Most people fall into the trap of building liabilities without realizing that’s what they are doing, they are financially illiterate, and fail to understand the difference between an income statement and a balance sheet, and the relationship between the two.
Having a good career only helps a person become more financially secure if they invest the additional money generated in the purchase of income generating assets. What constitutes an asset? An asset is anything that: Has value. Produces income. Appreciates in value and has a ready market for resale.
An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first.
Specialization is a trap that should be avoided. It’s more beneficial to know a little about a lot of business subjects than to know everything there is to know everything about just one area. By having a broad business background, you have more options available to you.
‘‘Do what you feel in your heart to be right — for you’ll be criticized anyway. You’ll be damned if you do, and damned if you don’t.’’
The rich look at a loss as a temporary setback. The poor look at a loss as a permanent state of affairs. “I always try and turn every disaster into an opportunity.’’ –John D. Rockefeller
As a general rule, successful friends will enjoy talking about money — it will be a subject they’re interested in and well read on. By contrast, unsuccessful friends will often avoid the subject like the plague –you’ll learn by observing what they do than you will by discussing things with them.
Make your investments freehold. Whenever you make an investment, your first goal (naturally) is to buy something that will increase in value. As that occurs, liquidate part of your position until your original capital has been repaid. You can now stop worrying about market fluctuations, because your capital has been returned. At this happy point, your asset is now completely freehold. Any further gains are the icing on the cake, or if the asset starts to lose value, it really won’t impact on your financial health — it will just delay the accomplishment of financial wealth.