Mind Your Own Business-Lesson 3

Robert T. Kiyosaki gives the third secret for becoming rich: “Mind your own business”

Working for others

Most people work for somebody else. Many of them own houses, vehicles, and loans to be paid back. They work for money and make their employers richer. They work part time for the government which deduct income-tax from the employees’ paychecks. After taxes, the next largest expense is usually their mortgage and loan EMI payments. An increase in their paycheck results in a higher income tax deduction. More pay generally results in more purchases on credit, and larger EMI payments. Thus by working harder, such people make the government, the bankers, and other creditors richer. Financial struggle is often directly the result of people working all their life for someone else. Many people will have nothing at the end of their working days. These people must learn how to have their increased efforts benefit themselves, and not others. This can be achieved by wise investments in money-making assets.

Business & Profession

There is a big difference between one’s profession and his business. Your profession often depends on what you study in schools and colleges. You study medicine, you become a doctor, you study law, and you become a lawyer. The mistake in becoming what you study is that too many people forget to mind their own business. They spend their lives minding others’ businesses and make them rich.

Your business revolves around your assets in your balance sheet, as opposed to your income. The rich focus on their assets, while everyone else focuses on his income statement. In addition to your profession, you must have your ‘business’ to make you rich. Many of the poor and middle class have no financial foundation, and have to cling on to their jobs for survival. They mistake big houses and other personal possessions as assets. In times of economic slow down, as the one we are going through now, they realize that these possessions are actually eating them live. Irrespective of whether they have an income or not, these so-called assets, cost them money every month-mortgage and EMI payments. They realize that what they thought were assets could not help them survive in a time of financial crisis.

Minding your own business

If you want to become rich, start minding your own business. Keep your job. But start buying real assets, not liabilities or personal assets that have no real value once you get them home. Keep your expenses low, reduce liabilities, and diligently build a base of solid assets. It is very important for parents to teach their young ones the difference between an asset and a liability. Get them to start building a solid asset column before they get married, buy a house, have kids, and get stuck in a risky financial position.

What are real assets?

Kiyosaki mentions the following as real assets:

1. Business that does not require your presence. You own them, but it is managed or run by other people. If you work there, it is not your business, but your job.
2. Stocks
3. Bonds
4. Mutual funds
5. Income-generating real estate
6. Notes (IOUs)
7. Royalties from intellectual property such as music, scripts, patents
8. Anything else that has value, provides income, or appreciates, and has a ready market.

Once a rupee goes into your asset column, never let it come out. It becomes your employee, working 24 hours a day for you, and can work for generations. Once your cash flow grows, you can buy some luxuries. Rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. A true luxury is a reward for investing and developing a real asset.