Hi friends and welcome to Life Lessons.
All of us want to get
wealthy. But we fail to notice the mindset of rich people. If you want to know
this unique mindset, you are at the right place. We all think that rich people
earn in large amounts. It is true. But there are many other factors that make
and keep them rich always.
Rich people not
only earn large amounts, they also have various techniques to earn and manage
this finance in efficient way. It is fact that everything in this aspect cannot
be described in one place but I would try to share few important techniques or
the Mindset of rich people that we can inculcate in us to generate riches.
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1. Managing Expenses:
First and the fore most change that needs to be inculcated is the way of managing expenses. Whenever there is a hike in income from a new source is generated, people think of going for new expenses. This is the mindset which should be avoided.
Ram and Shyam got a bonus from their job of Rs1, 00,000. Both dreamed of owning a big television in their home. After receiving the bonus amount, Ram went straight for buying a big television. On the other hand Shyam took a different decision. He decided to save the amount. He invested the same in a well known mutual fund scheme.
After 5 years, the life of television bought by Ram came to an end. Whereas Shyam’s investment tripled in amount and received an amount Rs3, 15,000 in return.
We can see a huge difference between the current values of the same amount (Rs 1, 00,000) between them. Both of them received same amount of money. Ram decided to increase his expense accordingly. Shyam decided to increase his savings. This is the interesting essence that needs to be understood.
It is
important to note that whenever our income increases, we need to look forward
to increase savings not the expenses. Thus managing expenses comes to play
here. This is one of those fundamental steps which help creating riches.
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2. Don’t hesitate to plan Big
To begin creating something big, planning of such big is inevitable. To achieve anything, we need to dream and plan for it. A person who cannot think of creating big can never do big.
A decade ago, we used to live in a rented house. Despite of complications in our family finance, we always managed to pay the rents in time. Due to delay in receiving salary, we couldn’t clear the rent in time. We delayed the payment by 5 days. The house owner went aggressive on us due to this. He used very abusive words due to delay in payment.
He had a perception that we are financially low and can’t develop in life. I was not in favor for such perception against me. I wanted to change the scenario. I planned big. I wanted a owned house and also have few more houses that can be leased to show him that I was not less than him in any way.
Today I have my own house; I have a couple of other houses that are given to lease. I could only do this as I dreamed and planned for it.
Don’t hesitate to think big. It may take time to get it big, but this is the foundation for making something different and big.
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3. Prioritize your surroundings before deciding finance
Tej wanted to buy a large premium sofa set for his house. This sofa set would cost him no less than Rs1,00,000. He was aware of the importance of savings and investing. He knew that investing the same amount would give him returns rather than purchasing a premium sofa set.
Recently his sister’s marriage got fixed. There was a need of minor renovations for the house. In this situation the need for sofa set also arose. His family also insisted that sofa set was the need of the day.
He was in a complete dilemma. If he avoided the plan, he would be tagged with the name Greedy fellow.
This is a reasonable confusion that many people can get into. It is valid to think twice before deciding in such situation. In the current scenario, apart from basic needs some other items have also turned into a need? These may include mobile phones, some appliances and furniture in home etc. Deciding them may be a confusing parts as illustrated n the above lines.
In these sorts of situations, it is important to prioritize the surroundings. What does it mean? We need to put all the postulates in a prioritized manner and then decide accordingly.
In case of Tej, marriage is a part of his prestige in his society. Here he may decide to purchase one if he feel that prestige is the more important than savings to him.
Tej has purchased a budget sofa set that cost him around Rs 25,000. This made his liability minimal moreover the need was also fulfilled. Thus he was still able to stick to his policy of saving and investing.
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4. Strive for Passive income.
Passive income in short- is that form of income of an individual that is paid regularly without any effort. This means that the individual gets regular income without any physical or mental work done for it. The best example may be a commercial space or a house lent on lease, an automated firm managed by loyal managers.
We see lot of people working for money. Some may even work extra time to generate extra money. It is not fair to comment on this process of Active income. People with no financial backgrounds should go through it to start generating finances. But active income if any is not going to work out on long scale. It is because the efficiency of the person is not going to be the same for his (her) whole life. As he (she) grows old, efficiency in work would definitely hamper. Thus exchanging time for money would not always work.
The only solution for safe and better finance is to build multiple sources of Passive income. This is the best kept secret of rich people. It is because almost 90% of a rich person’s income is passive. It is practical and true to understand that there is always a limit for active income. When a person exchanges time for money, it is always limited, since he (she) can have limited time to offer.
But this is not the case with passive mode of income. There is no limit of passive income. Depending upon the capacity of an individual to manage and create it, the passive income can account to millions and billions. To stay rich having multiple sources of passive income is the only safe way.
