Tale of Two Lifestyles: Which Will You Choose?

20 years ago John and Jane were both in their 30s, working hard at the same office job. John loved to show off his flashy car and designer clothes, always eating out at the fanciest restaurants and hosting lavish parties. Meanwhile, Jane kept to herself, spent on essentials only, saved and invested every penny, dreaming of a future where she could enjoy the fruits of her labor. Fast forward to today both of them are in their 50s and look how the tables have turned. John is now stressed out, constantly worrying about his mounting expenses and lack of financial security. Jane, however, has built a solid foundation of cash-flowing assets, allowing her to live life on her own terms and enjoy the finer things in life. So, ask yourself: which lifestyle will you choose, today for a better future?

In today’s fast-paced world, it’s easy to get caught up in the moment and indulge in the luxuries that life has to offer. After all, who doesn’t want to drive a flashy car, wear designer clothes, dine out at fancy restaurants, and host lavish parties? But have you ever thought about the long-term consequences of these indulgences? Are they worth sacrificing your financial stability and future security? Let’s take a closer look at the concept of assets and liabilities, as we explore these fundamental concepts from the lens of the famous book and its author “Rich Dad Poor Dad by Robert T. Kiyosaki “

“Rich Dad Poor Dad” by Robert Kiyosaki is a best-selling personal finance book that has revolutionized the way people approach money management. With its clear and concise explanations of assets and liabilities, it has helped readers understand the importance of building cash-flowing assets to achieve financial freedom and security. The book’s impact has been far-reaching, inspiring many to change their mindset and take control of their financial future.

Today’s post is about the two critical concepts from the book: Assets and liabilities. Everyone needs to understand these to steer their lives toward financial independence and ultimately abundant wealth. Knowing how to differentiate between the two and making the right choices can help you build a stable financial future. Let’s understand them in a very basic manner as the book describes them:

ASSETS

Assets are items that put money in your pocket. They are things you own that generate income or appreciate in value, such as real estate, stocks, and businesses.

LIABILITIES

Liabilities, on the other hand, are items that take money out of your pocket. They are things you owe money on, such as credit card debt, car loans, and mortgages.

Building Assets to Achieve Financial Freedom

Are you tired of living paycheck to paycheck and want to achieve financial freedom? Building assets is the key to generating passive income and reaching your financial goals.

Now that we have a clear understanding of assets and liabilities, let’s focus on building assets to achieve financial freedom. Since assets are the investments that put money in your pocket, therefore, building assets is crucial for generating passive income, which can help you achieve financial freedom.

However, building assets is not just about investing in financial instruments. It also involves developing skills and knowledge that can increase your earning potential. Acquiring new skills can lead to higher-paying jobs, or even starting your own business. Education, training, and personal development are all essential components of building assets.

Where to Invest?

One of the best ways to build assets is by investing in income-producing assets, such as stocks, real estate, and businesses. Stocks can provide long-term growth and dividends, while real estate can provide rental income and appreciation. Starting a business can also provide a stream of income and potential for growth.

For example (this is not buying advice, you have to do your own due diligence and risk mitigation):

• Johnson & Johnson (JNJ) is a famous company that produces pharmaceuticals, medical devices, and consumer health products. It has a long history of paying and increasing dividends, making it a popular choice for income-seeking investors.
• A residential rental unit is a type of real estate investment that can generate rental income and pay for itself over the time. In such an investment, the rent is utilized to pay for expenses, including repairs, maintenance, bills, taxes and mortgage payment. When you buy, you must ensure that there is positive cash flow after deducting all the expenses and vacancies. Moreover, if the housing prices go up, you can benefit from the price appreciation when you sell, which is called Capital Gains otherwise you can hold and enjoy the rental income.

Where to find money to invest?

Another important aspect of building assets is managing your expenses. It’s crucial to control your spending and focus on saving money to invest in assets. The more you save and invest, the faster your assets will grow and generate passive income. Also, you need to find ways to increase your income, so that you can invest more. Some examples of how you can find money to invest are:

Reduce expenses

One of the easiest ways to find money to invest is by cutting down on unnecessary expenses. Identify areas where you can reduce your spending and redirect the money toward your investment goals.

Increase income

Increasing your income can also help you find more money to invest. Consider taking up a side job or freelancing to earn extra income. You can also negotiate for a raise or promotion at your current job.

