In his number one selling book ‘Rich Dad Poor Dad’, American businessman, investor, author and motivational speaker Robert Kiyosaki sheds light on an obvious truth that the rich think differently. While the book has its critics, ‘Rich Dad Poor Dad’ makes for a good starter’s read. It challenges the potential entrepreneur and investor to assess how they think about financial management and wealth creation. Robert encourages the reader to become financially literate and understand the nuances and distinctions between the ‘rich’ mindset and the ‘poor’ or ‘working middle class’ mindset.
“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket” (Robert Kiyosaki).
One of these shades in thinking is the difference in definition of assets and liabilities. Many home buyers over the years have generally accepted their primary residence as an asset. Given Robert’s definition of an asset, your home is not an asset as it does not produce a positive cash flow. Yes, the definition doesn’t follow general Accounting standards and Robert acknowledges this, but the point is to focus on positive cash flow for wealth creation. In property terms there are arguments for negative gearing, while the cash returns on the actual property might be negative the strategy is supposed to have a secondary positive benefit in the reduction of tax payable elsewhere.
The book makes other notable distinctions such as “wealth is a person’s ability to survive so many number of days forward…or if I stopped working today, how long could I survive?” and “rich people acquire assets. The poor and middle class acquire liabilities thinking they are assets”.
Small nuances and distinctions in thinking can make a huge difference in life and investment results. At BMT we are dedicated towards building a community of smarter property investors Australia wide. We spread the gospel of tax depreciation and how it can save you thousands of dollars. The key is to be well informed with the right information. So arm yourself, educate yourself to make smarter and wiser financial and investment decisions. Which brings me to the point of this blog post, below is a link to the latest Westpac, Private Wealth, BT Financial Group report. It’s their quarterly High Net Worth Investor (HNWI) report, and it’s an insight into the investment intentions of wealthy Australians.
Have a read, compare your thinking and let us know how you fared. Are you thinking like the rich and Australia’s High Nett Worth Investors or do you need to assess the way you think about your finances and investment decisions?
http://bit.ly/BMThnwi