How Long Can You Survive On Your Remaining Savings?

The rich are getting richer, and the poor are getting poorer. Ever wondered why?

Rich are getting richer, and the poor are getting poorer. Ever wondered why?

In this summary, we are going to understand exactly, the meaning of this statement and why it is happening ever since the economic world has taken place.

Imagine this to yourself, how long can you survive on your remaining savings, if you were to stop working? What I just asked you was a definition of wealth.

There is a man named Robert Kiyosaki, an American investor, businessman, author, motivational speaker, and financial commentator who became well-known in recent years who has an estimated net worth of 100million dollars!

Here’s something interesting, he wasn’t raised in a wealthy background. In fact, his family was like most people who work but didn’t have the best financial education and often times struggled with money. So, then how did Robert become so wealthy today?

Robert Kiyosaki was born in Hilo Hawaii in April 1947. At the age of nine years old, he was attending the same public school where the rich people used to send their children. His town had a lot of doctors, business owners, and bankers. Robert saw that the rich kids would separate themselves from him as his family wasn’t able to afford the newest collections of toys and bikes like them.

So, one day Robert asked his father who had a Ph.D., and completed multiple universities with excellent degrees, “Dad, can you tell me how to get rich?” Unfortunately, his dad didn’t know the right answer because he wasn’t rich himself, so he responded with, “Well, use your head, son.” “Stay in school, get good grades so you could find a safe and secure job.

His real dad is what we’ll be referring to as the poor dad. He wasn’t poor at this time, in fact, he was making lots of money, but in the end, this man’s financial life takes a turn for the worse and he could never recover from it.

Now, little Robert has a friend named Mike whose father would be referred to as a rich dad, who started mentoring Robert and his son Mike about how the money really works. So then, what did rich dad teach Robert? He just poured a strong financial foundation of many important principles into these kids’ minds.

Difference between an asset and a liability

The first lesson you need to know is the difference between an asset and a liability and that you need to buy assets. If you want to be rich this is all you really need to know and understand the most! You see, the rich acquire assets, and the poor and middle class acquire liabilities but sometimes they end up thinking they are assets.

The primary cause of financial struggle is simply not knowing the difference between an asset and a liability.

An asset is something that puts money in my pocket and a liability is something that takes money out of my pocket.

For instance, let’s try the cash flow pattern of a normal individual. Let’s take an example of a person who earns his income from a job and his expenses are things like food, clothes, entertainment, and transportation. Unfortunately, he doesn’t have assets but sure does have liabilities that constantly take money out of his pocket because things like mortgages, taxes credit cards, loans and believe it or not, the house.

Now let’s take a look at how do cash flow pattern really works for the rich. Instead of looking to earn more money from their normal job as the only source of income, they buy and own assets that bring money into their pockets as a form of passive income. Passive income is something that earns money that doesn’t require you to trade your time for it, so in other words, you would be earning money even as you’re sleeping.

Examples of assets are businesses that don’t require your presence such as stocks, bonds, mutual funds, income-generating real estate, royalties, and anything else that has a value, that produces income.

Assets generate passive income

As mentioned before, poor dad was making quite a lot of money from his job but his expenses seemed to always keep up with his income and never allowing him to invest in assets. As a result, his liabilities such as his mortgages and credit card debts grew greater over time and this is the fault of having income equals expense and assets being less than liabilities, and sadly this is what drove poor dad into debt even after he passed away.

On the other hand, rich dad’s personal financial statement reflects the result of a life dedicated to investing and minimizing liabilities so he has income that is greater than the expense and the reason being, assets greater than liabilities.

This is practically why the rich are getting richer! Their assets generate more than enough income to cover expenses with the balance reinvested into the asset column. The asset column continues to grow and hence the income grows with it.

The difference in thought between the rich and poor

You see, both dads worked hard, but they have opposing attitudes and thoughts.

One dad recommended study hard so you can work for a good company. The other recommended study hard so you can find a good company to invest in.

One dad said the reason I’m not rich is that I have kids. The other said the reason I must be rich is that I have kids.

One said when it comes to money play it safe and don’t take risks. The other said learn to manage your risk.

One said I can’t afford that. The other said how can I afford that?

Although both men had tremendous respect for education and learning, they disagreed on what they thought was important to learn.

Fear and Greed

Robert learned from rich dad the truth about the general population, their lives are run forever by two emotions, fear and greed, that keeps you stuck in a pattern of getting up, go to work, pay the bill. Get up, go to work, and pay bills. Fear has kept them in this trap of working, earning money, and hoping fear will go away. They react emotionally instead of using their heads.

The other emotion which is desire, sometimes even called greed, is also a reason why people work for money. They desire money for the joy that they think it could buy. But the joy that the money brings is often short-lived and soon needs more money for more joy, more pleasure, more comfort, and more security.

You see, that same fear and desire are what makes a lot of people be so fanatical about going to school for a better chance of a high paying job, but don’t be discouraged, education and a job are important, but they won’t exactly handle that fear. To handle that fear, one needs to learn the power of money, not be afraid of it.

Emotions can make or break your income generation

Unfortunately, most schools don’t teach about how money works and if you don’t learn it, you’ll become a slave to the money. Ignorance of money can cause so much greed and so much fear that can lead you into your life’s biggest trap of constantly working.

The rich dad said,

Learn to use your emotions to think not to think with your emotions.

Instead of thinking like is there something I’m missing here? This is our reality for most people, their profession is their source of income. For the rich, their assets are their major source of income.

Apply these lessons in your life so that if someone asks you that if you would stop working today, how long can you survive? You might laugh at that person and say,

I no longer work for money, money works for me

Special thanks to Tree Langdon, CPA, CGA

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