Part 2: A Closer Look at Lesson 3, Minding Your Own Business
The book Rich Dad Poor Dad by Robert T. Kiyosaki with Sharon L. Lechter shares six lessons the author learned from his rich dad about money. The third lesson, Minding Your Own Business, was worthy of further examination because of the high importance Kiyosaki places on knowing what a true asset is.
Rule 1: You must know the difference between assets and liability and buy assets. This is really all you need to know to be rich. Most people do not know the difference.
Today I would like to examine Kiyosaki’s thoughts about
- Why a house is not considered a true asset
- Examples of true assets
Most people mistakenly believe their house is an asset
An asset has a cash flow of income. A liability has a cash flow out in expenses: payment, maintenance, taxes. Even if you buy your house with cash, it still has an outward cash flow.
Examples of True Assets:
- Businesses that do not require your presence.
- If you are working in the business, it is a job, not passive income
- This requires hiring highly capable and trustworthy managers
- Buying stock in a company is buying a piece of the company
- Do your homework- learn all you can and seek wise mentors
- Check out this article and video:
- Bonds are loans you make to a company or a government and are considered safer than stocks
- Check out this article: How to buy bonds
- Income generating real estate
- Typically, are rentals whether homes, apartments, commercial properties, storage units, or event venues
- This is the primary income for Kiyosaki. He says he buys properties and trades up, making a profit on each sale.
- Be realistic about the costs of owning rentals: insurance, maintenance, taxes, and tenant quality
- A way to invest in real estate and provide monthly income without the hassles of owning property
- Royalties from intellectual property such as writing, patents, stock photography
- This is where you need to inventory your gifts, talent, creativity!
- Royalties are income earned every time another party uses your assets, such as a song in a commercial, or for each book sold.
- You can also purchase royalties that the owner has decided to let go of through The Royalty Exchange. Check out this article: Make money through royalties
- Anything else that has value and produces income or appreciates
- Collections that increase in value
Other suggestions from Kiyosaki:
- Buy assets you love – he loves buildings and land. He trades up and generally holds them for less than 7 years. If you love it, you will have passion for it.
- Once a dollar goes into an asset, never let it come out– it is now your employee working for you.
- A true luxury is a reward for an investment– he does not buy a luxury item until an asset has provided the income to pay for it. This eliminates buyer’s remorse and/or guilt, and he truly enjoys the item more.
- He says “wealth” is being able to generate enough monthly income to pay for your monthly expenses. If you want to increase your expenses, you then increase your cash flow from your assets.
Hopefully you have seen something in this list of true assets that sparked your interest, and you are inspired to learn more about it. The sooner you start building your assets, the better, my friend!
Here is an interesting video from Warren Buffet: