Knowledge and a basic understanding of finance and investments are necessary for every individual as the same can impact his decision-making ability. Having a basic understanding of these financial terms can uplift the lives of the common masses to a great extent.

The Institute of Chartered Accountants of India has launched it’s “Vitiyagyan Abhiyaan” as a noble initiative to educate the Indian common masses about the basic terms of banking, taxation, insurance and important subjects of finance making it a national drive.

A person can be highly educated, professionally successful yet financially illiterate and this creates a huge difference. Robert Kiyosaki, author and innovator of “Rich Dad” brand has already emphasized the importance of financial literacy in his all time best seller “Rich Dad Poor Dad” and other financial literacy books.

The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth. Great opportunities are not seen with your eyes. They are seen with your mind. – Robert Kiyosaki

RIch Dad Poor Dad

Few pointers as Kiyosaki highlights in his legendary book “RIch Dad Poor Dad”

What you know is your greatest wealth. It is what you don’t know that is your greatest risk. There is always a risk so learn to manage risk instead of avoiding it.

You need to develop three main skills to be an intelligent investor – find an opportunity that everyone else missed, raise money and organize smart people around you who can guide and assist you in creating great wealth.

Kiyosaki says, “I do not know the first thing about putting components of a computer together, but I do know how to put pieces of opportunities together or know people who know how.”

Rich don’t work for money, instead, their money works for them. RIch people build assets while others liabilities. Most people work for their companies, for governments (as taxes) and for banks (as interests on loans) yet they forget to work for themselves (building assets).

An asset puts money in your pocket while a liability takes money out of your pocket. Any person’s cash flow tells his real story about how he handles his money. The majority of people let their lack of money stop them from making a deal.

For most people, as the pain of losing money is far greater than the joy of being rich, they don’t win financially. In such a situation a quest for a financial dream turns into a financial nightmare.

So many people want money yet when it comes to taking risks they get trapped by emotions of fear and greed. To gain financial freedom one must have an open mindset. Words like “I can’t afford it” shuts down your brain while words “How can I afford it?” open up possibilities, excitement and dreams. One must work to learn, not just work for money. Failure inspires winners while failure defeats losers.

Always pay yourself first then only to the rest of the world. What does it mean? Always pay yourself by saving a little percentage of what you earn, any excess is a bonus. Your savings rate is more important than your investment rate. It’s more important to save than how much you get in return. Even if you save a nominal amount regularly, over a period of time, it can accumulate to a great wealth with the benefits of cumulative returns.

Don’t get into large debts. Keep your expenses low. Think before you buy something. Don’t just jump into impulse buying. Give yourself time before choosing whether you need to buy something. At least give a day, a week, or month’s time before taking your decisions depending on what kind of item you are buying. Ask yourself – do you really need it? If yes, then go for it. Most things you desire become obsolete with time.

Build assets first. Real assets are things or businesses that keep generating revenues to you for your future needs. Most people get trapped in the rat race and buy things which they actually don’t need compring themselves as their friends or neighbors have brought.

Let the pressure build to buy something, Use this pressure to build something that generates more money and then with this extra money buy the luxuries you want.

There is gold everywhere, most people are not able to see it. We all have the power of choice, most people do not choose to be rich. Choose the right kind of friends and people around you, who have a growth mindset. Stay away from people who always have reasons to tell you that something won’t work.

If you want new results, stop doing the things you usually do. Always look for new ideas and #thinkovate ways to achieve them. Find someone who already has reached where you wish to reach, follow the techniques and principles they applied to reach there. Make them your mentor. Learn by reading books and magazines in that field, take classes or attend seminars / webinars, listen to podcasts, acquire knowledge and apply it to achieve your goal.

Master a formula and then learn a new one. People say you become what you eat, it’s rather you become what you learn as you are the sculptor of your own life, learn great success formulas. Be a lifelong learner.

Harness the power of good advice by paying fees to professionals so as to use their great advice to enhance your returns on money.

See what others miss to see. Live within your means before you start to expand your means. Do not incur new long term debt.

Rich people acquire assets while poor and middle class acquire liabilities which they assume as assets. Every liability you have makes you an asset of those you owe.

It’s not about how much money you make but how much money you keep. Your savings rate is more important than your investment returns.

Most people work all their lives paying for a house they never own. They buy a new house every few years each time incurring a new 30 years loan to pay off their mortgage.

Real assets are built by having a business where it runs smoothly even when the owner is not present, where they are run by others on your behalf. If the owner has to work, it’s like a job.

Stocks, bonds, income generating real estates, notes, royalties from intellectual property such as music, scripts and patents, or anything else that has value, produces income and has a ready market. Rich people create corporations to build their assets and its the biggest secret of their success.

Rich buy assets, poor have only expenses and middle class buy liabilities (luxuries) which they think are assets. Rich people focus on their asset columns while all others on their income statements. Financial struggle is often the result of people working their whole life for someone else.

What other great financial tips would you like to add to this? Drop them in your comments below.