Robert Kiyosaki wrote a great book called “The Guide to Becoming Rich without Cutting up Your Credit Cards”. This book, even though small, shares a powerful message that mainstream financial knowledge is somewhat flawed.
Does A Big House Mean Your Rich?
For example, we may believe that someone who owns a large house is rich. This is far from the case. Even though the house looks like a mansion, what’s truly important is what is going on on the financial statement.
If that big house is draining money out of the owner’s pocket every month, then it’s a liability. It’s only a matter of time when the house can not be paid for anymore and the owner is forced to sell. However if the financials behind the house is healthy, meaning the mortgage is cashflow positive and puts money in the owner’s pocket, then the owner would consider the house an investment.
Your Financial Statement
The most important concept in this book is your financial statement. When you go to the bank to seek a loan, the bank does not ask for your report card in school. Instead they ask for your financial statement.
The concept behind your financial statement is to make sure you have healthy cashflow. Cashflow is when your income exceeds your expenses.
For example, if your income is $1,000 per month and your expenses is $700, then your cashflow is $300 per month. However let’s say your cashflow becomes $20 per month.
This is not good for you only have $20 left over and vulnerable to anything life throws at you. However if your cashflow is $900 per month, obviously you can save more, invest more and build your financial fortress a lot quicker.
I learnt this concept many years ago and have been using it ever since. Cashflow is one of the most important factors of building wealth.
Good Debt and Bad Debt
Robert Kiyosaki talks about the difference between good debt and bad debt. Most people get confused with these two terminologies and they can get into trouble.
For example, good debt is when you borrow money from the bank and you invest it into a vehicle that makes you money and covers your loan. However, bad debt such as credit cards can take money away from your pocket per month leaving you an worse situations.
It’s very important to understand the difference between the two but once you get it, you can accelerate your financial future.
Overall, this is another great book by Robert Kiyosaki, it teaches you the basic fundamentals of managing your finances in an easy to understand fashion. Great book.
Stay Strong and Be Relentless.
PS. I have coaching positions available if you need help in setting up your online business.