Do you have a goal to increase your income and move towards financial freedom this year?
If your answer is yes, let me share an insightful advice that I got from Robert Kiyosaki’s bestselling book with you.
The book is Rich Dad, Poor Dad and even though I have read it more than 20 times, it was while I was reading it again in the last week of December 2014 that I suddenly got an insight that can really have a huge impact on your income.
That is if you apply it to your life.
Before I share this insightful advice with you, here is something you should know.
Most people never get out of their financial struggles
because they have have no organized plan of action
to improve their income.
And for you to be able to put together an action plan, you must have a specific measurable target that you are aiming for.
For instance, people have different targets for their financial income.
Some people are okay if they can earn an extra N50k per month.
Some are okay with an extra N200k per month.
Some want an extra N1m per month.
But what exactly do you want?
Don’t just have it in your head.
Get a pen and a sheet of paper and write it down.
So once you have written down what your new income goal, the next thing is to create a plan for it.
This is usually the hard part.
And this is where the advice from Rich Dad comes in.
In Chapter three of Rich Dad, Poor Dad, You will find this SOLID advice:
Rule One: You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule.
Most people struggle financially because they do not know the difference between an asset and a liability.
So, what is an asset and what is a liability?
DEFINITION – An asset is what puts money in your pocket and a liability is what takes money out of your pocket.
E.g – If you found yourself in possession of N5 million for instance, what will you do with it?
Most people will spend the money to buy a car, build a house or just save it in the bank.
Let’s look at those 3 options:
1. Buy a car: Buying a car is a liability because cars take money out of our pockets in form of fuel, repairs etc. As a matter of fact, a car that you bought for N5m today will be sold for less value if you were to sell it 2 months after.
2. Build a House: If you build a house with the N5m, that can be an asset either you decide to live in it or rent it out. If you live in it, you will save rent money and if you rent it out, you will be collecting rent from the tenants. It takes quite some time for you to make back the amount you spent to build a house.
3. Save it in the bank: Putting your money in the bank for savings purposes should be just that. SAVINGS. Not to get it to work for you because it won’t. The interest rates bank pay you is just so small.
If you have N50,000 for instance and you put it in a savings account, you may think your money is safe and getting interest but the raw truth is that your money is actually losing value due to the rate of inflation these days that is higher than the interest your bank is giving.
If you put that N50,000 instead into a small business that generates a profit of N30,000 over 30 days, that will be FAR more profitable.
But if you can’t do business because of time or lack of skills, another way to make your money work for you is by putting it into investments with better interest that do NOT need your presence or efforts.
Banks provide this type of investment which they call fixed deposit but I still think their interest is too small.
N50,000 put into a fixed deposit account with any Nigerian bank will only give you about N5000 interest for a whole year.
That is a measly N415 per month.
If you put the N50,000 instead into other better investments that pay you a monthly interest of N2,500 per month, that will be N30,000 interest in a year.
However, the main problems people have is:
1. They do not have the time and skill to run a business or
2. They do not know about proper investments that can yield them better interest rates especially on a monthly basis.
When creating your plan to increase your income this year, you should be sure to involve at least one of the two.
And you don’t have to be in possession of N5m or even N50,000 before you start to do something about your finance.
You can start by saving N5,000 or N10,000 from your monthly salary and begin to put that money into something that makes money. That is how to move up. That is how to grow.
If you are yet to read Rich Dad, Poor Dad, you should get a copy of the book from a nearby business. If you have read it before, you need to read it again.
I hope this short article has given you one or two helpful pointers. Thanks for reading.
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