Automate savings

Automating your savings is a great way to consistently save money without thinking about it. Set up automatic transfers to your investment accounts or savings account every month.

• Sell unused items

  Sell items that you no longer need or use. You can sell these items online, at garage sales, or at consignment shops. The money earned from selling these items can be invested.

• Use windfalls

  Any unexpected money you receive, such as a tax refund or inheritance, can be used to invest. Instead of spending the money, consider investing it to grow your wealth.

• Avoid Lifestyle Inflation

  As your income increases, do not increase your lifestyle expenses, rather use the increased amount to invest in assets. This will accelerate your wealth-building journey and you will be able to enjoy the bounties of your sacrifice, and consistent and disciplined investing without worries of financial insecurity.

Where not to spend

Here are some examples of things that people may perceive as assets or good buys, but can actually be liabilities that take money out of their pockets, but the key takeaway is that just because something may seem like an asset or a good buy, it’s important to consider the ongoing costs and potential downsides before making a purchase:

• Cars (Brand New or Expensive)

  Car’s main purpose is travel and transport. While owning a brand-new car or a luxury car can be a status symbol and provide a great driving experience, it can also be a liability in terms of its maintenance costs, insurance, down payment and installments, and depreciation. While you are on the road to building wealth you can fulfill the requirement of travel even with a used or second-hand car, and the luxury cars can be pended for later.

• Home

  Unless you are buying a house for renting and earning passively, owning a home can be a liability as Robert Kiyoski has explained in the book. A house takes from your pocket in the form of maintenance costs, property taxes, and mortgage payments. The house price may appreciate over time, but that does not put money in your pocket unless you sell it.

• Designer clothing and accessories

  Wearing expensive designer clothing and accessories can be a way to show off one’s status and style, but the money spent on it is a liability, as the purpose of a comfortable and stylish outlook can be achieved without expensive brands.

• High-end electronics

  Purchasing the latest and greatest electronics, such as a new smartphone or a high-end laptop, can be tempting, but it is a liability as it will become obsolete soon and lose its value quickly. Getting a few years of service out of perfectly functioning electronic gadgets can free up a lot of money that can be used for investing in assets. An interesting approach can be to buy the stocks of the companies whose products you will like to have and buy from earnings from those stocks.

• Time-shares and vacation properties

  Owning a time-share or vacation property can seem like a good investment in terms of future vacations, but it can also be a liability due to the high cost of maintenance fees, property taxes, and potential rental income losses.

What to Do?

Make a plan for your Money

Lastly, it’s essential to have a plan and a strategy for building assets. It’s important to set goals and milestones and to track your progress along the way. By having a plan, you can stay focused on building assets and achieving financial freedom.

Be Disciplined and Consistent

Setbacks and failures are part of life, and it is also true for investment life. Once you have your goals and plan in place, you have to meticulously and continually work on it. However, whenever you make a mistake (which is inevitable), learn from it, correct and adjust your plan for it. One of the biggest safeguards is your knowledge, so build it and do not depend on tips offered by others regarding what to buy and what not to buy. This will help you mitigate the risks that come with investing.

Compounding Over Time

Investments compound over time, this is the actual power of consistent investments in cash-flowing assets. Compounding over time can grow your wealth and make you a millionaire, potentially a Billionaire. Compounding with reinvestment of cash flow in more assets can accelerate your financial growth much more, thus reducing the time to reach your goals.

For all this to happen, you have to become financially literate, wise, and conscious. Start learning about personal finance and remember, consistent and disciplined investments in cash-flowing assets can compound over time and help you achieve your financial goals faster. So start today!

Power of Passive Income

Passive income is a powerful tool for building wealth and achieving financial freedom. By building passive income streams, you can earn money while you sleep, achieve financial freedom, and gain more control over your life. While building passive income streams may require some upfront effort and investment, the long-term benefits make it a worthwhile pursuit.

So start exploring passive benefits, and income opportunities today so that you can enjoy the benefits of financial freedom and flexibility.

The Benefits of Passive Income

Passive income provides several benefits that make it an attractive wealth-building strategy.

• Keep building wealth even in your sleep

  With passive income, you can make money even when you’re not actively working, which means you can earn more without sacrificing your time.

• Achieve financial freedom with Passive Income

  Passive income can provide you with a steady stream of income, allowing you to pay your bills, cover your expenses, and save for the future.

