I believe that you can in fact be rich — no matter where you are at financially right now. The problem is that most of the money lessons you were taught growing up don’t help you accomplish this goal!
I know this from personal experience. 🙂
Growing up, I was taught to go to school, go to college, then go to more college (long story short, that’s how I ended up as a lawyer). The point of going through that much schooling was to ensure a good career where I could support myself and my family (i.e., school leads to job leads to money). But after graduating law school with over $200,000 in student loan debt, I discovered that the path I had taken was not set up for making millions.
Traditional Way of Thinking About Money
Work hard and you’ll get a good job. This is what we’re taught about money. If you save enough money from working, you’ll be able to retire one day. Essentially, trade your time for money.
The problem: There’s only so much time in the day. Even if you worked all day and all night, there will always be a cap on your income because there are only so many hours in the day.
Making money by working is only one way to receive income, and it’s known as earned (active) income. But if you want a lot of money, you have to get money another way. Money has to work for you instead of you always working for the money. (Full disclosure, I am not yet a multi-millionaire. But stay tuned..)
New Way of Thinking About Money
After reading Rich Dad Poor Dad by Robert Kiyosaki about a year ago, I was introduced to a different way of thinking about money. Since then, I’ve read a variety of books on passive income, wealth creation, and business (read my favorite books here). I’ve learned so much about how to think about money, in a way that is different than “work hard for your money.”
12 Money secrets no one taught you in school
- It is really hard to get ahead and make a lot of money by relying on one source of active income (here’s a list of posts to help you make more money).
- Relying on one source of income means that you’re really dependent on that source. It’s better to diversify your sources of income. Or put differently, create multiple streams of income.
- If you work for money, you receive active income. If your money works for you, you receive passive income (trading your time for money).
- Passive income is generated from your assets. Assets create cash flow.
- Assets classes include: business, real estate, and paper / commodities (stocks, bonds, silver, gold, etc.).
- Business: Passive income from a business means that you are not needed to be there to generate income. But if you start a business, you really need to love it to make a lot of money at it. Start small, get really good at it, then leverage. This is what I did by starting Financegirl (you can learn how to start a blog, too).
- Real estate: Real Estate creates cash flow and is considered an asset when you own it as a rental property. Buying a house with a 30 year mortgage for personal use (without any equity in it) is not an asset, despite what society wants you to believe.
- Investing: There are so many different ways to invest in the market, including managing your own portfolio by handpicking stocks and bonds, or by hiring a financial planner to help you do it.
- In order to accumulate assets, it’s important to learn a lot about investing, real estate, and business.
- Besides accumulating assets, you need to get out (and stay out) of debt. If debt is an option for you, you’ll always be in debt.
“The rich rule over the poor, and the borrower is a servant to the lender.” Proverbs 22:7
- There’s a difference between cash flow and net worth. Cash flow is the money coming in during the month; it increases your life style. Net worth is wealth accumulation; it’s how much cash flow you can generate. If you want to increase your cash flow, you need more streams of income. If you want to increase your net worth you need to put that income into investments.
- We all have a money blueprint, meaning we have certain views about money and we act accordingly. If we change our money habits we can change our lives. (Live intentionally with your money.)
- Money is just a reflection of you. You, yourself, will attract or repel money and opportunities. If your money is a mess right now, you probably need to work on yourself before you can work on your money.
- You are the average of the five people with whom you spend the most time (more on that here). So, if you want to be successful and make money, start hanging out with other people who are successful and know how to make money.
- No one will care about your money as much as you do, so choose professionals carefully.
A Final Note!
Learning about money is the first step toward creating a solid financial foundation, which I believe is your responsibility to do as a living, breathing, healthy adult. There are many ways to do this. One way is to read blog posts and books. I have learned so much about money over the last three years and it has undoubtedly changed my life forever.
Do you have any money lessons that you wish you knew when you were younger?