Are you tired of running the rat race? Waiting for your salary to hit your account every month, only to realise that almost all of it goes into paying your bills? What you seek is financial independence and that’s why you should follow Robert Kiyosaki’s wisdom from Rich Dad, Poor Dad.
When can you consider yourself financially independent?
You attain financial freedom when you no longer have to pay for your expenses, and your passive income pays for them.
How do you generate enough passive income to pay your bills?
By investing in assets that generate positive cash flow.
How do you do that?
Well, here are lessons from Rich Dad, Poor Dad that will help you gain financial freedom.
Assets and Liabilities
Your path to financial freedom starts with an understanding of what assets and liabilities are. Assets put money into your pocket. Liabilities take money out of your pocket. So a house you buy to stay in is a liability – you do not make any money from the house but might have to spend money on its upkeep. A house you buy to rent out is an asset as you get rent from this house every month.
To gain financial freedom, you should have more assets and fewer liabilities.
Make your money work for you
You can only work a set number of hours per day and your hourly income will hit a ceiling at some point. So working harder is not the secret to financial freedom. Creating multiple streams of passive income is. Invest in assets that will generate positive cash flow.
Pay yourself first. Like I mentioned in the post about principles from The Richest Man In Babylon, pay yourself 10% of your income as soon as you get paid. Use this 10% to buy assets. Do the same with the money that you generate from your assets.
Remember, building wealth is a long term game. You might not have enough money to buy a house that you can rent out right at the get-go, but you can accumulate enough money to do so over time. Meanwhile, you can invest in other investment vessels like stocks and mutual funds to build up to the large capital you need to buy real estate.
Never stop learning
Most people think that learning stops after college. That is especially false in the case of money. We are not taught everyday finance in our schools and colleges. Also, the world around us keeps changing so you have to keep learning about accounting, investing, markets, and the law.
Accounting will help you read and understand numbers. Investing will help you use your money to make more money. Understanding markets will help you understand the basic rules of supply and demand. Understanding the law will help you get tax advantages and keep you out of financial trouble. These skills will help you identify good investment opportunities and stay out of bad ones.
The more knowledge you have, the more you can manage risk. Risk is merely a product of a lack of information. So invest in financial education for it will help you choose your assets wisely and therefore, help you escape the rat race faster.