Lesson: 2.2 business mindset

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Lesson: 2.2 Business Mindset

In lesson 2.1, We have learned that the Business is the preferred asset class of rich people. And the rich people teach their kids since their childhood that they should own a business first and later on acquire other asset classes such as paper assets and gold.

We also learned in the previous lesson that, middle class mainly focus on acquiring paper assets and gold first while rich focus mainly on developing their own business first and after that they acquire and accumulate other asset classes.

And this is the reason why people should have at least one privately owned or a business on which you have at least 10% of the management control.

Thus, starting your own business should be the first thing you should do to grow the asset column of your financial statement. And that’s why the financial advise to get rich is – Start your own Business as early as possible.

Now, the only problem with starting and running a successful business is that,most of the people don’t have any mindset to start and run a business.

Why Middle class Don’t have mindset to Own their own Business?

Because of the Education System. The entire Education system is designed in such a manner that the schools and colleges will only teach and motivate you to become employees and self-employees.

The reason why most of the people afraid of starting their own business even though they know that it is very important asset class to own to become rich is – Because Schools have trained them to become employees and Self-employees.

When people leave the school, they leave their schools physically but they don’t know that their school has imparted a mindset of becoming an employee or self-employee. Over the time, the school has developed various reflexes in your brain that you will feel fear when you think of starting and owning your own business.

Diagram: 45 – School imparts different sets of keywords (Middle class) in your mind while to become a rich you will need different sets of keywords – The keywords of Rich.

So Which are those Reflexes that prevent you to start your own Business?

01) Well, the first Reflex the school develops in you since childhood is, Exam fear. In the exams, if you ask the answer of some question to your friend or colleague, you will be punished. This kind of system is designed because the school wants you to become employee or a self-employee (Doctor, lawyer) in the future.

And that’s why you will have to do all of your work by yourself. While in the real life, Businesses run with the team work. So by taking exams, Schools are developing a false mindset and a reflex to not to do a team work.

This is because the schools know that if you will do a team work, you will definitely become successful. And this is what a Successful Business requires. Any successful Business in this world is the end product of a great tea work. Before taking any key decision, the board of directors, management team and key officials of any business discuss that issue and after working on that issue as a team, they collectively take a decision.

And this type of mindset is EXTREMELY IMPORTANT to develop a successful business which can work even without your presence generations to generations.

But Schools have been designed in such a manner that, such kind of mindset that is extremely important to develop a successful business doesn’t develop in your mind. This is because the basic function of a school is to develop a mindset in your mind of that of Employees & Self-Employees  who have to work hard alone by themselves for the business owners. And that’s why you are not allowed to do a team work in your exams. And if you try to do it, you will be punished in your school.

Now, when you leave your school, this mindset of working alone and doing everything by yourself makes you a perfect employee or a self-employee. And that’s why after leaving your schools and colleges, you wander here and there to find a job. This is because now you fear of doing a team work. This is because the school has punished you or prevent you to do a team work in your childhood.

Now, take the examples of various Billionaires who are high school and college drop outs. Say for Example, Bill Gates, Dhirubhai Ambani, Mark Zuckerberg, Subhash Chandra, Steve Jobs, Henry Ford and many others.

These people have left their schools and colleges before completing their education and that’s why the school system failed to develop a mindset of working alone in these people. And that’s why these people did the team work and made their fortunes. Today they are billionaires.

So if you want to start your own business than first of all think of doing a team work. Try to understand that the school system has imparted this mindset of working alone while you need to do a team work to become a successful business owner.

And this is the reason why many small business owners don’t make any fortunes from their businesses. This is because they do everything by their own in their businesses.

02) Second reflex the school develops in you is, fear of thinking about money. Our School system teaches us the following words repeatedly.

- Go to School

- Work Hard

- Get Good Grades

- Get a Job – The worst keyword that can prevent you being rich. The Schools give you only one option to make money and that is job. And this simple keyword is so much smartly incorporated into your brain by education system that you can not think anything other than getting a job once you leave your school. So first of all delete this keyword from your mind.

- Job Security

- Become a Doctor

- Job Safety

- Do it yourself

- Don’t ask for anyone’s help

- Be Self Dependent

- Don’t think about money during your school time…etc..

Thus, the above keywords are embossed in our minds when we leave a school. Unfortunately, the schools don’t teach us the following words that rich teach their kids.

