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.
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.