Why does financial literacy differentiate you from being rich or poor? | By Marcus Tan | Jul 2022

When knowing is half the battle

Rich Dad Poor Dad Robert Kiyosaki Photo

If you’re familiar with Robert Kiyosaki (author of “Rich Dad, Poor Dad”), you probably know that he retired at 47. Retirement doesn’t mean not working. Instead, for him, unless there are extenuating circumstances, he can choose to work or not, and his wealth will automatically grow, staying ahead of inflation.

When your asset becomes large enough to grow on its own, it supports your livelihood and you no longer need to invest capital to develop and build the asset.

Think of it as planting a tree. You water it for many years, and one day it grows into a big tree with deep roots. You no longer have to take care of it, but the tree provides shade and fruit.

Photo by Natasha Chebanoo from Pexels

Many people think that only money can solve their problems, but when they are not financially literate, they realize that they are going through a difficult journey.

Real life example:

  • Charles M.Schwab: The head of Bethlehem Steel, the largest steel company, is penniless after 5 years of borrowing money to live.
  • Samuel Insour: The president of the largest utility company also died in a foreign country.
  • Howard Hopson: The head of the largest natural gas company went crazy in his final days.

Most people don’t realize it’s not how much money you make, it’s how much money you keep. You’ve seen lottery winners go bankrupt later and even celebrities with huge millionaire status (like Mike Tyson) go bankrupt, what’s wrong with it all?

Here’s what I learned from Robert Kiyosaki, Steven Siebold, and Napoleon Hil, it’s not how much money you make, it’s how much money you keep.

If you want to be rich, you need to be financially literate.

Photo on Pixabay from Pexels
  • The rich get assets.
  • The poor/middle class acquire liabilities that they consider to be assets.
  • Assets put money in our pockets.
  • Liabilities take money out of our pockets.

Buying things that generate income and avoiding things that make you pay is the goal. Honestly, that’s easier said than done.

Rich Dad Poor Dad Robert Kiyosaki Photo

This kind of cash flow looks all too familiar, and I’m sure, like me, you’ve probably had one in your life.

Think about it, if you’re poor and can’t save, where does your money go?

I’ve spent so much money on stupid stuff in the past that I’ve wondered why I’ll never be able to get ahead financially, with rent, student loans, bills, etc. piling up without any growth in my assets. This is not the way you want to live.

Rich Dad Poor Dad Robert Kiyosaki Photo

This is the cash flow of the rich. Yes, they may have expenses and liabilities like you and I, but they have income generating assets. Their income-generating assets often grow and are able to cover these costs.

Do I still have some debt? Yes, exactly. I have rent, loans and student loans…but I know what those are.

The rich focus on buying and building assets.

  • Assets may include building your business, podcasting, e-commerce, buying dividend stocks, bonds, investing in startups, rental income, and more. The list is endless.
  • Debt drains your cash, such as paying off vacation loans, credit card loans, new car loans. These take money away from you and not bring you income.

Many educated people successfully pursue their careers but find themselves struggling financially. They work harder, but they never seem to succeed.

The truth is, what was missing from their education was the financial knowledge of how to manage money, not how to make it. It’s about knowing what to do with your money, once you’ve made it, knowing how to keep it going longer, and knowing how to make it work harder for you.

“If you can’t find a way to make money while you sleep, you’re going to work until you die.” – Warren Buffett

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