- Financial Statements

- Assets

- Liabilities

- Good & Bad Debt

- Cashflow

- Active & Passive Income

- Investments

- Business

- Create Jobs

- Real Estate Investing…etc…

The above are the keywords that should be embossed in your mind if you want to become rich and ultra-rich. But the above words are smartly removed from the entire education system. So that you don’t think and understand the game of money.

Thus, when you leave your school, you leave your school with the first set of the keywords which are taught to you in school. And that’s why even after becoming a high skilled doctor, you prefer to work as an employee at government hospital or some privately owned multi-speciality hospital.

This is because in your sub conscious mind, the first set of keywords are embossed by your schools. And over the time, these keywords have become your subconscious (Spinal) reflexes.

While to grow rich, you will need to emboss the second set (Shown above) of keywords in your mind. These are the keywords by which you can understand money and the game of money. And that’s why rich emboss the above keywords in the mind of their kids since their childhood.

It is the School which emboss the false keywords in your mind since your childhood and that’s why when they enter into the real life, they fear of starting their own business and can’t understand the game of money. This is because the only keywords which are embossed in their mind are get a job, job security, go to school, work hard, do it yourself…etc…

So now, if you want to start your own business than first of all remove the above two reflexes from your mind which the school system has developed in your mind. And after that incorporate a new mindset by learning and understanding the new sets of keywords given in this lessons series.

Creating Your own Business is the Ultimate Way to Become Rich -

So now, you know that rich are rich because of their asset column. Rich are rich because they keep acquiring more and more assets out of their money. Rich accumulate all types of assets such as Businesses, Real Estate, Gold, Paper Assets, Web assets and many other types of assets.

But the Business is the only Asset which is the most valuable asset that rich people have. Creating a new business out of scratch is all about creating new asset in your asset column. And the Business will generate passive income for you from which you can acquire other Cashflow or Capital gain assets to grow richer.

What common mistake the middle class people do is, they start acquiring capital gain assets first like gold and paper assets (Stocks & Mutual Funds) and that’s why they can’t grow rich than certain limit.

While rich teach their kids to develop a Business first and later on from the passive income of their businesses, acquire other assets. Thus, start developing your own business since your very young age and become rich and financially free.

Middle Class people buy capital gain assets like gold and paper assets from their hard earned active income. While rich people buy these assets from the passive income generated by their ultimate Asset – Business. And this is the core difference between the rich and middle class.

Diagram: 46 – Middle Class Work hard to earn money and Buy Capital Gain Assets While Rich Work hard to create their own Asset (Business) First which hires other Assets.

First of all you should develop your own Business first and later on you should buy other assets to become rich while the middle class do exactly reverse means they first of all buy capital gain assets like gold and paper assets hoping that one day they will become rich and later on start their own business…!!!

Exercises:

- Entirely remove the first set of keywords from your mind. Never think about those keywords in your mind.

- Start learning and thinking the second set of keywords in your mind. This is because these are the keywords which are required to win the game of money. You can not win a game of money by using the first set of keywords.

- Develop a habit of doing everything in a team work. Start developing a great team for your business.

- Develop a habit of thinking in the financial statements.

Asset is more precious than money

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Asset is More Valuable than money

Which is more Valuable - Asset gold money?

For the Rich, Asset is more valuable than money (Currency Now) while for everyone else, money (Currency) is more valuable than the Asset.

Let me explain you why Asset (stocks, bonds, Gold, Real Estate, Mutual Funds, businesses, Web Properties, Intellectual Properties... etc..) is more valuable than money?

Well, This is because is something which keeps appreciating Asset in its value forever while money is something which will lose its purchasing power over the period of time because of the inflation.

In 2003, the Gold price was US $ 300 per ounce and in 2010, it is $ 1200 per ounce. This means that in 2003, you would able to buy the some amount of goods and services for $ 300 and today in 2010, you can buy the same amount of goods and services for whooping $ 1200.And this is the depreciation of money by four times in just 7 years because of the inflation.

So it means that if today (in 2010) you have $ 1200 in your pocket than after 10 years, you won ' t be able to buy the same amount of goods and services in the economy.Purpose if today you have 1 ounce of gold (or any other Equivalent Asset such as stocks, bonds, real estate, websites, blogs, art, mutual funds... etc...) in your pocket than even after 10, 20, 50 years you will be able to buy the same amount of goods and services from the economy.In fact, you will be able to buy much more amount of goods from your assets in the future.

