school's initiative
The school doesn't teach you about money, so in this blog, I'm going to tell you the rules the rich follow and how they view their real estate investing deals. We share what the rich focus on when they find properties to invest in and the major considerations they focus on. After looking at and understanding my blog, you will find that becoming rich is very easy and becoming poor is very hard. .so, first, you need to understand about assets and liabilities.ASSETS VS LIABILITIES:
Assets add money to your pocket, and liabilities take money from your pocket. The main difference between assets and liabilities is that assets provide a future economic benefit, while liabilities present a future obligation.Examples of assets include cash, accounts receivable, inventory, prepaid insurance, investments, land, buildings, equipment, and goodwill. From the accounting equation, we see that the number of assets must equal the combined amount of liabilities plus owner's equity 
What Are the Main Types of Assets?- Cash and cash equivalents.
- Inventory. ...
- Investments.
- PPE (Property, Plant, and Equipment)
- Land.
- Buildings.
- Vehicles.
- Furniture.
- the land is classified as a long-term asset, and so is categorized within the classification of the fixed assets on the balance sheet. If anything, the land is considered to be the longest-lived asset, since it cannot be depreciated, and so has an essentially eternal useful life.
- The biggest asset of your life is situated between your two ear-THE BRAIN, the more you invest in your brain the more knowledge and skill you would have.
The Top 4 Assets you should invest in:Many people say that to school and get a high-paying job. That’s not creating wealth. That's a job."you should focus on your asset column, not on your income statement." Number 1 is Business. The richest young guys today start companies. Some great examples of this are Facebook, Google, Apple, etc. Number 2 is real estate. What my dad taught me is the combination of being an entrepreneur in business and an entrepreneur in real estate. Now due to this combination, I pay no tax and I make a lot more money.
The 3rd asset is Paper. Savings in gold, papers like stocks bonds mutual funds are liquid. You make a mistake, you can get in and out real quick. The last asset is Commodities and this is why much people own oil because in the U.S. if you deal in oil, you get tax breaks. So oil is very profitable.
PAY YOURSELF FIRST:What does it mean to Pay Yourself First? Why is it important to pay yourself first? how to pay yourself first? And finally, how much to pay yourself first?When people start to have a steady income, they immediately increase their expenses. Soon they get entrapped in the Rat Race of “Get up, go for job and pay bills” regardless of the amount of money they earn every month. :- MR. smart
Firstly, they work to materialize the dreams of their employer. Secondly, they work for the government by paying taxes. Thirdly, they work for the bank which owns their mortgages and credit card loans. They work for everyone else. Then they put a little, if any, money in the asset column. That is precisely the reason they remain a struggling middle class. But, Mr Smart expects you to break these shackles and seek financial freedom. So, you should rather be
paying yourself first by putting a sizeable part of your earning in asset column and spend what is left. The Pay Yourself First concept is of fundamental importance in your way to getting rich.
Mr Smart divides the concept of paying yourself first into two parts. Firstly, set aside a sizeable portion of your monthly income and spend only what is left. Secondly, buy assets that generate money without your personal presence and efforts. Stocks, bonds and housing units which generate rental income are examples of such assets which make passive income for you. That is the Pay Yourself First definition.
If your income is bare enough to meet your living expense, then take a leap further by seeking a second job. Mr Smart admits that it is easy said than done. But, you don’t have any choice if your target is financial freedom. So, get the second job and save all the additional income to buy passive income-producing assets. Repeat this cycle over and over again. In a few years, you will not only free yourself from the Rat Race but also seek financial freedom. Here comes the point when your guide Mr Smart wants you to stop working for money. Yes, you have listened rightly STOP WORKING FOR MONEY. Now, you should rather make money work for you. You may keep or leave your day time job. But, you must not essentially work for money.
Steps you need to follow:
You can keep your savings in a separate bank account till you have saved enough money to buy an income-producing asset.
Don’t be afraid of risk. Rather manage risk creatively.
Invest your time, money and energy in your financial training and learning.
Increase your portfolio of income-generating assets gradually.
If your income is bare enough to meet your living expense, get a second job and save all the additional income to buy passive income-producing assets.
MR. SMART VS TAXMAN:
When it comes to tax, the rich make the rules. if you want to become rich, you have to play by the rules of the rich.
The rules of money are skewed in favour of the rich, and against the working and middle classes. After all, someone has to pay taxes.There are many ways that the rich make a lot of money and pay little to no money in taxes. On the flip side, the poor and middle-class toil away for their money, pay more in taxes the more they earn, and then park their earnings in savings and/or retirement accounts. In the meantime, they receive little or no cash flow on which to live while waiting for retirement -- when they’ll live on their meagre savings.
