Something a lot of us have heard in our upbringing is that a house is a good investment for the future. It is something that has become common knowledge. Let us examine a story about an alternate view on investments and assets coming from someone who today is a rich entrepreneur and investor.
It begins when little Robert and his friend started in a school for wealthy kids, coincidences in school borders made it so that he went to this school instead of an average school. Both he and his friend Mike came from families with regular income, his father was well a paid teacher and they lived in a nice house having everything a normal family would have. But no matter how much his father worked they did not have any money after all the bills, the mortgage, car loans and daily expenses were paid. Robert was made fun of in the school by the other kids with wealthy parents, he and his friend was annoyed by the fact that their family in their eyes were poor and they often spoke about how they would go about becoming rich.
After their big project in the backyard which involved aluminum from toothpaste tubes, a barbecue, some cheaply made molds which proved to be a bad try at coin counterfeit which Roberts father told them was illegal, they gave up. Tired and about to give up they asked the father how people manage to become so rich. After looking at the small hopeful children the father could only answer that he did not know how people became wealthy and rich, but he had heard a lot about the father of Mike. At the bank, he had overheard how they had praised his skills as a businessman, so he told them to ask Mikes father about how to go about becoming rich.
Mike’s father was an entrepreneur who at that time was in his starting phase, in later years he would become the richest man in Hawaii. The boys looked at each other dumbfoundedly and could not imagine that the father of Mike would know these secrets. This was the start of the success for Robert Kiyosaki, through learning from what he called his second father, his rich dad. He learned a new mindset about economy and how to get money to work for you, the boys learned a simple principle.
Assets are objects that earn you money, liabilities are objects that take money from you. The mistake people do is treating their house, car, boat, hobby equipment as an asset they will earn money on. What Robert and Mike was told was that it is the opposite, all of this are a liability. A house you must take up mortgage on, pay interest rates on, maintenance, utility bills, refurbishment is not an asset. Unless it is rented out to others and gives you money in the pocket it is just a liability. The same goes for everything else you own that does not earn you money. People gladly buy themselves more liabilities and shy away from the real assets that give them money in their pockets.
According to Mike’s father there where three things they need to concentrate on acquiring which would generate cashflow:
- Companies you own as an entrepreneur
- Property that could be rented out
- Securities as stocks, bonds, obligations, funds
Robert Kiyosaki wrote a book about this called «Rich Dad, Poor Dad» where you can read the whole story about how he started and eventually became a successful entrepreneur, property investor and bestselling author. A very important topic to teach yourself, if you do like most people and buy yourself liabilities you will be trapped in the rat race living from payment roll to payment roll.
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Blog: Above average - Millionaire Shortcuts