Diagram: 48 - Old Financial Advise - Save Money. Modern Financial Advise - Save & Invest Money

In other words, preserve and increase your purchasing power Assets.While money reduces your purchasing power because of the inflation.

And this is the reason why Rich people focus on the Asset column of their financial statement rather than the Income (Like Middle Class people) and accumulate more and more assets out of their money.

Rich buy assets in exchange of their money while middle class save and accumulate money thinking that one day they will become rich.See the rules of money have been changed after 1971 when the US president Nixon has removed the Gold Standard and made US dollar the free float currency and later on the entire world has removed the gold standard.

Middle class people are savers and the savers are losers because the money that you save in your bank accounts will eventually lose its purchasing power over a period of time because of the inflation making you poor.

So the smart thing is to create or acquire assets.Rich people know this secret of money and assets since their early life and that ' s why from very early life they spend their time and energy to either create assets or acquire assets out of their money. Whenever rich have surplus money on their hand, they simply buy assets out of their money. They keep accumulating more and more assets in their asset columns rather than saving more and more money like middle class.

In True Sense, money is not your Asset but it ' s your liability.This is because your saved money which sits idle into your bank savings accounts will ultimately lose its purchasing power and the value because of the inflation.

While the Asset not only beat the inflation but also appreciate in its value as well as provide you a steady passive income. Thus, acquiring assets one time is hard work and after that weather you work or not, money will keep flowing into your bank accounts (Passive Income).

While Saving money is a life long process. No. matter how much you save, if you are not going to buy assets from your saved money than ultimately you are going to be poor in spite of how much you save.

Rich teach their kids since their childhood that the Asset is more valuable than money and that ' s why they should always think to grow the asset column of their financial statement rather than focusing on the Income (Active Hard Earned Income).

While Middle class people teach their kids since their childhood to focus only on the income and nothing else. And that ' s why they force their children to work hard at school to get good grades and after that find a safe and secure job and work hard at the job place to earn higher monthly income. The middle class people think around the Income. They focus their time, energy and mind to increase their Income. And to increase their income they take more and more educational degrees and work over time at their jobs or take part time jobs to increase their income.

Goal they don ' t know that this is the current income and the day they will stop working for their current income, their entire income stream will be suddenly disappear.More their saved money will also lose its purchasing power over the period of time.The inflation will erode the purchasing power of their money.

While Rich know that Asset is more valuable than the Income and that ' s why they focus their mind, time, money and energy to create and acquire more and more assets and grow their asset column.They also know that building the Asset column thee one time is hard work only and after that their Asset column will generate passive income for them to maintain which they won ' t have to work any more.

So after building the Asset column, even if the Rich will stop working, the money will still keep flowing into their bank accounts for the rest of their lives and even after that.

So if you want to become rich than give more importance to create and acquire assets.To become rich, you need to focus on growing the Asset column of your Financial Statement.By only saving lots of money, you can not become rich.Aim to become rich, you need to acquire assets out of your saved money.

One most common and age old financial advise in this world is - live below your means.It means that spend less than you earn money.Most of the people spend more than they earn by scratching credit cards and taking excessive bad audience like personal loans, car loans and shopping statement.And that ' s why finance gurus from all around the world teach their children to live below their means.They advise people to spend less than they earn.So that they can save more money.Purpose This Financial advise was actually once upon a time in this world means before 1971.Goal after 1971, this financial advise is no longer effective to ensure any kind of financial success in your life because USA has removed the Gold Standard (The Gold Back up to the dollars) in 1971.In fact, if today you follow this advise and save lots of money than you will surely be in financial trouble in the future.Because you are accumulating (Saving) Something (money) which is going to depreciate over the period of time because of the inflation.And that's why the Modern Financial Advise is - Don' t Live Below your means.Spend most of your money to create or acquire assets and grow your asset column so that in the future your Asset column generates passive income for you which can make you financially free and rich.

Asset is Always more Valuable than the money.

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Lesson: 2.1 Asset Classes

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Lesson: 2.1 Asset Classes

So now you understand the basic difference between Assets and Liabilities. Assets put money into your pocket weather you work or not while liabilities will take money out of your pocket. This is a simple definition of the asset.

You also know that, Rich focus their time and energy to create and acquire assets. While middle class don’t buy assets but they actually buy liabilities to look cool and rich.