On your left is the well-known Mr. taxman. how much strange his face is the more strange is his tax system. it divides the people into four types:- employ, businessman, investor and self-employed people.
 |
| MR. taxman |
tax percentage:-
employ:40%
businessman:20%
investor:0%
self-employed:60%
To save yourself from Mr. taxman," Mr smart recommends you be in the business and investor quadrant.
you can convert your quadrant like: you are an employee, and so you pay 40% tax. you should need to get out of that, which is also known as a rat race.
The more you get scared from the taxman, the more he will tax you. you should be confident to face the taxman.
"The most important thing, you should face more on your asset column rather than your income"
That is, you should increase the assets which would give you the money where you are not physically present. rather than if the income increases the Taxman will tax you more.
so, don't let the taxman tax you. now,
TAKE ACTION
Cashflow - A Representative sector:-
Why do the rich get richer and the poor are getting poorer?
there are two categories of people in the world, those who see the world through the left side of Rich Dad’s CASHFLOW Quadrant and those who see it through the right side. My hope is that for others, it will be the beginning of changing your mindset about money.
The CASHFLOW Quadrant is divided into four types of people, two in each category.
The left side of the CASHFLOW Quadrant
On the left side of the quadrant are Es and Ss. They pay the most in taxes and trade their time for money. And each has a different mindset.
E is for employee
At the end of the day, the most important thing for employees is security.employees shy away from risk, they don’t see the need to learn about money or how it works. For them, education is about learning the skills needed to get a steady, high-paying job with great benefits. When employees need more money, they look for a higher-paying job.
S is for self-employed
People in the self-employed quadrant are not good employees and often have the attitude that no one can do it better than them. While they still like the idea of security, they have a larger tolerance for risk, and thus don’t mind working for themselves. In fact, they like it that way because they feel in control of their future.
People in the S quadrant are doctors, lawyers, dentists, accountants, and other service-based businesses and consultants. They have very high standards for their work and because of this, they have a hard time delegating to others. Again, they don’t like to hire employees because nobody does it better than them. As a result, they only make money when they are working. This means they don’t own a business, they own a job.
When self-employed people need more money, they look for more hours they can bill.
The right side of the CASHFLOW Quadrant
On the right side of the quadrant are Bs and Is. They pay the least in taxes and create or invest in assets that produce cash flow for them even when they’re sleeping.
B stands for Business Owner
Unlike those in the S Quadrant, business owners don’t own a job. They own a system or a product that makes money even when they aren’t working. Because they know they can’t be successful on their own, business owners look to hire people who specialize in skills needed for the business and hire those who have more talent and skill than them. They look to delegate as much as possible, not keep all the work for themselves. The best business owners know they could leave their company for a year and come back to find it still profitable and running better than they left it.
Business owners are often seen as risk-takers, but from the perspective of a business owner, being an employee is riskiest because employees have no control. A business owner can make the decision to do layoffs or fire an employee, but no one can take the business away from the business owner. And when the economy takes a downturn, the business owner has the most control to make the business work and survive.
When business owners need more money, they create a new product or create or acquire a new system that produces money.
I stands for Investor
Investors have the highest financial education of anyone in the CASHFLOW Quadrant. They are adept at finding assets that provide a steady income in the form of cash flow and they often use other people’s money (OPM) to attain those assets. They then use the income from those assets to acquire even more assets, growing their wealth through this velocity of money. They enjoy the most in tax breaks, don’t have to work at all if they desire, and don’t have to deal with managing employees. The richest people in the world are investors, and as a general principle, 70% of their income comes from investments with the other 30% made up of wages.
When investors need more money, they look for an opportunity to acquire an asset that produces more passive income.
What really makes you rich
When I ask most people, “What is it that makes someone rich?” the answer I usually get is, “They make a lot of money.”
How much money you make does not make you rich. Rather, how much money you keep is what makes you rich.
Those on the right side of the CASHFLOW Quadrant pay the least in taxes, know how to use debt to make money, and hedge against inflation through their assets. They not only make more money than employees and self-employed but they also definitely keep more money. Those on the left side of the quadrant work for what is called earned income. It is the highest taxed income. They have little-to-no tax shelters. Those on the right side work for passive income, the least taxed income. They have many tax breaks in the tax code they can use to their advantage.
0 Comments