A lot of people believe that money will make them rich. This is why they leave school and go to university to become doctors, lawyers and other professionals that earn a lot of money. They believe that the more money they earn the richer they will become. But this is not true, generally speaking the more people earn the poorer they become because they get into more debt and buy more things that go down in value.
A friend of mine is highly specialized and earns a great deal of money. His wife is also highly specialized and has her own psychology practice, so they earn a lot of money. But so far all they have seemed to do with their money is accumulate more debt. Sure they have nice cars and nice furniture, but they are now required to work more than I do because their expenses are higher. Their money is not making them rich. It is making them comfortable, but it is not making them rich.
My friend has been talking to me about financial advice. It is sometimes interesting when you talk to people who earn a lot of money because they think that because they have the money they are more valuable to a partnership than me. But the funny thing is that I am more valuable to the partnership than them because money itself won’t make you rich, but what you do with your money makes you rich.
Lets say my friend had $100,000 (which I know he either has or could accumulate quickly), with his financial education one of the best things he could do is put the money in the bank and earn 4% interest. He would then be taxed 50% on that interest earning him 2% overall (per year). The value of his money is going down 3%-5% per year from inflation meaning that he is ultimately losing 1%-3% per year on his $100,000. That is a loss of $1,000-$3,000 per year. Now that is not a very good investment. I on the other hand can take $4,000 and earn 25% tax-free income by purchasing an asset. When inflation goes up my asset goes up in value and so does my return on investment, so I don’t lose money. I end up earning $1,000 per year on $4,000 while he loses $3,000 per year on $100,000. So as you can see it is not the money that makes you rich but the financial intelligence and why you do with the money that will make you rich.
Money Goes Down In Value Over Time
One of the reasons money doesn’t make you rich is because money goes down in value over time. The government can print as much money as they want (and they do). The more money they print the more your money becomes worth less and less. People say the cost of living is going up (this is also known as inflation) but really the buying power of money is going down. So by just saving money you are losing value every year as the buyer power of the dollar goes down.
Money Itself Doesn’t Make You Rich
Money doesn’t make you rich, but it is what you do with your money that makes you rich. Poor and middle classed people use their money to increase their expenses. They do this through buying bigger houses, more expensive cars and gadgets. As they get a pay rise their expenses to go up and they end up with newer stuff but they are actually poorer than before and are constantly forced to work just to pay for their expenses. Rich people use their money to buy assets that generate their income. Because they buy assets their income is constantly going up. They can use to passive income (income they don’t have to work for) from their assets to pay for their expenses such as debt and expensive gadgets and cars etc.
You might have a lot of money, you might have very little. But the fact is that money doesn’t make you rich. What you do with your money will make you rich or poor and know what to do with your money ultimately determines how hard your money works for you. For me, with a good financial education, a little bit of money can work very hard for me. For someone else in a high paying job even millions of dollars won’t allow them to retire because their money doesn’t work hard for them. So if you want to be rich focus on increasing your financial education.
Money Alone Does Not Make You Rich
Does money alone make you rich? The answer is a very straight NO. Money alone does not make you rich. We all know people who go to work every day, working for money, making more money, but fail to get rich.
Ironically, many only grow deeper in debt with each dollar they earn. We have all heard stories of lottery winners who became instant millionaires, who suddenly became poor again (much poorer than before).
Many of us know of individuals who have lost money investing in the stock market. Even investing in gold, the world’s only real money, can also cost the investor to lose money.
So if money alone doesn’t make you rich then what makes you rich? It’s.
Financial Intelligence:
In today’s world, financial education is absolutely essential for survival, regardless of whether we are rich or poor, smart or not smart.
As most of us know, we now live in the Information Age. The problem with the Information Age is being information overloaded.
Today, there is way too much information, so much more than we can handle. That’s why financial education is extremely important, without financial education, people cannot process these information into useful knowledge.
A question before we carry on, do you think that money is the root to all evil?
Is Money the root to all evil?
Many of us seem to think that money has some sort of quasi-religious or cult-like taint to it, believing that the love of money is the root of all evil.
As most of us know, it is not the love of money that is evil. It is the lack of money that causes evil. It is working in a job we hate that is evil. Working hard yet not earning enough to provide our families is evil. For some, being deeply in debt is evil. Fighting with people we love over money is evil. Being greedy is evil. And committing criminal or immoral acts to get money is evil. Money by itself is not evil. Money is just money. A mere paper, that’s it!
How to Improve Your Financial Education?
You can first start by reading Rich Dad Poor Dad written by Robert Kiyosaki – founder of the RichDad Company or you could start by playing Cashflow101 board game (also created by Robert Kiyosaki and his team). Much of the content in this post is referred to his books and teaching.
Interestingly, Robert’s mentioned in several of his books that he failed English during his school days because he coulddon’t write, read and punctuate. But to me, I think he’s one of the best author out there. He can simplify a complex subject like accounting, cash flow management etc (which I took many years to learn but still coulddon’t understand) till so easy that even such a person like me (a pea brain) can understand what he’s trying to bring across in just a few days after reading his books.
Every time I finish reading his books (Yes I read and re-read his books over and over again), I felt like I have a personal conversation with him. That’s how great his books are.
What makes Robert’s book different from the majority of the business books out there is that Robert talks about his failure more often than he talks about his success, he believe that we can learn a lot more from his failure than from his success.
In my humble and honest opinion, his books are of great value and is easily worth a lot more than a mere $20. So if you’re interesting in buying Rich Dad Poor Dad or the Cashflow101 board game, I highly encourage you to get them now. Head over to Amazon.com, hopefully there’s still some stock left for you to purchase at a discounted price.