So if you want to become rich in your life than you will have to acquire more assets in your life. You will have to work hard to grow the asset column of your financial statement if you really want to become rich one day in your life.

Diagram: 42: Financial Statement Showing 4 Basic Asset Classes

In this article, we will discuss about various types of asset classes. Here are the 4 basic types of asset classes in the world.

01) Business

02) Real Estate

03) Paper Assets (Stocks, Bonds, Mutual Funds, Pension Plans..etc…)

04) Precious Metals (Gold & Silver)

There are several types of assets in this world. But the above are the 4 basic types of assets.

Other Assets -

- Intellectual properties (Books, Music, Movies, Novels, Patents, Inventions, Copyrights…etc..)

- Web Properties (Domain names, Websites, Blogs, Forums..etc..)

- Art & paintings

- Rare Wine

- Vintage Cars

- Collectibles (Stamps, coins, old coke bottles…etc..)

Business -

First of all let me tell you that, Business is an Asset class. A Business is an asset because it puts money into your pocket weather you work or not. And that’s why a Business is the asset. In fact, a business is the most valuable asset class in this world. This is because the owners of the business can get rich much faster than the owners of any other asset classes.

Diagram: 43 – Middle Class work hard for Money (Active Income) while Rich Work hard to create & Acquire new assets and grow the asset column of their financial statement (Passive Income)

Developing a Business is all about creating new assets in the asset column of your financial statement. Bill Gates (Microsoft), Larry Page (Google), Mark Zuckerberg (Facebook), Dhirubhai Ambani (Reliance), Henry Ford (Ford Motors), Ray Kroc (McDonalds), Michael Dell (Dell Computers), Steve Jobs (Apple) have created their own Assets – Their own businesses which are multi-billion dollar empires today making them billionaires.

Business (& Real Estate) is the preferred asset class of the rich people. In fact, 99.99% of world’s rich people own at least one business in the asset column and that’s why they are rich and ultra-rich. So if you want to become very rich in your life than develop at least one successful business in your life.

Real Estate -

This is the second asset class which is preferred by Rich people. This is because the rich can acquire this asset class by using good debt (Mortgage Loan). Say for example, if the real estate property is worth of $ 5 Million than a rich can acquire it just by putting $ 1 Million down (20%). This is the main advantage of real estate investments.

You can use debt to acquire this asset and ultimately become more richer than ever.

Paper Assets -

These are basically the assets of the Middle class and Upper middle class. This is because these are the assets for capital gains only. The Examples are – Stocks, Bonds, paper Gold and Mutual Funds or any other kind of paper assets.

Rich also invest in these assets but not from their hard earned money but from the passive income generated by their other cashflow assets (Businesses & Real Estate). Thus, for Rich paper assets are the last asset classes to acquire while for the middle class this is the first asset class to acquire.

Today all the employees and self-employees around the world invest in this asset class mainly for the capital gains. But unfortunately, investing for the capital gains is the risky form of investing. While rich invest for both cashflow and capital gains.

Precious Metals (Gold & Silver) -

After 1971, the US Government has removed the gold standard and the US Dollar became free float currency means the US Government can print as much money as it want according to the need of the economy after 1971. And subsequently all the countries of the world have removed the gold standard.

Thus, the more money the banks and governments from all around the world will print, the price of the precious metals will go up more.

Well, of course Rich Invest in Gold. But the gold is not their primary asset class. This is because it is the Capital gains asset class. It doesn’t provide you any cashflow.

The problem with middle class people is that they invest in gold as a primary asset class and that’s why they will have to depend on only one kind of profit and that is capital gain. This is really a risky Investment strategy.

Diagram: 44 – Difference between Middle class and Rich Investing (Middle Class Invest for the Capital Gains while Rich Invest for Cashflow & Capital Gains Both.)

The Difference between Rich & Middle class investing -

The rich and middle class both invest in all of the above asset classes but in the different way. After all, all of the above are the assets and as we have learned in the previous lesson that to become rich, all you need to do is to acquire more assets. So the more assets you will acquire, the more rich you will become.

Thus, all of the above are after all the assets and can make you rich and richer. But the only problem with the middle class is that, they buy mainly Capital gain assets (Paper Assets & Precious Metals) from their hard earned money which is a risky thing. This is because the middle class have been taught in the school that Business is risky.

