“Why rich people are rich?” , This question haunted me for years now.Without knowing the actual answers I usually assumed that they were born rich and inherited the wealth from their parents or some people got really fortunate in their business or whatsoever. These may be true for some cases, but what about those who don’t have inherited wealth or a very big business.
If your parents are not in the top 1% rich people in the world, then subconsciously they are not teaching you how to be rich.It’s not like they don’t love you or anything, its just they even don’t know it themselves and their parents didn’t taught them too.In the book of Robert Kiyosaki named”RICH DAD POOR DAD”, he vividly explains how his real father(poor dad) who always asked him to study hard so he can land a good job and start earning good, but still struggled with financial matters, himself did a Ph.D.And, on the other hand, his friend’s father(rich dad), didn’t even passed 8th grade but was one of the richest men in Hawaii.His poor dad used to tell him that you should work for money whereas his rich dad used to tell him to find a way so that money works for you.Well, how can money work for you?
To understand this concept, let me introduce you to two terms
1: ASSETS and 2: LIABILITY.
By definition, assets are those which can or have the potential to bring you money, like giving your extra room of your house for rent.It can be a source of money, so your house can be called your asset and liabilities are those which do not have the potential to bring you any money in any form rather liabilities may take money from your pocket
.For example, your phone, it takes a lot of money to buy a decent phone with features, it is not a source of your income rather you pay your phone bills,cost of maintenance, cost of broken screen(UGH! that NASTY broken screen glass) and also it takes our precious time every day.Not that it’s a bad thing( it is), but it is not to be counted as your asset.similarly, your TV, you pay for the subscription cost of channels you watch, but it does not put some extra income in your pocket.
What normal people do is whenever their pockets are loaded in cash they tend to spend it on the liabilities and luxuries.They buy a new phone, a new gaming console or in some cases, a car.
whereas that rich people do is the invest some of this money in stocks, share markets or in buying is assets that will eventually bring them money.
AGAIN assets are those which bring you money eventually and it consumes no or less of your time.If it consumes more of your time it’s a business, not an asset.JUST REMEMBER, rich buys assets, poor pays for expenses and middle classes buys liabilities which they think are assets but are not.
There is usually two types of income:
1: ACTIVE INCOME
2: PASSIVE INCOME
Active income means as long as you keep working, you get paid.ad if you stop working for some reason, you don’t get paid.For example, A company job, till you work, you get paid and if you stop working then voila! YOU WON’T GET PAID.And passive income is when you get paid even when you aren’t working.how does that happen?For example, you started a youtube channel and posted videos, monetized it etc.Even when you are not working or in a vacation, people still watch your videos and money gets rolling down to your account.AS SIMPLE AS THAT.So, having a decent amount of assets will generate you a decent amount of passive income.
TIPS TO HAVE MORE ASSETS THAN LIABILITIES:
1: Don’t invest in luxurious items unless really necessary.
2: Stop buying expensive good for the sake of it being “trendy”.
3: Invest in buying assets like share markets, real estates etc.
4: Giving the extra room of your house for rent to someone can bring you cash.
5: Save the extra bucks to invest it in future assets.
6: Buy a blogging website and get it started, it can bring you money later. 7: Invest in a business of your own.
Buying expensive TVs, phones, cars do help you look rich but in reality, you’re not getting rich.No matter how much you earn, it’s going to be eaten out by those liabilities.The rich spend money on which could make him more money but not so rich spend on commodities for luxury and liability, buying a 60-inch plasma tv doesn’t make you money, it is just a sink for your hard-earned money.
don’t worry if it seems spending in assets too much risky investment for you, spending in liabilities is just like throwing your money in water, yes it seems to give you immense pleasure at the beginning but eventually, you’ll go for wanting more. Having good assets may one day pay all your bills and maybe you’ll be rich, just as you dreamt.