I recently read the book “Rich Dad, Poor Dad” (borrowed it from the library, being a cheapass). It really opened my eyes. Robert Kiyosaki doesn’t blame anyone for anything; he simply tries to educate the poor to become rich, or at least have enough income to live a good life.
Sadly, only 1 out of 1000 will follow his advice and make serious adjustments to their finances. Americans on average borrow 2% more than they earn! Why the hell would normal people buy new stereos or MP3 players on credit, when they can’t even repay it back? Yet this is what normal people do.
Before reading Rich Dad Poor Dad, I spent 80% of my income on instant gratification (restaurants, new mobile phone, other stuff teenagers buy), saved 10%, and used 10% to pay for my school books.
Since I read and understood the book, I spent 80% of my income on investment and business (currently negotiating with banks for mortgage for an investment property, set up business which is making enough passive income to support me), 10% on school books, and only 10% for instant gratification.
Yet one of my friends earns almost double my income. He recently blew $1000 on a new mobile phone, $400 on new clothes, and $5000 on a vacation to Europe. He is “poor”, yet his parents are well off with a solid income.
I’m not communist, but I believe that if we were all to seriously review our financial situation, and the financial situation of the rich, we would find completely different habits. When I worked for a local property investor, to my surprise I discovered when she was younger, she never had any “luxury” items! No cars, boats, etc despite a high income. Her first luxury car was brought when she was 30, and with a property income of over $100,000. I was shocked! I didn’t understand then how anyone could survive without the luxuries of new mobile phones, computer games, or other instant entertainment.
Its sad that our consumer society wants nothing more than instant gratification. What is more sad is that people are becoming poor because of it. When was the last time you ate out? How much did your mobile phone cost? How much internet fees do you incur? Phone calls? How much do your clothes make?
And the big question: how much of your income do you spend on smart investments, excluding bank deposit and fund management?
By the way, do you know if you saved $20 a day (when you grow up and start working) then put it into property, you will be a millionaire within 37 years? Amazing isn’t it, yet people are still so poor. $20 a day can be saved by not buying any luxury goods, not buying a new watch, buying clothes at discount sales and avoiding brand names, not eating out (making your own food), cutting back on all soft drinks (which is bad for you anyway), and limiting entertainment to one night per week. Its achieveable.