While Rich people mainly buy (or create) Cashflow (+ Capital Gain) Assets (Businesses & Real Estate). And from the income generated by their cashflow assets, they buy the capital gain assets like Gold and Paper Assets (Stocks, Bonds & Mutual Funds).

This is the single difference that can make you rich or middle class in the long run. Many middle class accumulate lots of assets in their Financial statements but most of them are paper assets & Gold – the capital gain assets only. And that’s why they will have to wait for years until the price of the asset goes up.

While Rich primarily buy the cashflow (+ Capital gains) assets so the day they acquire these assets, their income and cashflow also improves immediately. Thus, they can enjoy their life very well as well as acquire more assets from their increased income very easily.

Online Assets - Information Age Assets -

After the birth of the Internet in 1990, the entirely new asset class has been created in world known as – Web Assets or Web Properties.

The Examples are – Websites, Blogs, Forums & Domain Names.

These web properties tend to appreciate so much fast that even high school going kids started becoming millionaires before leaving their high schools. In fact, today many self-made billionaires are in their twenties and thirties only because of the web properties.

The founders of Facebook, Amazon, Google & eBay are the billionaires today. The reason why web properties appreciate so much faster is because the entire world is connected to the internet today which makes exponential growth of the web properties in its valuations as well as the cashflow. 

If you want to become very rich in your young age than try this asset class. This is because it is the only fastest appreciating asset class in the world which can make even a school going kid a millionaire or multi-millionaire before leaving his high school.

Summary:

If you want to become rich than acquire any kind of assets. Keep accumulating more and more assets out of your money. If you want to become rich than the only thing you need to focus is on the asset column of your financial statement and nothing else.

However, there is a huge difference between the middle class and rich investing. Middle class invest primarily in the paper assets and gold while the rich invest primarily in the businesses and real estate and after that acquire other capital gain assets like paper assets and gold.

So if you want to become rich than it is advisable to start a Business or real estate investing first. This is because these are the cashflow assets which can acquire other assets afterwards without much efforts.

Dholera CRS in Gujarat, India

Lesson: 2 Versus Liabilities Assets

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Lesson: 2 Assets Versus Liabilities

These are the another two terminologies which are not being taught in the school. And this is the reason most of the people remain middle class or poor and struggle financially for the entire life.

If you understand the meaning and the difference of the two words Assets and Liabilities than you can really become rich and ultra-rich in your life. Rich people teach their kids the meaning of these two words very clearly since their childhood and that’s why their children make excellent financial decisions when they grow younger.

Diagram 1 Financial Statement Showing Assets and Liabilities. Assets put Money into your pocket by generating cashflow while the liability takes money away from your pocket by making expenses.

Asset means anything which appreciates in its value (Capital Gains) and / or Put money into your Bank Accounts (Cashflow) weather you work or nor.

Liability means anything which depreciates in its value and / or Takes money out of your Bank Accounts.

These are the basic differences between the Assets and Liabilities. In other words, Anything which puts money into your pocket is an Asset while anything that takes money out of your pocket is a Liability.

Rich people always buy Assets while middle class people always buy liabilities and after that struggle financially. Remember that, rich are those who spend their most of the life accumulating Assets.

Examples of Assets are – Stocks, Bonds, Gold, Real Estate, Mutual Funds, Businesses, Art & Paintings, Rare Wined, Web Properties (Blogs, Websites & Domain names), Intellectual properties, Copyrights, Patents ….etc..

Examples of Liabilities are – Debt, Car Loan, Credit card outstandings, EMIs, Club memberships, Luxurious Cars, Watches, Clothes, Status Symbols, Country Houses….etc…

Diagram 2: Rich Focus on the Asset Column While the Middle Class focus on the Income (Hard Earned Money) and the Liability Column

Most of the middle class think that High Income is the indicator of financial well beingness. Middle class think that people who earn high income are rich. But this is a Myth.

The Truth is that, people who have more assets are rich. Income has nothing to do anything with your wealthiness. The more assets you own, the more rich you will become.

Rich people accumulate more and more assets in their life and that’s why they grow richer and richer. While Middle class people have a false belief that the higher they will earn, the richer they will become.

And that’s why middle class work harder and harder at their job places to earn more income. This is because they think that the higher income they will have, the more richer they will become.

Diagram 3: Financial Statement of the Middle class – Middle class work hard for the Active income and focus on buying liabilities and these liabilities make them expenses.

Diagram 4: Financial Statement of the Rich. Rich focus on growing their Asset column. They create, acquire and accumulate more and more assets in their asset column and these assets generate passive income for them.

