We focus on earning more money with the belief that more money aids to knock out our problems. But if we do not have the skill to manage cash flow then higher-earning also will not be able to help us, even it can work as a curse for us. Many a time, with more money, people will increase their spending and take higher debt. This will create a problem bigger compared to what it was earlier. We are the CEO of our life so that we have to think in a way to improve our position.
Our liability is an asset for someone and we are working to make them rich rather than to make ourselves. We need to remember that good debt is debt someone else paid for us. Bad debt is a debt that we paid with our sweat and blood.
We need to learn to spend within our means rather than spending more on liabilities, we should work on increasing our means (assets).
We can reduce personal debt by not using multiple credit cards, focusing on earning a few amounts extra every month, try to repay slowly one by one debt. As we get debt-free then we should start investing the same amount which we paid every month on debt. This process will help us to grow steadily.
Investment always helps us to become financially free while debt drag down our dream.
Money is like a drug. When we become addicted to work for money then it will be very difficult to change that habit (rather than an addiction). We get happy when we have money and upset when do not have it. And it is a reason why we cannot shift to the B and I quadrant easily.
An “E” works for the system.
An “S” is a system.
A “B” creates, owns, and controls the system.
An “I” invest money into the system.
Money addiction creates a fear within us. whereas our passion helps us to build a business, not our fear.
Many times, during a recession, hits the economy, few of the companies decide to cut employees’ strength and due to this decision, lower-level employees have to face major prices. So, seeking security becomes riskier. While this kind of fear does not chase B and I quadrant people. They work on improving the system, enhancing the system, and improving their financial knowledge.
Many of us trained with fears since our childhood which has created difficulties with change quadrant. When we want to achieve a bigger success then we need to have a faster processing time with higher accuracy. We can go how much fast, we want. But need to remember one thing is never taking a shortcut. Shortcuts will not lead us towards results but it will trap us in midways. Financial intelligence, not an emotional decision, and focus on numbers always help to achieve our financial goals.
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.
Being Financially uneducated is riskier rather invest.
Learning investment is more essential than any other profession. Because other professions teach us to work for money and investment teaches us how money works for us.
We have to learn financial knowledge by ourselves because if you go for the insurance salesman and ask that insurance is essential or not then he sells you his product. If we want to learn about investment then go with the advisor who is investing their fund, not to them who just sell advice. Also, we need to keep in mind that there is not a single assets class that is responsible to create wealth.
Success or failure, wealth or poverty, depends solely on how smart the investor is. A smart investor will make millions in the stock market. An amateur will lose millions.
Different levels of investors
The Zero-Financial-Intelligence Level
These are people who do not have any financial intelligence, they spend more than they earn. They believe in looks like rich rather be rich. Though they are earning well, they will reach zero due to their zero financial intelligence. If we do not have any savings, have liabilities, no income generation from the assets column then we need to first focus on repayment of liabilities. These will help us to come out from these levels.
The Savers-Are-Losers Level
These people know that savings are essential for future unforeseen events. But they keep saving money either into a saving account or into the government bond / FD. These all instruments are considered safer but when we compared them with inflation, these instruments do not provide us with protection against inflation. Due to its nature of not protecting against inflation, it even becomes riskier. In general, savers are losers.
The I’m-Too-Busy Level
These people are busy with their careers, family, other interests, and vacation. And due to such a busy schedule, they do not have time to become financially intelligent. So that they deliver their money to the expert to manage on behalf of them. They consider experts have expertise. When the market is into the bull phase, everyone is an expert but we can come to know about the real expert during the bear phase of the market. They invest in many of the avenues but if the market phase changes to the bear then they will also lose everything.
The I’m-a-Professional Level
This is the do-it-yourself investor. This investor may buy and sell a few stocks, often from a discount broker. They think that why should pay a broker when they can do investment by themselves. These people spend their lives in a small area of assets class but we have to understand that investment is a huge subject and we should keep learning about the wider area of it. Those who understand this concept and invest time in learning about investment can able to move to level five. Level-4 investors take control of their lives, knowing that their mistakes are their opportunities to learn and to grow. The fear of investing does not frighten them. It challenges them.
The Capitalist Level
These can be rich people, businessmen, or moves from level 4 to level 5.
These people know that they have to give more to receive more. They focus on raising more money which requires them to focus on their skills, business systems, and people.
We have seen in the first article of the series that the author did not have money and from zero, he has created wealth. So we also can create wealth from zero. Thus, we stop giving the excuse of not having money.
We have to perform a self-analysis about where we stand today? What is our level?
The “I” quadrant is the most important quadrant for our future. If we do not focus on it then we cannot have a good financial future.
