Tuesday, August 5, 2008

Rich Dad, Poor Dad

After years of investing, I decided to read "Rich Dad, Poor Dad" once again. It's always interesting reading something again. This time around, a lot of what was said made more sense to me than the first time around. Here are a few things that stuck out:

"The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets."

So, in order to be rich, then all we need to do is buy assets? Wow! It sounds so easy. If it's so easy, why aren't we doing it?

It stems from the fact that people lack financial education. People do not know the difference between an asset and a liability. Most people think assets are "things" that have value. If we learn to see an asset as something that puts $ in our pocket and a liability as something that takes $ out of our pocket (as the book says), it would make things so much easier.

But, it's hard to change people. The most important thing people can do to change their situation is to put time to improve their financial education. Most people do not. Knowledge is power.

That is why I am dedicating my time into my financial education and building up my asset column. Over time, I know it will pay off. Most people my age think that I am working too hard and that I should enjoy my youth. I keep hearing the phrase, "You might die tomorrow!"

Many people do not see the problem we are facing - our financial futures are in danger. Why? We live in a society that expects too much from others and when our expectations are not met, we find someone to blame. So, what happens when someone is laid off from a company after almost 20 years of service? That person gets angry and is left with no income coming in. They either have to find another job or live with what they have saved up in the bank. And most cases, people do not have much saved.

The reality is that we are poorly educated financially because of the archaic school system. The adage of "go to school, get good grades and get a good job with a good pension are long gone". It's not going to happen anymore - people are living longer, costs are rising and companies can no longer afford to pay people who are no longer working for them. The numbers simply do not work.

Most people I talk with will give me every excuse in the book not to invest. Most will say they do not know where to start, they do not have $ to invest, their too young, or they plan to work.

Usually, I tell them the best thing they can do is to start putting in the time into their financial education and start reading books and/or attending seminars. Most times nothing happens. Why? Fear and greed. The problem is everyone wants to make $ and they want to make $ fast but they are afraid to make mistakes. If people cannot make $ fast and not make any mistakes, then they shut themselves off. Honestly, I've never met anyone successful who has never made a mistake. I've made plenty. We all learn from our mistakes.

As it says in the book, this is the problem we have and it plays on the two emotions of fear and greed. People are so fearful of losing $ investing or not having a secure job. So, they end up working and in working the greed sets in. People buy things on credit they cannot afford. In order to pay for these things, they have to work. Thus, the cycle begins.

After reading the book again, it's amazing to see how fear and greed take over people's lives. Sometimes it irks me when people ask me how they can be rich fast. I tell them there is no "get rich quick" way to make $. Everything takes time and work. But, over time the work will pay off. Usually, I get blank stares. And, most people go back to their usual life and end up in the "rat race" for the rest of their lives.

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