What exactly is it that separates the wealthy from the rest of us? This is an essential question that isn’t asked nearly often enough. On first considering the question, you may be tempted to give answers such as, “Having wealthy parents†or “Winning the lottery†or even “Working at a cushy, high-paying job.†Indeed, anyone in any of the aforementioned circumstances can count his or herself among the very lucky.
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Unfortunately for these people, however, being lucky isn’t all it takes to become rich. Robert Kiyosaki, author of the best-selling Rich Dad, Poor Dad books claims that being rich has more to do with how much money you hold on to than how much money you have coming in.
Kiyosaki’s father, the so-called “Poor Dad,†is a great example of a well educated man blessed with a great career who was nonetheless poor, because he couldn’t seem to keep any of the money he was earning.
The good news for you, is that becoming rich has less to do with external factors like your job or whether you were born a Rockefeller, which you can’t control, and more to do with internal factors which you can.
Whether you ever become rich or not is determined, in large part, by nothing more than how you think.
Kiyosaki’s “Rich Dad†used a graph entitled the Cash Flow Quadrant to explain this principle, separating people into four groups. ‘E’s and ‘S’s, or employees and those who are self-employed, occupy one half of the graph. ‘B’s and ‘I’s, or businesspeople and investors were on the other. Robert Kiyosaki claimed that, in addition to representing the source of a person’s cash flow, these categories served as a window into how different type of people think about money.
Furthermore, Kiyosaki explains, individuals don’t land in one quadrant or another by a roll of the dice.
According to Kiyosaki, the people who fit into these four categories are fundamentally different in their thoughts and emotions, and these essential differences drive individuals to behave differently towards their money.
What’s more, Kiyosaki says, it is that emotional difference that determines to which quadrant a person is drawn. And, he says, you can always tell which quadrant a person is coming from simply by listening to what they say. If you hear a person talking primarily about their benefits and job security, then that person is coming from Kiyosaki’s E or employee quadrant. He also goes on to say that it is perfectly all right to live your life in the E quadrant if security is indeed the most important thing to you. But, he adds, the E quadrant is the most difficult quadrant from which to become rich.
Though the revelation that wealth simply depends on your attitude and personality may initially seem rather intimidating, you should take it as encouragement. Even if you don’t see yourself as a lucky person right now, rest assured that you can, if you have the drive, become wealthy.
Real estate is a great place to start for prospective investors; it’s what made “Rich Dad†rich in the first place! In order to become a real estate investor and start building your fortune, all you have to do is make a decision to stop working for a paycheck, and put your paycheck to work for you.
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When You Think Real Estate, You Think Rich
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If you’re new to investing, this stock market tutorial will give you a general overview of stocks and demystify the whole process.
There is a common misconception that only the wealthy can invest in the stock market. This is simply not true.
It is essential to have a general understanding of stocks before you begin investing. Since you have chosen to read a stock market tutorial, you’re clearly taking the initiative needed to join in on this wonderful opportunity to earn additional income.
This stock market tutorial will discuss just the basics on stocks. Upon finishing, move on to the next level of advancement. Before long you’ll be a stock market tutorial graduate! Perhaps you’ll be the next Donald Trump someday! But let’s not get too far ahead of ourselves!
Where Do People Learn About the Stock Market?
Many jobs will offer stock options to their employees through the company. A simple investment such as this can result in some wonderful long term returns.
Another place people get started with stocks is from a family member such as a parent who takes the time to teach them. Some couples handle their stocks together, and some parents talk to their teenage children about stocks.
Other sources for information on the stock market include: a stock market tutorial such as this one, books, business magazines, and more.
What Are Stocks?
Stocks are portions of ownership (also called “sharesâ€) in a company. Growing companies sell these shares to help fund further development.
Why Should You Invest?
The question of whether to invest is yours to decide. Let’s assume since you’re reading a stock market tutorial you’re already convinced. You may still want a few reasons to invest, though. Here are some benefits to investing in the stock market:
Stocks grow over time. When the stock grows you can sell it at a higher price and thereby turn a profit. However, in selling it, you relinquish the opportunity to generate future income from that stock to the new investor.
The main reason to invest in stocks is that you can make more money more quickly, if you invest in the right stocks, than you can through other methods of investing.
Types of Stocks
Stock types are broken down by the risk involved. There are low risk stocks, moderate risk, and high risk. These terms seem fairly self-explanatory even in a basic stock market tutorial.
Low risk stocks are best when you start out. As you might guess, you can invest in low risk stocks without negatively impacting your finances in a major way. The lowest types of risk are found in older, historically successful companies. Newer companies whose future is uncertain are considered high risk.
How Do You Choose What Particular Stocks To Invest In?
There are many factors that can affect the desirability of a stock. One is called price to earnings ratio. Is the company making money? Have their profits increased over the past year? Are they in debt over thirty percent? There are many others.
This is where having a stock broker comes in handy. A stock broker can help you keep track of your facts about various companies and make recommendations on which ones may be wise investments.
The necessity of your involvement in the research of companies before investing should never be underestimated. You don’t want to just trust your broker with your money. You want to work as a team.
If you intend to get serious about investing in stocks, you’ll need to continuously monitor the market on a daily basis online, on television, and in print.
Hopefully this very basic stock market tutorial has taken the mystery out of investing in the stock market. This is only the beginning of what could be a very prosperous future for you and your family! Just be careful and be diligent with your investments!
About the Author: Steven Miller is passionate in learning financial freedom & wealth creation with 21st Century Academy’s self-made millionaire Jamie McIntyre who has learned from the likes of Tony Robbins, Robert Kiyosaki and many more.
