Creating Wealth : Chapter 3

*rich dad series is too hard to 'squeeze', so I decided to continue this for a while.

Chapter 3 :
A Fool and His Money Are Soon Parted

but why is that?
because a fool doesn' know how to manage money!

"give a man a fish and you feed him for a day.
teach a man to fish and you feed him for a lifetime"

any approach that doesn't teach the principles of wealth is doomed to failure.

THE SEVEN WEALTH PRINCIPLE.

wealth principle + attitudes of a wealthy mindset = the foundation of your wealth pyramid.

Wealth Principle #1:
Don't Count Your Dollars Until They Have Passed Through
the Strainer of Taxes and Inflation.

Wealth Principle #2:
Make Maximum Use of Your Assets.
Sacrifice to Invest in Things Which Go Up in Value.

"appearance of wealth" - [fancy cars, fine clothes, stereos etc]
make people looks rich but in reality the become poorer each and every day.

Avoid, as much as possible, spending any money for consumer goods which go down in value.
Only borrow money to make money.

The wealth seeker choosed sacrifice and the poverty seeker chooses instant gratification.
The poverty seeker wants what he wants and he wants it now!
The welath seeker tries to make every dollar count.

Wealth Principle #3:
Don't Diversify.
Concentrate All of Your Eggs in the Right Basket.

Andrew Carnegie :
"put all of your eggs in one basket and then watch that absket"
There is a time to diversify and a time to concentrate.
if you are just starting, you CONCENTRATE.

Don't dissipate your energies in a dozen different directions.
become an expert, and when you fail, learn from your failures.

Invest Heavily In Your Strong Investment.
Make It The Workhorse Of Your Program.
Keep Only A Small Amount On Reserve.

Wealth Principle #4:
Wealth Seeker Are Always On The Offensive,
Not On The Defensive.

from a parable:
"Thou wicked and slothful servant[who got 1 talent but afraid to use it]....
Take therefore the talent from him, and give it unto him which hath ten talents
[who originally has five talents and worked to make it ten]....And cast ye the Unprofitable Servant into outer darkness."

The best defense is a good offense.

Wealth Principle #5:
Money Must Multiply at Wealth-Producing Rates of Return.

The answer is to use leverage. Leverage is debt.
Most had not acquired wealthy mindsets because of their fear of debt.
but wealthy thinkers learn how to control debt...
a little sacrifice, and a lot of leverage...

Leverage, the powerhouse of any investment plan, must be used carefully
and only in conjunction with the right investments.

Wealth Principle #6:
Choose Investments That Are Both Powerful and Stable.

Power and Stability.
Power - the ability of an investment to grow at high wealth-producing rates of growth.
Stability - the ability of an investment to grow steadily, surely, relentlessly upward in value
without broad fluctuations up of down in price.

The only way for an investment to achieve liquidity is to give up something of value.
Stability is more important than liquidity.
The key to becoming wealthy in a "when-to" investment is to learn when to buy and when to sell.
timing is of the essence.

BUT, I would rather be a "how-to" investment adviser.
not when to buy them but how to buy them...

HOW-TO inevestments are rarely liquid, are always management intensive, require a higher degree of expertise
....but they produce wealth.

Don't Wait To Buy Real Estate. Buy Real Estate And Wait.

Wealth Principle #7:
Control Is Essential.

Somehow, somewhere along the line, we transferred ultimate control of our money to someone else.

There will be tempting offers.
but remember Wealth Principle #3

You Concentrate Heavily Into Your Strong Suit.
and nothing else.

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next chapter preview
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Part Two
The Creating Wealth Strategy
Chapter 4
Launching Yourself into Financial Self-Reliance.

blogger notes : this will be a deeper discussion than just general numbered points.
and eventually leads to real estate strategy. anyway this is one of the best books I read.