Financial Freedom - Two Schools
I started my journey to financial freedom by going back to "school". I started off with the Rich Dad series by Robert Kiyosaki, and then went on to read other books like the Millionaire Mind by Thomas Stanley. I discovered two schools of thought from the books I read. The conventional school and what I call the Rich Dad school.
The conventional first school taught conventional wisdom of the ancients; save, and then invest. The second school called out to me to think different, create a new world without necessarily having to put down my own money.
They seemed diametrically opposite. I could not abandon my journey on account of this apparent paradox. To proceed further, I needed to dig deeper, and work out my personal pathway?
Prudent Son
As I sat under the conventional school, I was taught how to be prudent and frugal. Downsize my spending, live below my means. Pay me first, eliminate debt, be first on the queue during sales, use store coupons, buy quality stuff so that it will last forever, eat in, stick to your budget, take impulse to the divorce courts (and reject any out of court settlement) etc.
After having locked away the budget deficit monster, and stashed away a neat pile, I should have an account for the rainy day, and another for investment. More of this in "The Basics" section. I was to cut my coat according to my clothe, not according to my size. Rather I was go on a diet and reduce my size to fit the coat (or force myself in). I was to say goodbye to borrowing (except for mortgage and other worthy causes) and invest from my funds.
Yes, make more money. Specialize in a field I love. Earn more by being more specialized, knowing more and more about less and less. Find my niche. If I muster enough courage to exit the rat race, go work for myself (Self employed). Keep working harder and earning more. Invest for the long term. Fire and forget. Don't keep your TV locked on Bloomberg channel (and drive your spouse nuts). Go to sleep and wake up after five years. An asset is anything you can eventually sell for much more than you bought it. Determine your risk tolerance and lower your anchor. Slow and steady wins the race, someday?
Rich Son
In the Rich Dad School, I was taught to live within my means. Not for the sake of prudence, but to keep creditors off my back so that I will be left alone to use my brain. Keep increasing my means to cover my expenses instead of keep reducing my expenses to fit my means. Think BIG. Use other people's money to invest, instead of save to invest. Banish the word "I can't afford it", but rather "how can I afford it?"
Earn more and more by serving more people more people, employing a business system such that I work less and less. Sail away to sunny Barbados while my money and people work for me. Build businesses and become a selling shareholder. Be a business owner instead of self-employed. Have the business pay for my expenses. Know a little about everything, and employ specialist to handle the brass tacks. Keep buying assets, and let my assets pay for my liabilities. Keep you're your money moving, don't park it. Aim before you fire, and watch the trajectory of your shot. Know when to go in, when to hold on, when to walk away, and when to cut your losses and run for dear life. Broaden your horizons. Don't settle. An asset is anything that puts money into your pocket while a liability is anything that takes money out of your pocket (no matter how much it appreciates in paper value). Win the race, while you are still young, and in love :-)
Which Way To Go?
Gulp. These two sure look contradictory. On a closer look, I found out they are talking about two different things. They are addressing two different plans. The Rich Dad School is talking about the Rich Plan. Fast track exit from the rat race to the rich level. The Prudent School is talking about the Secure Plan. Attaining financial security, then heading upstairs to meet the big boys. Rich Dad talks about a fast plan while Prudent "Dad" talks about a sure plan.
I found out personal circumstances differ: where you live, the financial system there and your family circumstances etc. Each school needs adaptation to one's peculiar circumstances. For my peculiar situation and aspirations, I needed both. Having since returned to my home country Nigeria, where consumer credit facilities are virtually non-existent and interest rates are in double digits, I could not use the leverage of other people's money. I needed cash for every step I took, every move I made.
The road to financial freedom is a lonely road. Each pathway is different. I have to chart my individual path. I cannot "cut and paste" someone else's plan. Sure I need others along the way, but the buck stops at my table.
Straddling two schools, I needed to be fast on my feet or I trip up easy. Most of the work was in the mind. Having inherited the workaholic trait from my Dad, I needed to think doubly hard, or fall back to ""work hard and switch off your brains". I had to overwrite my old mindset and keep thinking outside the box, consistently. Therein lies the cure to paradigm paralysis...
Journey Begins