Let the journey continue!
Throughout the book, Rich Dad Poor Dad, Robert breaks down different lifestyles or spending patterns which I love because it lays out the reality of how each lesson is played out. For example, here is one illustration he makes:
Source: Rich Dad Poor Dad, Robert Kiyosaki
In conclusion….. just kidding. I don’t know about you, but for me I can sit here and stare at the picture as it speaks for itself! My mind rushes through so many scenarios on how to implement each structure. Without further ado, welcome to my mind where I will try and explain how each one plays out in reality.
Imagine three 20 year old’s, each with a different mindset which plays out in their character which will eventually build patterns as to how they manage their money. Now let’s look at their monthly figures:
- Mr Poor Mindset
Landed a decent 9 to 5 job w hich pays him $4500 a month (after all those taxing deductions)
He pays $3000 on a mortgage for a nice house, $900 on living, spends another $300 on luxuries because he can
He then has an additional $200 leftover, but this will be used the next week on some additional luxury items because ‘why not?’ - Mr Average Mindset
Works a 9 to 5 job, gets paid $3500 a month,
Pays $2500 on a mortgage (since he was ‘smart’ and bought a humble home)
Spends $600 on living costs (since he is frugal and ‘good’ with money)
He also has self-control to avoid unnecessary luxuries
Lastly, he saves $400 for his annual holiday at the end of the year - Mr Rich Mindset
This guy works hard at an average job getting paid a wage of $2700 a month,
He pays $1500 rent for a small apartment and $500 for living costs
He puts nothing into savings, and the remaining $700 is put to work
Now, you should have noticed here that I have intentionally placed the richest mind in the ‘poorest’ setting. I want to show you how brains matched with consistent values will always outweigh someone who simply works hard and earns big. I’m talking to all you ‘minimum wage’ people out there who may be feeling powerless! Of course if the bigger earner applied a better mindset they would also be in a much better position. Also, before you start roasting me on the accuracy of these numbers I encourage to take a step back and learn the lesson instead of letting arrogance blind you. Moving on!
So, using a good old excel sheet and looking at what happens over 10 years of these habits, lets see where our friends will be at when they are all 30 years old:
- Mr Poor Mindset
Climbed up in his company and is paid more at $5500 a month
Because he can now afford a bigger house mortgage repayments take up $3800
It costs him more to live at $1100 a month as he accumulates more liabilities (for example the faster and less efficient car, more monthly subscriptions etc.)
He has a strong habit of indulging in luxuries because he has been able to afford it his entire life, which now costs $400 a month
Lastly, he continues to loosely ‘save’ $200 a month - Mr Average Mindset
His hard work has paid off and he now receives $4500 per month
He also has a more comfortable house which is costing him $3000 per month
He also enjoys life more and his living costs come to $800
Lastly, he has worked hard throughout his 20s so now allows himself to enjoy life more and has luxuries of about $200
The spare $500 is placed into his safe term deposits and saving accounts for big holidays and other big spends - Mr Rich Mindset
He is paid more at $3500 but by this time his working dollars are now earning him an extra $2000 a month resulting in an income of $5500 a month
He is also enjoying life at a better apartment which costs $2500 per month
He happily maintains himself at $700 a month for living
He also now enjoys himself a little with $300 going to luxury items
Last but not least, he comfortably puts another $2000 to work based on his initial habits
So who wins? What factors determine a winner? Well for me there are several factors here that I would like to point out as to why the richer mindset wins:
TIME – You may have noticed how both the two extremes had the same total income at the age of 30, both Mr poor mindset and Mr rich mindset now earn $5500 a month, and this was on purpose. They earn the same but there is a clear winner which is Mr Rich Mindset because his income is less dependent on his job, naturally resulting in less strain and time being demanded from work. More free time to do what really matters to him!
ENERGY – Whatever job he works, it’s safe to say that a $3500 paycheck will require less effort than a $5500 paycheck (most of the time). Now he has more energy to do what really matters to him!
INCOME – At this stage, his overall monthly income is the same as the rich person, but in the long run the hard working job is normally capped and pay rises slow, but for Mr Rich Mindset his passive income will do the opposite and grow faster. By the time they’re 40 years old, Mr Poor Mindset will be at about $6000 a month while Mr Rich Mindset will be closer to $12000 a month. More money to spend on what really matters to him!
NET VALUE – Mr Average Mindset will have more savings than Mr Poor Mindset because of his good saving habit, but the value of Mr Rich Mindset’s assets will be far greater than both of theirs combined!
These lessons break down patterns not just for the poor and rich, but also the middle class. I love that because most people will fall into that middle class and think they are okay because they’re not in poverty (which is true, because even owning a house is a blessing). These types of people are the ones who will have a decent job and be able to afford decent toys and holidays, the ones who will purchase liabilities thinking they are assets. There is nothing wrong with this, but there is so much potential to do better. So how does one switch from an average mindset to a rich mindset and in practical terms, what does that look like? A start will be the very first lesson earlier on creating a focus on building assets rather than collecting liabilities. That means changing your spending habits to filter all your income through assets before you start eyeing up your next car or house. It means stop chasing salaries and start chasing real freedom which involves planning and putting money aside that works for you.
As you can see, I am enjoying learning and ranting on these topics as they are very interesting to me and I hope you enjoy them too!
Take-Away Point:
- Rich minds beat rich salaries
- True wealth isn’t just measured by money