But well, Rich know that Assets make anyone richer and richer. The main limitation of Job Income is that, the day you will stop working, you will lose that entire income. But the advantage of owning the asset is that, once you acquire the asset after that weather you work or not, sleep or travel the world, your asset will keep generating passive income for you for the rest of your life and for your future generations even after you.

And that’s why owning an Asset is the smart thing to do rather than working hard at your job place to increase your income. Rich know this secret of owning assets since generations and that’s why they teach their children since their childhood the basic difference between assets and liabilities and importance of owning the assets.

If you want to become rich in your life than always buy assets. Always focus on growing the Asset column of your financial statement. This is because rich always think of growing their Asset column of the financial statement.

While middle class always focus on their Income. Middle class always look for the ways to increase their income. And that’s why they work hard at their job places, do over time at their job place or even do the multiple part time jobs to increase their income.

But they don’t know that the day they will stop working, their entire income stream will suddenly disappear. Rich know this fact since their childhood and that’s why they focus their time, money and energy to build their Asset column. And once they build sufficient asset column, after that weather they work or not, the money from their asset (Passive income) will keep flowing into their bank accounts for the rest of their lives and even after that.

Have you ever think that why rich people don’t work for anyone else? Why don’t they like to do a job? Is this because they are rich? Nope. This is because the rich people know that working for someone else (Job) means trading your time in the exchange of the money. And the day you stop trading your time in the exchange of the money, your income will also stop. But well, if you have spent your time and energy to build assets in your life than after growing your asset column sufficiently, even if you stop working for the rest of your life, the income will still keep coming from your asset columns.

And this is the prime reason why rich people start developing their own Businesses, Investments and Assets since their very early life. This is because they know that the time is very valuable asset and that’s why they use their time and energy to create assets (Businesses & Investments) which can provide them unlimited cashflow weather they work, sleep or travel the world in the future.

Now, just think in your financial statement and the financial statement of the company for which you are working as an employee. Well, when you do a job means trade hours in the exchange of your time, you are developing the asset of someone else (The owner of the company) in exchange of a monthly paycheck.

In other words, when you work for someone else. You are growing the asset column of that person by putting your time and energy in that business and thus making the owner of that asset/business more richer.

So if you want to become rich or super rich in your life than start developing your own assets in your life. Never work for someone else (job) and trade your time in the exchange of the money.

So How Rich people Grow their Asset Column?

Keep in mind that, rich always think in the financial statements mainly in the Asset column of their financial statement. They always focus and work hard to grow the asset column of their financial statement. This is because they know very well that the asset column of the financial statement is the only thing which can make anyone Rich or Ultra-rich.

You can grow your asset column by 3 ways.

01) Acquiring Assets out of your Hard earned money

02) Convert Something into Asset

03) Creating new Assets in the world

The first way to grow the Asset column is – you simply acquire assets out of your income. Say for example, you buy stocks, bonds, gold, real estate, mutual funds, web properties or any other asset out of your hard earned money.

The second way to grow your asset column is, you convert something into assets. Say for Example, if you have a bicycle then you can give it on rent. Or if you have a good stamp collection then you can put your stamp collection in exhibition and generate cashflow from it and thus, you have converted something into the asset.

Diagram: 5: Ultra-rich (Billionaires) Create New Assets in their Asset Columns by developing a successful business and later on taking it to the public.

The third way to grow your asset column is, you create new assets in your asset column out of scratch. Super rich people think in this way and that’s why over the time they become billionaires. Creating asset means developing businesses out of scratch or crating some kind of asset out of nothing such as writing a novel, writing a book, recording a music, making an art or painting or making an online application or anything like that.

You will have to use your mind very well to create assets out of nothing in your asset column. Say for example, take the example of Bill Gates. He developed the operating system for computers - Windows (Previously DOS) which he created out of nothing. Take the Example of Larry page who developed Google, the world famous search engine. See the authors, singers and artists around you. All of they create assets out of nothing and become rich.

Thus, Rich teach their kids to focus mainly on the asset column of their financial statement. In fact, all the rich people around the world are busy with growing the asset column of their financial statement. They put their time, money and energy to grow their asset column.

In contrast, Middle class people put their all time, money and energy to grow their income. And that’s why the more money they earn, the more hard work they will have to do. But for rich, the more assets they will grow, the more money their assets will generate and the less hard work they will have to do.

