Since I’ve been on a “Business Building”, “Wealth Creation” journey for the past decade or so, I have embraced and promoted one concept or principle far over all the others. The principle is that of the “Asset and Liabilities” teaching I learned from the Rich Dad Poor Dad book. To summarize it, “Assets put money in your pocket whether you work or not, Liabilities take money out of your pocket whether you work or not”. This idea is the foundation for wealth creation. It’s the first thing we try to instill in others who are interested in trying to create a financial future for themselves or their families.
Along our personal journey, we have had highs and lows where cash flow was both abundant and when it was scarce. One of the things we’ve always done no matter what was to never sacrifice an income producing asset just because of a temporary crisis. We’ve done just about everything else to smooth over those moments of crisis. We’ve sold furniture, campers, boats, cars. We’ve taken on extra jobs, even temporary loans to insure the on-going stability of our income producing assets. Assets that produce income are the only thing that creates on-going perpetual income, and ultimately, any level of true financial freedom.
Recently, we have been mentoring a couple who found themselves in a financial crisis. I’m not sure of the severity of it because they didn’t share that with us. I do know that they chose to liquidate an asset to fix their situation. I’m not sure if it was the only option they may have felt was available. Since they didn’t ask for advice, I assume they were not looking for an alternative to “Losing their Asset” (so to speak).
I’m not intending to be critical of the decision. I’m just making a note that when you begin to understand the role of income producing assets in the success of wealth creation, you find ways to protect them at all costs. It’s one more way that proves that wealth creation is a mindset that is far different than a financial survival mindset.
Don’t Lose Your Assets!
I hadn’t really thought of this in these exact terms until the other day. My last posting had a comparison list between a wealthy mindset vs a poverty mindset. Item number 11 said: “Rich people choose to get paid based on results. Poor people choose to get paid based on time”. The reality of this statement is monumental. When I read this, it reflected a concept that I began to embrace over ten years ago that you will find over and over in my postings and teachings. “Assets put money in your pocket whether you work or not. Liabilities take money out of your pocket whether you work or not”. Taken from one of my favorite authors, Robert Kiyosaki.
By choosing to adhere to this practice, you must create assets that produce income that is not tied in a proportional way to the amount of time you have to invest in them or commit to them. What a different concept this is. When relying upon an hourly paycheck (or even a salary or commission based paycheck), your income is directly or indirectly based on the time and energy you invest. If the time or effort ever ceases, so does the income.
As I began to mentally dissect this statement, I began to realize that the businesses I had created over the last several years were becoming more and more result based in their income producing capacity. I have not received a paycheck in over 10 years that has been linked in any way to the time I have spent on a task. All of our income is generated solely from the quality of “results” of our business decisions and actions. When our decisions are poor, this income suffers, when our decisions are good, our income flourishes.
Here’s the most important part of the equation. There is no limit to the number of businesses or income producing assets we can create or possess. When income is proportional to time spent, the income is limited to the time multiplied by the hours available. This is not the case when a business asset has a specific result expectation. If a business asset has an expected result of $50,000 annual income and there can be 20 businesses with similar expectations, then the income can compound to a far greater degree than time based income.
Think about it and then think about what life would be like if the limitations of time were removed from your income producing ability!
1. Rich people believe “I create my life.” Poor people believe “Life happens to me.”
2. Rich people play the money game to win. Poor people play the money game to not lose.
3. Rich people are committed to being rich. Poor people want to be rich.
4. Rich people think big. Poor people think small.
5. Rich people focus on opportunities. Poor people focus on obstacles.
6. Rich people admire other rich and successful people. Poor people resent rich and successful people.
7. Rich people associate with positive, successful people. Poor people associate with negative or unsuccessful people.
8. Rich people are willing to promote themselves and their value. Poor people think negatively about selling and promotion.
9. Rich people are bigger than their problems. Poor people are smaller than their problems.
10. Rich people are excellent receivers. Poor people are poor receivers.
11. Rich people choose to get paid based on results. Poor people choose to get paid based on time.
12. Rich people think “both”. Poor people think “either/or”.
13. Rich people focus on their net worth. Poor people focus on their working income.
14. Rich people manage their money well. Poor people mismanage their money well.
15. Rich people have their money work hard for them. Poor people work hard for their money.
16. Rich people act in spite of fear. Poor people let fear stop them.
17. Rich people constantly learn and grow. Poor people think they already know.”