YEARS AGO when Napolean Hill wrote the book, Think And Grow Rich, many readers became receptive to the importance of the mind in creating wealth.
More recently, with the book, Rich Dad, Poor Dad, Robert Kiyosaki and co-author Sharon Lechter reverted to the basic principle: “Wealth is all in the mind”. However, they are even more targeted and potent in their presentation.
For this Christmas season, I am wishing you true wealth by reviewing the key lessons of Rich Dad, Poor Dad for wealth-building. What is the most valuable learning we can take from this relevant little book?
First, the authors stress the profound weaknesses arising from the fact that children are not taught the basics of personal finance in schools. Then, if parents don’t know any better, they cannot be the ones to train and develop the child.
Parents need to develop their investment, marketing and general financial literacy and to share their understanding with their children. Readers have the opportunity to examine themselves and the direction in which they are leading children.
It is useful to be clear about the basic concepts of marketing, sales, law and taxes. How is your knowledge and understanding of the Barbadian environment?
Do you have the details of your personal financial situation set out in any structured manner? Can you provide a personal income statement and balance sheet? Do you know your net worth? Are you sensitive to the importance of cash flow? Do you have an understanding of your own cash flow patterns? Do you understand the mathematics of finance?
Are you aware of the various investment vehicles available to you and their risk and return profile? Do you have investment experience? Do you feel comfortable trying to structure a financial deal?
With regards to earning money, the most significant aspect of the new thinking will be about creating and fashioning business deals. It may include preparing business plans and proposals. The ultimate quest will be to exercise the mind to find ways of “creating money”.
The more important task, though, is to rethink. The critical exercise will be to shift the long-held thinking about basic life functions like employment, earning, purchasing and investing. This is also the most difficult task to achieve as it goes to the primal psyche of the individual and of the community. It is equivalent to trying to change a group norm of an entire nation.
The major paradigm shift is for us all to place investment experience as a priority in our financial lives. Only after we have had some investment success should we consider “spending wisely” some of the return proceeds.
For the new year, investing practice must be high on the agenda. The shift of all shifts is to move our thinking away from looking to our salaried income for our purchasing power to looking to our investment returns.
This paradigm shift allows us to move away from measuring ourselves by the job we can hold, or by the salaried income we can make. Indeed, it may release many young people from striving to be professionals and instead seeking their true vocation.
It encourages us to seek financial independence by building up adequate passive income. The measure of your true wealth will always be the extent to which you can support yourself without working. The most active part of your body in achieving this will always be your mind.
Hopefully, we can all take this new approach forward into the new year.
Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters.
Her advice is general in nature. Readers should seek advice about their specific circumstances. Email LouiseFairsave@nationnews.com.