‘Rich Dad’ Robert Kiyosaki Reveals Why Having Lots of Money Doesn’t Make You Rich
While we may think that someone with lots of money can be considered rich, the reality is that you can easily spend all of your funds. On his website, Robert Kiyosaki and his team revealed that having lots of money doesn’t make you rich and explained how people with money can end up broke.
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Find out more about the harsh truth about how people with abundant money can still end up with nothing in the long run.
Why Having Lots of Money Doesn’t Make You Rich
Kiyosaki’s site stated that having lots of money doesn’t make you rich because how much you keep matters. The logic is that keeping and growing your money is what makes you rich since you can’t be rich if you don’t have a plan for consistent income in the future. It’s also possible that you can spend the money that you have since there’s no guarantee that your income will remain high for your entire career.
Kiyosaki cited examples of people who will make significant money but spend just as much. For example, if you bring in $50,000 monthly from a lucrative job but then spend $50,000 monthly on expenses, you’re not rich. You’re broke and will be in a dire financial position when the money stops rolling in since you haven’t invested in your future.
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Why Do People With Money Go Broke?
How can someone with lots of money end up broke in the long run?
Taking Advice From the Wrong People
Rich people or those with lots of money will go broke because they end up spending their funds after taking advice from the wrong sources. If you want to get rich and stay at that level, you have to be cautious about who you let on your team. You don’t want to take advice from those who don’t have a proven financial track record. You also don’t want your money to disappear because of poor advice on investing in the wrong assets.
Not Investing Enough
These people who end up broke despite having money at one point also don’t prioritize investing. Kiyosaki suggests putting most of your funds into cash-flowing assets that generate passive income. If you’re spending your money as it comes in and not allocating it toward real estate and other investments, you’ll always have to rely on your job. Once your income dries up, you’ll be stuck with your high expenses to deal with.
Staying an Employee
Kiyosaki is a proponent of entrepreneurship, and he believes that relying on your employer for all of your income could lead to issues. He argues that being an entrepreneur isn’t as risky as being an employee because you can control your destiny when you work for yourself.
On the flip side, as an employee of a corporation, it’s believed that your income isn’t as steady since they can just release you during tough times. When your job lets you go, your income will drop to zero, and you’ll be stressed about covering your expenses.
The B.E.A.R. Trap
This acronym is a framework used to explain why people end up broke.
The B.E.A.R. Trap is broken down:
Beliefs: These are the thoughts that lead to how we act based on opinions. These beliefs don’t always reflect reality and can sometimes lead to false thoughts.
Excuses: Kiyosaki feels that people will create excuses about how they don’t have enough time or other feelings along those lines that lead to bad habits.
Actions: Kiyosaki argues that your actions will come from beliefs and excuses. The excuses that you create can lead to poor decisions or indecision.
Results: This refers to the outcome from the combination of beliefs, excuses and actions.
If your beliefs are based on flawed or inaccurate opinions, you’ll create excuses that could lead to negative actions and poor results. This framework explains how you could have no money in the long run despite starting in an advantageous position.
The Importance of Understanding Money Management
Kiyosaki believes that understanding what to do with money is what ultimately makes you rich in the long term since you’re making the right decisions. You could squander your funds if you’re unsure about handling your finances or investing for the future.
A common concept that Kyosaki brings up is distinguishing between an asset and a liability if you want to be financially literate. Kyosaki wants people to understand that their primary residence isn’t an asset. If something isn’t producing a cash flow, it’s technically a liability. An asset will put money in your pocket, while a liability takes money out.
Closing Thoughts
Kiyosaki states that if you want to get rich and stay there, you’ll want to allocate your money toward assets that provide a consistent cash flow because that’s true security. When you don’t have to worry about how your bills will be paid, you can focus your energy on other areas of life. You remain tied down to your job when you don’t invest in income-generating assets.
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This article originally appeared on GOBankingRates.com: ‘Rich Dad’ Robert Kiyosaki Reveals Why Having Lots of Money Doesn’t Make You Rich
