Saturday, November 04, 2006

Financial Freedom

Dollar SignI am rereading Rich Dad, Poor Dad the subtitle is “What the Rich Teach Their Kids about Money - That the Poor and the Middle Class Do Not.” Robert T. Kiyosaki is a smart man. (And a rich man.)

If you haven't read it, you should. People ask me all the time how I can manage to own a boat and not work - I am too young to be "retired." The trick is to have income that doesn't come from an employer, but from assets. To be fair, mine doesn't cover my total expenses, so I am burning through some assets, but it is worth it. I will need to break down and get some type of job or pull away from the dock....

Anyway this is a great book. It will probably teach you some things about money you don't know and probably upset you. (Your home may be your largest "investment" but it is NOT an asset - it adds no income to you life - it is a liability - it only has expenses associated with it.) But that is the definition of an asset - it produces more in income than it consumes in expenses.
The rich buy assets, the poor have only expenses, the middle class buys liabilities and thinks they are assets.
Here are some things to think about, some come from Mr Kiyosaki, some from other places.
  • Buying a bigger house when you get a raise is a bad idea.
  • Pay off your house loan as fast as you can. (It makes retirement easier)
  • Don't turn your credit card debit into a 30 year loan. You pay too much in interest expenses.
  • If you can't afford your house on a 15-year mortgage, you can't afford your home. (Look into the every 2-week payment plans...)
  • Mutual Funds are not exactly the safe/smart investment your financial advisor (who makes money selling mutual funds) lead you to believe.
I could go on.

Money is an important thing in most peoples' lives. It is sad that they understand so little about it, and let money have control of their lives instead of taking control of if themselves.

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