Rich Dad Lessons: The "perverse" game of the money
Based on Kiyosaki’s work
Every day in the world, billion dollars are looking for a home. They are money changing hands and, in most cases, they pass from the hands of people in the left side of the cashflow quadrant (employees and self-employees) to the hands of people in the right side (business owners and investors).
Somebody could say it is not always in this way, because somebody has to pay to the employees and self-employees. But what we can also say is that when an employee is paid, usually the owner of the business where this employee is working has already earned enough money to pay for this employee and besides he has a revenue for himself by using the other people’s time. Likewise, usually when a customer pays to a self-employee, he pay money for a benefit (product or service), and this benefit is produced by investing time and effort of the self-employee: it is only an interchange of people’s assets. There are exceptions, but those are rules of the capitalist world in where we live.
We can say this: In general terms, the money flows constantly from the left side to the right side through assets like profitable businesses and the investments. On the other hand, the employees and self-employees earn the money through another type of asset: their own time and their own knowledge.
This money movement from the left side to the right side in the cashflow quadrant is observed not only in the labor or commercial world. The money also changes hands by means of a mechanism which, although is “perverse” for many people, it really constitutes the way to win the money game: the debt.
Let me ask a question: who do you think is winning the money game? The person who must pay the debt or the other one who receives the payment of the debt? The common sense tells us that usually who receives the payment of the debt should be the winner in many cases.
That doesn’t mean good debts don’t exist. If you get in debt to acquire assets by a financial scheme where the cashflow covers the monthly payments and besides it produces a revenue, the money game has two winners then: you and your creditor. When finishing paying the debt, your creditor will be happy because he made money with the interests of the debt and you will also be happy because you bought an asset by using the money of other person: your creditor.
Only a few people think seriously about this and most people make financial errors by getting bad debt: a debt to buy liabilities or things that don’t produce incomes, only expenses. Day by day we see some people getting in debts to buy a car that lose an important part of its value at the same moment when it leaves the concessionaire. And unless the car be used to generate a monthly income higher than debt payments, these people will lose some money every month while they are working harder in order to pay for something that doesn’t give any financial recompense. (Of course, many people will say it gives them status and comfort, but actually in terms of financial freedom, the status and the comfort don’t say much about the success of somebody).
The same thing happens with the houses and mortgages. People fight to pay their houses during years and they think it is their more important asset, and for that reason they pay their mortgage gladly. Although to pay for a mortgage is more preferable than to pay rent every month without receiving some financial recompense, the wrong thing is to believe that our house is an asset. An asset is really what puts money in your pocket. On the other hand, your house, the same as a car, only generates some expenses unless you rent it with an appropriate price.
The bankers understand the money game very well. The business owners often also understand it. They know if more people owe them, then they will have more possibilities to become richer.
If you want to have financial freedom, you should acquire true assets. And when you get in debts, make sure that those debts pay for your assets that, in turn, can generate you a monthly cashflow higher than the payments you must cover.
Those are the good debts. In that way you can win the “perverse” money game without being owner of a bank or a moneylender.
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