• Greater flexibility and control over your life

  With passive income, you can choose how you want to spend your time, whether that’s traveling, spending time with family, or pursuing your passions.

Passive Income Streams that don’t Require Money

These are just a few examples of passive income ideas that don’t require money to get started. Of course, some of these methods may require time and effort to build up, but they can eventually lead to a stream of passive income.

• Create Digital Assets

  Creating digital assets such as eBooks, courses, YouTube videos, software, podcasts, etc. can be an excellent source of passive income. Once you’ve created these assets (which of course requires your effort up front), they continue paying you as and when people use them.

• Renting

  If you have extra space in your home or apartment, or you can rent a vehicle that you don’t use often, you can rent these out using online platforms like Airbnb, VRBO for space, and Turo or Getaround for your vehicle. This can generate passive income with very little input.

• Referral programs

  Many companies offer referral programs where you can earn a commission for referring new customers. You can share your referral link on social media or with friends and earn passive income from any resulting sales.

• Royalties

  Royalties are payments that you receive for the use of your intellectual property, such as music, art, invention, book, or photography. If you have a talent in any of these areas, you can create original content and license it to companies or individuals for a fee or percentage of sales. This can generate passive income for you without any ongoing effort on your part.

Have some Savings, Build Passive Income Streams by Investing

Building passive income streams requires some upfront effort and investment, but it can pay off in the long run. Here are some strategies for building passive income streams using the money you have arranged using the strategies discussed above:

• Rental Properties

Rental properties can be an excellent source of passive income. By owning and renting out a property, you can earn rental income every month. Of course, you will have to deal with tenants and maintenance, but with the right property and management, rental properties can be a lucrative source of passive income.

• Dividend Stocks

Dividend stocks are stocks that pay out a portion of their earnings to shareholders. By investing in dividend stocks, you can earn a regular stream of income without selling your shares. Dividend stocks can provide you with a steady stream of income and potential capital appreciation.

• Peer-to-Peer Lending

Peer-to-peer lending platforms connect borrowers with investors, allowing investors to earn interest on their investments. By investing in peer-to-peer lending, you can earn steady passive income from the interest earned on your investments.

• Invest in a small business

If you have a talent for identifying good business opportunities, you can invest in a small business and earn a passive income as a shareholder. This can be done with little money upfront, by either investing directly in the business or using a crowdfunding platform.

Rich Dad vs. Poor Dad (Robert Kioysaki’s Story)

Kiyosaki tells the story of his childhood, where he had two “dads.” One was his biological father, who was highly educated and held a stable job, but struggled to make ends meet. The other was his best friend’s father, who didn’t have a college degree but was a successful entrepreneur and investor, with several streams of passive income.

The two dads had vastly different views on money and wealth. The biological father believed in the traditional idea of working hard, saving money, and investing in a 401k for retirement. The “rich dad,” on the other hand, taught Kiyosaki the importance of financial education and creating passive income streams.

The lessons Kiyosaki learned from his “rich dad” changed his life. He became a successful entrepreneur and investor himself, with a portfolio of assets that generate passive income to this day.

Key Takeaways

One of the key takeaways from Kiyosaki’s story is the importance of financial education. You can’t build wealth if you don’t understand how money works and how to make it work for you. That’s why he advocates for learning about personal finance, investing, and entrepreneurship, and building passive income streams that can provide financial security and freedom.

The other takeaway is that you need to invest in assets not in liabilities, as liabilities take money from you and assets put money in your pocket.

Conclusion

Rich Dad Poor Dad teaches us a valuable lesson about leading a wealthy life and have a wealthy lifestyle, that, it’s not just about making money, but about acquiring assets that generate passive income.

By investing your time, energy, and money in acquiring assets, you can achieve financial freedom, have more flexibility and control over your life, and build wealth even when you’re not actively working.

Remember, assets put money in your pocket, while liabilities take money out of your pocket. It’s up to you to focus on acquiring more assets and reducing your liabilities.

Whether you’re starting from scratch or already have some savings, there are plenty of ways to build passive income streams. So start exploring the different strategies we’ve discussed, and take action today to begin acquiring assets and building your own passive income streams. With persistence and dedication, you too can achieve financial freedom and live the life you’ve always dreamed of.

If you haven’t read Rich Dad Poor Dad yet, I highly recommend giving it a read to learn more about the power of assets and liabilities in wealth-building.

So don’t wait, take control of your financial future by acquiring assets not liabilities!