentioned seven steps that help us to find our financial fast track and achieve our goal of the B and I quadrant. I will continue with those seven steps from my upcoming articles.

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

Be the Bank, not the Banker

When a panic situation is everywhere people got trapped with fear emotion. We cannot see the cheaply available investment avenue if we cannot think with rational thinking. During such a period, a person who has control over emotions has financial intelligence then he can establish a business and expand it with little effort.

If we have read, having financial intelligence, control over emotions then we can say that time will change but history repeats itself.

Every bull phase has many financial heroes and when it burst, the majority of heroes becomes a villain. So, we have to put lots of care before admiring any of the heroes of a particular time.

An employee has to first pay tax from income that is income – tax then remaining for spending. While for businesses income – spending then remaining for tax.

While governments would like to take more money from corporate bodies, they realize that if they pass abusive tax laws, the corporate bodies will take both their money and their jobs to some other country.

We need to focus on increasing an asset on the balance sheet. This we cannot do in one go. We can slowly and steadily acquire assets without getting over-leverage and without taking additional risk.

Start small, and take your time. Experience is more important than money.

We need to transfer our thoughts process from “I can’t” to “how I can do it”. Then we can see that the results get started. But it’s not an easy and short process. It will take time and effort to change the thoughts. Another point is when we are working for being “B” and “I” then we need to focus on understanding laws and take benefits from them.

We should focus on reading history and try to learn from it. So that we can understand the cyclical nature of any market. And we can take benefits of those nature.

We have two choices, either we can choose security or freedom. If we go for security then we have to pay a huge price and taxation. If we go for freedom then we can learn to play this game and can play it wisely.

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

You Cannot See Money with Your eyes

If we see some tempting offer then we must have to be suspicious. There is no free lunch available.

We have to analyze various aspects before making any investment. We may make mistakes and mistakes are essential to learning about and correcting them for better growth.

People make an investment with emotion rather than with mind which led to losing money by a majority of people. At last, they become a dreamer, speculator, or broke down. When someone told us about a good deal and earning good in the future then our emotional bias comes into the picture and become greedy as well. This emotion stops us from making wise decisions.

If we want to be successful in the B and I quadrant then we have to train our mind that we can observe what others used to ignore. We can start by getting more about financial literacy. Our ability to create more money will bring more money for us. This education helps us with taking proper steps and investing becomes less risky for us. Education will help us to differentiate between good and bad advice.

Also, when we know about investing, we or our advisors choose to provide us higher yield with a less risky avenue.

We need to understand that when we buy any property on a mortgage then that’s not our assets rather than its and assets of a bank. It will fall under the liability side of the balance sheet. When we fail to make payment on time, the bank will take over that property from us. Taking debt is not always bad but if we take personal debt then it must be small. And if we go for a huge dent then someone working for paying it. That’s means business debt.

As we have learned in the series of rich dad poor dad that we consider assets to only be those properties that generate a cash inflow to us. All other properties are considered as our liabilities.

Now, comes to savings and deposits then yes those are not taking any cash flow out from us so that is our first level of assets.

Many of us spending our life on the opinion of others rather to focus on the fact. We should only trust facts nothing else.

When it comes to money, most people are either lazy or searching for shortcuts, so they don’t do enough due diligence. And there are still others who are so afraid of making mistakes that all they do is due diligence and then do nothing.  Too much due diligence is also called ‘analysis paralysis.’ The majority cannot become financially free because they live in debt till die. So, this will not bring freedom for them.

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

I am grateful to Mr.Meihol Jhaveri (Founder of Gatisofttech) for the development of the Lucky Idiot website.