In the book, Rich Dad, Poor Dad by Robert T. Kiyosaki with Sharon L. Lecther, Kiyosaki encourages us to mind our own business
Minding your own business is not just about starting your own small business. Rather, it is about realizing that developing and managing your assets is your most important business no matter what your profession or how you make your living. It is about building up and sustaining the assets which will eventually free you from the day-to-day slaving at work.
We tend to make our profession or career the focus of our lives, making someone else rich. Rather, we should be focusing on acquiring and expanding the assets that will make us financially independent. By building up your assets, you can eventually raise as much or more income than from your daytime career or profession.
One such asset involves owning a business. Yet, if you have to work in the business, it becomes your job. The business in this case is not one that you have to mind directly. It is an investment that generates cash income for you while other people manage it for you.
Then, there are shareholdings in companies which provide dividend income. In addition, such stock can be sold in order to realize capital gains. Mutual funds provide an alternative for the investor who may not wish to spend the time analysing and choosing the companies to invest in.
Alternately, you can purchase debt instruments in public or private enterprises, typically called bonds or debentures. Cash income will arise from the interest payment during the life of the bond or when the bond matures.
Real estate that generates income also falls among the asset listing. So, too, do notes receivable – when you have loaned someone funds that the borrower agrees to repay with interest by a written and signed note.
Royalties from intellectual property such as books, music and patents can also be a cash income source. In fact, anything that can generate income or that appreciates in value and has a ready market can qualify as an asset. The key requirement is that your assets must be able to provide cash.
Minding your own business means acquiring assets and building up as many assets as possible regardless of your way of making a living. Eventually, if you mind your own business successfully, you will have enough cash income to afford to retire early.
Kiyosaki warns the middle class about acquiring significant residential mortgages and believing they are holding assets; the strain of maintaining the mortgage usually makes it impossible to garner reasonable investment experience. He recommends that investment experience come first since minding your own business is a priority. That is, as early as possible, you must acquire and build your asset base.
It is only when your assets have started to provide income that you should consider acquiring a mortgage commensurate with the level of cash flow generated by your assets. This is the preferred way of financing one’s residence. Whenever you plan to acquire additional assets or luxury items such as a bigger house, jewellery or exclusive clothing, then make your asset business generate the cash required. Then reward yourself by your success in investing.
Through investing, a solid financial base is created. You can keep your daytime job while you are minding your main business. Instead of financing luxuries from your daytime job’s pay, you can now finance them from your own investment income, the more secure approach.Â
• Louise Fairsave is a personal financial management advisor, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.
