The book "Rich Dad Poor Dad" has been a bestseller for many years. Truly understanding and mastering this book indicates that you are getting closer and closer to wealth...
Try to think about it: What were the major items you purchased in your life in the past or recently?
Houses, cars, luxury goods? Have you ever considered whether these items will bring you wealth or debt?
When a purchased house appreciates in value and is then sold, or when it is rented out to generate rental income, the house becomes an asset.
If it is only for personal residence, there will be many expenses such as house price depreciation, mortgage payments, depreciation of the house, etc. In this case, the house will become a liability.
Similarly, If you buy a car to operate as a taxi, and the income from taxi services exceeds the expenses of using the car, then more money will flow into your pocket, and the car will become an asset.
if you buy a car just for your own use, then the money in your pocket keeps flowing out, and the car becomes a liability.
Moreover, if you bought the house with a loan, before you finish repaying the loan, the house actually doesn't belong to you; it belongs to the bank. The bank has the right to auction your house if you fail to repay the loan.
If we can recognize assets and liabilities early, when we have some savings for consumption, we must clearly distinguish whether what we buy is an asset or a liability.
- If you bought an asset, try to use the income from its appreciation for consumption. Your assets will increase day by day, and the consumption that should be made will also be consumed.
- If the money is spent for consumption purposes only, solely to satisfy the demand for goods and services, then it will be very difficult to accumulate wealth.
You are working for money.
Is it the money that works for you?
"The poor and the middle class work for money.
The rich let money work for them."
The former represents the state of the majority of ordinary people, who work with their own time and exchange it for money.
The latter is good at using money and making money with money.
---Working for money (the poor/middle class): The primary goal is to achieve "security".
Thinking pattern: Their income is entirely dependent on active work (salary). Therefore, their core goal is to seek a stable high-paying job, generous bonuses, reliable social security and pensions. The essence of their working for money is to trade time for space, and to exchange current labor for future life security.
Example: An excellent programmer, working overtime and improving his skills, aims to increase his annual salary from 500,000 to 800,000. His income increase is entirely dependent on him devoting more time and energy to his work. Once unemployed or unable to work due to illness, his income will immediately cease. His wealth ceiling is the upper limit of his personal time and ability.
---Making Money Work (For the Rich): The core objective is to establish "freedom".
Thinking pattern: The primary purpose of their work is not merely to earn a salary, but to acquire capital or build assets. Once the assets are formed, passive income can be generated. Their goal is to have the passive income cover their living expenses, thereby obtaining the freedom to choose not to work (financial freedom).
Example: The same programmer might use part of his salary to invest in learning, develop his own software or app, or invest in a startup company. Even when he is on vacation, these "assets" are still generating income for him. His goal is not to always work for others, but to establish his own "income-generating system" as soon as possible.
Human time and energy are limited. Using this limited resource to earn money, it's obvious that the amount of money you can obtain will be very limited.
The money obtained by exchanging time is called active income.
Those who exchange money for time are actually generating money with money. Therefore, even if they don't work, they still have income.
This kind of income is called passive income.
Passive income is not limited by one's energy and can be accumulated infinitely.
It can be seen that whether one can handle and utilize money well also determines the final outcome of one's wealth.
I finally understand why I haven't achieved financial freedom. It turns out that, like most people, I had already accumulated "debt" before. Had I read "Rich Dad Poor Dad" earlier, would I have taken fewer detours?