So understand the basic difference between Assets and liabilities and spend your time and energy behind growing your asset column.

Many Financial Advisors and Finance Gurus around the world advise you to live below your means (It means Spend less than you Earn). Well, The basic logic behind this personal finance advise is that, by reducing your expenses, you increase your Cashflow (Income – Expense). And this increased cashflow is used to buy more Assets. But for the most of the people this advise doesn’t work. This is because they don’t divert their Cashflow to grow their Assets. They don’t use their cashflow to create and acquire more assets. And that’s why not the all the people in this world who live below their means can’t become rich. Remember that, living below your means will only make you rich if you are going to divert that cashflow to grow your Asset column by either creating new assets or acquiring assets out of your Cashflow.

Billionaires are Ultra-Rich (Billionaires) because of their Assets and not Because of their Income

Now, let us discuss something about the billionaires. There are almost 1100 Billionaires in the world according to Forbes. Do you know that why these people are Billionaires? Well, most of the people in this world think that they are billionaires because they have earned those billions of dollars. But well, This is not the Truth. The Truth is that, these people are Billionaire because of the Net worth of their Assets in their Asset columns. They are Billionaires because of the Valuations of their Assets in their Asset column is above a Billion dollar.

Say for Example, Bill Gates is a Billionaire and world’s richest person because his own stake (Shares/Asset) in his own corporation Microsoft is worth of Billions making him Forbes Billionaire. So the moral of the story is that, you don’t have to earn a billion dollars to become a billionaire. But you need to acquire or create assets in your asset column which become worth of billions in the future.

So focus on growing on your asset column rather than growing your Income like Middle class.

Celebrities, Doctors & Lawyers are high Income professionals but not all of them are Rich

Celebrities, Doctors and Lawyers are high income individuals. They earn lots of money in their financial statements but still not the all of them are rich or even billionaires. This is because they only earn high. The higher they earn the higher they will pay in taxes and less they will accumulate. Most of the high income professionals in this world have a false belief that they are Rich because their income is high. And that’s why they never focus on growing their Asset column of the financial statement.

But the truth is that, you can be rich only by acquiring more assets in your asset column. You can not be rich by earning high income and without accumulating assets. This is because the day you stop working behind your hard earned income, it will suddenly stop while the income from your asset (passive income) will keep flowing into your bank accounts weather you work or not?

Diagram: 6: Biggest Offpaper Assets and Liabilities

Biggest Off-paper Assets and Liabilities

Some assets and liabilities are those which you can not write down or include on your Financial statements. This is because they are intangible. Here are they.

The Biggest Off-paper Assets are,

01) Time

02) Financial Knowledge

The Biggest Off-paper Liabilities are,

01) Spouse

02) Friends

Rich accumulate more Assets and less liabilities. And this is the reason why true rich people understand the value of their time. They have been taught since their childhood from their parents that, The Los Money can be recovered but the lost time can never be recovered. And that’s why the rich are time savvy. They spend their time in such a manner that it will produce On-paper assets. No matter how smart you become financially but if you become smart in your old age than there is no meaning. This is because you have lost your time to become financially smart. And that’s why time is the biggest asset.

Another great Off-paper Asset is your Financial Knowledge means Knowledge about money and how it works. Right now you are reading this article and gaining the Financial Education. This will be your biggest off-paper asset which will make you rich in the future. If you are young today but don’t have the Financial Education of money than your biggest asset –Time is of no value. This is because you don’t know what to do with your time. You don’t have any idea that you need to focus your time to grow the asset column of your financial statement.

Now, let us talk about the off-paper Liabilities. Always chose your spouse and Friends very carefully. This is because spouse and friends which are not carefully chosen can be your biggest liability. They will suck your Biggest Asset – Time and make you middle class or poor. You would have focus that time to grow your Asset column otherwise.

Exercises

Ex: 1 Make the habit of thinking about the Asset column of your financial statement. Before spending your time, energy and money always think first that how will your this particular move will help to grow your asset column?

Ex: 2 Take a paper and pencil and draw the Financial Statement line diagram on it. And think that How you can create new assets in your asset column? Think of starting your own business.

Ex: 3 Take a paper and pencil and make a list of Assets in one column and liabilities in the other column. Now, think that which are the assets that you understand more? Focus on those assets and acquire more and more of those assets and grow your asset column like anything.