Look in the mirror… and meet your main asset
Sometime ago I discussed the difference between possessions, assets and liabilities. Provided that assets are all things that ‘put money into your pocket’, your main asset is your labour and you as its subject. In other words, the main thing that puts money into your pocket is you through your paid work. This is also a point that Joe Dominguez and Vicki Robin drive home very convincingly in their book Your Money or Your Life: your main source of wealth is your income. Pretty obvious, right? Continue reading
The Money Principle financial health: who controls the flows of your money-river?
Now you have a vision of the island you would like your life to be and of the island that it is. Today I would like to take us through four further steps. These are:
a) Identifying what are the key features of the two islands (the one we are and the one we aspire to be) and how these are different;
b) Focusing on the resources that will move us from the island we are to the island we aspire to be;
c) Considering who controls the inflow of these resources; and
d) Thinking about the outflows. Continue reading
What is money?
“Money is something you have to make in case you don’t die.”
Max Asnas
According to the all mighty Wikipedia ‘money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a giver country or socio-economic context.’ Money has three main functions, namely it is a medium of exchange, a unit of account and a store of value. In the near past money was what we have come to refer to as ‘commodity money’ or ‘commodity currency’ – this means that money had value because of the material from which it was made or because there was a commodity or precious metals it was linked to. Today most countries have ‘fiat money’ – this is money the value of which stems from being declared by a government to be a ‘legal tender’ (or accepted for payment of different kinds).
Good definition, this is. But does it help me understand what money is and, even more importantly, how to control it? Hardly! I need to go several steps further for that; and several steps more towards everyday language and examples, I suppose. Otherwise I am no wiser than I was when I asked this question. Continue reading
Kiyosaki, Robert and Sharon Lechter (1997) Rich Dad Poor Dad
Beyond the nonsense: seven useful messages
In June 2002 Rob Walker published an article entitled ‘Why Millions Buy Rich Dad Poor Dad’s nonsense?’. Why irrespective of the questionable robustness of the financial advice millions buy and read this book rather than look for other, much more reliable, sources, the author asked. He goes on to identify four elements to the success formula, or if you prefer gimmicks. These are
‘First, there’s the mandatory declaration that it isn’t a get-rich-quick book. Second, there’s the repeated claim that “the rich” have “secrets” that led to their success and will herein be revealed. Third, the material is presented as a series of “lessons.” And fourth, those lessons are positioned as being counterintuitive revelations that effectively undercut various popular “myths.” The book’s back cover promises, among other things, that it will “explode the myth that you need to earn a high income to become rich.’
This article provoked a rather heated debate on the blog. Comments show that Rich Dad Poor Dad won a decisive victory over Rob Walker. Many pointed out that the book is an imaginative source of basic information about personal finance and financial management.
I was really pleased to read this because Rich Dad Poor Dad is where I started. After discovering the extent of the financial trouble we were in, after the range of emotion from anger to despair I decided that the way forward is to get myself educated. My belief at the time was that I cannot understand money; I was not interesting in understanding money either. Reading something easy and accessible was a way forward.
And there I was; sitting on the sofa one distant afternoon and reading the whole book in about three hours. Did I read it as a novel? Yes I did. Did it give me an idea about the basic concepts of personal finance management? Yes it did. Did it set me on the way to further learning? It surely did. But did I find it annoyingly American? Yes I did.
Cutting through the repetition, the marketing tricks, the over-emphasis on income generating real estate and generally the irritation, there are the seven useful and valuable messages I got from Rich Dad Poor Dad. These are: Continue reading