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Stock Market Tutorial: The Bare Basics
Most people thinking about their future always would like to think about availing of some attractive financial products that will effectively be able to provide additional income for them as well as their families especially at the time of their retirement. This will take some time to consider most especially in trying to choose which will provide the best option depending on one’s situation or circumstances. Among the products available out there are a host of annuities.
For your information, an annuity is simply an agreement for an organization (an insurance company) to pay another an income stream in the form of regular payments in exchange for investment given in the form of premiums. There are various types of annuities that people can choose from. One of those choices is fixed annuity.
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In a fixed annuity, an individual receives a fixed and guaranteed regular income for the term of the agreed contract. This term usually covers the duration of the individual’s life. Fixed annuities also provide a guaranteed interest rate for the investment sum of the policy. The advantage of a fixed annuity contract is that it has a cash surrender value which can be availed in partial amounts or in its entirety before or during the annuity period.
In a fixed tax-deferred annuity, the individual is allowed to invest in a annuity with an accumulation period wherein taxes on earnings are deferred or delayed until a certain term. The advantage of this is that it allows your investment to grow faster because it earns an interest on the money that you would have otherwise pay to taxes every year. The individual benefits from compounding of the tax-deferred earnings, that is, until he makes a withdrawal or begins receiving his annuity income.
Fixed tax-deferred annuities are safe as investment income especially for people planning for their retirement. Every qualified life insurance company issuing such tax-deferred income investment instruments are required to meet its contractual obligations. This is made possible by companies establishing reserves that should be equal to the withdrawal value of every annuity policy at all times. Aside from the reserves, the insurance companies are legally obligated by state law that certain levels of capital and surplus be met in order to further increase the protection of the policy holders.
As an added benefit to fixed tax-deferred annuities, they are not subject to withholding taxes while they are compounding. This makes such policies the best option for those people planning to save money for a long period of time. The longer the investment stays without any withdrawals or income payouts made, the longer the growth and the higher the earnings that it will make for the policy holder due to the tax deferment.
What makes tax-deferred annuities attractive is that they do not mature like other instruments such as bonds and certificates of deposit. The principal as well as the interest of your annuity policy will continue to earn interest until you finally withdraw an amount from it or if one reaches the age of a hundred years. You can let your money grow even more if you let it. But what makes tax-deferred annuities even better is that you will always have that option available to make necessary withdrawals or begin receiving your annuity income at any time.
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A Consumers Guide to Buying a Fixed Annuity
The middle class and the poor people spend their earned income on luxury items while the rich people use their money to invest in assets that generate passive income. Then the rich people use the passive income to enjoy luxury items. Based on my understanding of the Rich Dad’s series by Robert Kiyosaki, this is one of the main differences between the rich people and the others. If I want to be wealthy, then I need to adopt this approach of not using my earned income money on luxury items.
But I find that it is very difficult to adopt this approach. I must stop spending on luxury items and invest in assets that generate passive income so that I can be rich. Even though most people know that simple rule, few people actually are capable of adopting it.
This is the same in the case of people who had been smoking for years. Most of them are aware of the dangers of lungs cancers due to smoking. Yet, they continue to smoke. Similarly, if you tell an obese person the danger of overeating, he will still continue to overeat. If you tell an alcoholic to stop drinking, he will still continue to drink.
Do you know why?
To answer that question, there is a need to understand how pains and pleasures work.
If you had a chance to ask a smoker why does he smoke, he would likely to give you a reason that is related to pleasure. I have heard people who smoke do it when they are stressed. According to them, smoking helps them to relax.
If you were to interview someone who overeats, he would likely to give you a reason that is related to pleasure. I have heard people who overeat when they are stressed. According to them, eating helps them to relax.
If you were to question someone who is an alcoholic, he would likely to give you a reason that is related to pleasure. I have heard people who get drunk when they are stressed. According to them, drinking helps them to feel high. And the list goes on.
I notice a common thing among all these people. Though they are doing different things, they are doing them because they derive pleasures from doing them. Their minds have been wired to treat their actions as pleasures not pains.
That explains why I have difficulty in adopting the approach as learned from the Rich Dad’s series by Robert Kiyosaki. I enjoy luxury goods. Thus, I will associate pleasures with the luxury goods. I do not associate pains with spending money on luxury goods.
Everyone in the right frame of mind will go for pleasures and not pains. Thus, it only makes sense for me to tolerant pains now provided I can enjoy greater pleasures later. And this conviction is even stronger if I could have a taste of greater pleasures first. This is like a glimpse into what my future would be like if I were to adopt the approach of wise investment instead of spending on luxury items. If I were also able to experience pains of no money for retirement at old age now instead of in my future, then I would associate pains with spending my earned income on luxury goods now. And this is the same for the other cases.
If a smoker were able to experience the pains of lungs cancer now instead of in the future, then he would definitely associate pains instead of pleasure with smoking. He would associate pleasure with no smoking now if he could experience great health in the future. He would definitely stop smoking on his own accord.
If an obese person were able to experience the pains of bad health due to overeating now instead of in the future, then he would definitely associate pains instead of pleasure with overeating. He would associate pleasure with no overeating now if he could experience great health in the future. He would definitely stop overeating on his own accord.
If an alcoholic were able to experience the pains of liver failure due to over consumption of alcohol now instead of in the future, then he would associate pains instead of pleasure with drinking alcohol. He would associate pleasure with no drinking of alcohol now if he could experience great health in the future.
In other words, the way that I associate pains and pleasures with things will determine my future. With this new understanding, I can make use of the association pains and pleasures to my advantage. If I want to be rich and wealthy, then I need to associate pleasures by adopting the approach as learned from the Rich Dad’s series by Robert Kiyosaki to invest in assets that generate passive income instead of spending on luxury items.
~ Bryan Dulaney
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Pains And Pleasures!