It is true that building passive income sources requires time and money. But it should be the ultimate goal of an individual to get secure finances and get rich for generations together.
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5. Look for opportunities.
Rich people always look for opportunities. They strive to find opportunities in all the possible ways, select one of them and proceed in this direction. Common people focus on the obstacles that they may face when they do anything; this mistake is not done by rich people.
Karan, 25 wanted to take a franchise of a big car showroom. He had half of the investment needed for the same, he was also aware that the other half can be easily financed by any of the financial institutes. His parents and friends were not confident about the decision. They feared of the obstacles that Karan would face in this process. Since car business was quite new for a young guy like Karan, they suggested to not to enter that business.
On the other hand, Karan was confident on his decision. In few months he made all the required investment ready and started the business. He faced challenges in his way in many areas; he took time to learn everything and went forward. After few years, everything began to turn good. He started to see large amount of profits. He was able to recover all the investment that he put on the project.
The small narration above can illustrate the difference between the rich mind set and the common man mindset. Rich people only look at the opportunity. Karan saw that there was no car showroom on his town. So he planned to grab the opportunity. He never thought of the obstacles he was going to face. He went focused on his plan facing the obstacles one by one and finally became successful and rich.
To be rich, always look at the opportunities before looking at the obstacles.
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6. Be genuine always
India is a unique country in many ways. Once the country was full of riches and genuine people. Despite of improvements, various invasions polluted the real essence of the country. Back when kings used to rule the country, the essence of life in a society is being genuine.
Later some greedy subordinates of kings and other great people began to loot the treasures behind their back. These people have saved lots of money by manipulating various transactions. Many of them never enjoyed their lives nor did they develop themselves with this money.
It is easy to understand the reason behind it. Since all the money they tried to save is corrupted, they were not in a position to expose it. Thus their savings were never used in any investments. Thus this looted money began to diminish without any use as it passed through generations.
Thus being genuine is important at any transaction. This not only gives you a satisfaction at the end of the day but also brings trust of people on you. This in turn increases the chance of getting a good circle around us thus making our business a success easily. At the end of the day any business or work can only work out when there is belief in that brand or the person.
Bonus: Know the Cash Flow Quadrant.
If you want to get rich, it is important to understand the Cash Flow quadrant in life. The Cash Flow quadrant explains the way in which one has to proceed in life to get rich and successful. The pictorial demonstration of the quadrant is given below:
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| Image Source: John Chow |
It basically has four quadrants (Stages), depicting four different financial stages in life. These are:
1. The stage1 is depicted with letter ‘E’. This implies ‘Employee’. This is the first stage of finance which depicts that one has to get into a good job in beginning of life to generate initial capital for future plans. This stage generally generated 5% of total wealth in life on average. Here wealth is directly proportional to time invested.
2. Stage 2 is depicted by ‘S’. This implies ‘Self-employed’. When the individual has generated enough wealth in previous stage, it is time to be self-employed. Here the amount of active work determines the income not the time.
3. Stage 3 is depicted by ‘B’. This implies ‘Business owner’. After the individual gets enough experience in owning a responsibility; he (she) gradually shifts the work into a business. Here the individual begins to hire people to work for them since their exposure and work broad here. Thus the individual starts to earn more than the active work he (She) invested.
4. Stage 4 is depicted by ‘I’. This implies ‘Investor’. After some time after owning a successful business, an individual generates enough money to create own investments thus turning into a investor. In this stage there is no need to work, rather the individual can invest the finance and see growing it. This is nothing but generating passive income as a whole.
When
a person starts from scratch and aims to get rich, this should be the ultimate
root map. I have learned this concept from famous personality Robert
Kiyosaki. He is the author of bestselling books Richdad poor dad and Cash Flow quadrant.
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| Get this Book From Amazon here Book Size: 336 pages |
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| Get this Book From Amazon Here Book Size: 360 pages |
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The quadrant may not lie satisfactory for all the people. For example: son of a rich person may not start from scratch. If he is able to start with sound finance, he can directly start owning a business and invest in various areas. At the end of the day, the need of the day is the most possible ways of passive income.
Summary:
There are many techniques that are used by rich people exposed. Since they are already exposed, many people started implementing them in their life. But the truth is that many of these tips reach saturation after some time when majority of the population began to put it in action. Building Passive income sources is an evergreen technique on the contrary. Whatever may be the extent one is able to manage, passive income is always advisable.
It is important to excavate the set of fresh techniques time to time to get rich. I hope I have provided at least a part of such fresh techniques in these episodes. I would share any new techniques if noticed in my future episodes.
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