15 years ago, I read an influential book by a renowned author and a billionaire, Robert Kiyosaki, “Rich Dad Poor Dad,” was the book’s title.
Chances are you read it.
Today, the book is ranked high on the Amazon website. It’s ranked in position 20 on amazon’s top 100 books, globally.
Once again, I reflected on Kiyosaki’s Rich Dad Poor Dad teaching and lessons learned. I tried to recall some of the concepts in the book – especially the cash flow quadrants- upon which the book was conceptualized. The cash flow quadrants are labeled as E– employee, S– self-employed, B– big businesses, and I– Insider investor.
The left quadrant represents the poor dad’s worldview while the right quadrant represents the rich dad’s worldview. If you dissect the quadrant right at the center.
Kiyosaki’s book, Rich Dad Poor Dad, in my opinion, is a book I can strongly recommend to a friend, especially, a South Sudanese friend for an obvious reason, it contains lifetime lessons on financial literacy which you can’t find in a conventional learning institution.
Kiyosaki’s book is a contrasting view of his two fathers who were highly educated but see life and money from different standpoints. His poor dad thinks the love of money is the root of all evils while the other thinks lack of it is the root of all evils.
So, he decided to name one rich dad, and the other poor dad based on their worldview.
His Ph.D. father or poor dad advised him to go to school, get a job, work hard, save money and invest in long-term businesses specifically in stock. On the other hand, his rich dad prepared him to be financially literate and a savvy entrepreneur.
He advised him to arm himself with mindset and skillsets. The knowledge he cannot find in school is financial literacy skills.
He then anchored it on the knowledge of six important words of financial education, and these are income, expense, assets, and liabilities.
The last two are CASH FLOW. Robert framed them – the six-important words that every financially intelligent person MUST know and apply.
Perhaps you’re familiar with the six words and you’re applying them in your life. If so, congratulations, and if not, don’t worry they’re the core of this article.
Allow me to ask you, what rings in your mind when you hear the word “ASSET” and “LIABILITY”?
Chances are you associate assets with physical possession. Perfect, anything with value, and the value here is money. For example, is the phone in your hands an asset or a liability? Did I hear you saying it depends, right? If so, what about the laptop from which you’re reading this article, do you think your laptop is an asset or a liability?
Anyway, if it’s putting money in your pocket called it an asset, and if it is taking money out of your pocket called it a liability. An asset puts MONEY in your pockets, and a liability takes MONEY out of your pockets
Take, for example, a car can be both an asset or a liability. Let me explain, a personal vehicle takes money out of your pocket, you need to fuel it, service it and repair it.
In that respect, your car is a liability.
However, a rental vehicle or a car for hire puts money in your pockets, right? That’s why it is an asset
Likewise, a rental property puts money in your pocket. Your money working for you, whether you are working or not working, whether you’re sleeping or traveling money flows into your pocket or bank account. That’s an asset. You’ve put in place an income-generating activity or a venture.
The secret is to focus on keeping your expenses low while working to grow your income. As a savvy entrepreneur, your goal should be growing your net operating income or NOI, which is simply income after expenses. That’s why the last two words are key, cash flow. Cash flow helps you to know the direction of your money, where is your money flowing? Is money flowing out of pocket or flowing into your pockets?
That’s why the financial record is key to your financial discipline. A financial record is a tracking tool a source document for your reference, and accountability.
That’s what rich people do and what poor people do not. That is this week, lesson. The six important words of financial literacy.
And, by the way, are you aware of the three words that the trailblazers lived by? Please join me in my next piece as I walk you through the three words revered by the trailblazers, the financially free fellas, and be the judge.
As much as they are revered by the trailblazers they are alien to the poor, and the masses that fall for short-term gratification and live a miserable life.
© Stephen, 2022
