Is Investing My Money Risky?
Why the path to true financial freedom means financial education
My poor dad often said, "Investing is risky."
My rich dad often said, "Being financially uneducated is risky."
Most people know they should invest. The problem is that most people, like my poor dad, believe that investing is risky. The reality is that it's not—if you are financially educated, have experience, and have good guidance.
In today's economy, it's much more risky to rely on your employer for your well being than it is to become financially educated and to invest your money wisely. It's also risky to put your money in the bank and collect interest that barely covers inflation...and if inflation really takes off, you'll actually lose money. As many people learned over the last decade, it's risky to consider your personal home as your primary investment. And it's risky to put all your hope in a broker and a 401(k) for your retirement investments.
Today, if you want to be financially secure and free, you must learn to invest.
The consequences of investing poorly
Learning to invest is important because it's the key to financial freedom. Five things happen to those who don't know how to invest, who do not invest, and who invest poorly.
They work hard all their lives
They worry about money all their lives
They depend on others, such as family, a company pension, or the government to take care of them
The boundaries of their lives are defined by money
They don't know what true freedom is
Investing is true freedom
My rich dad said, "You will never know true freedom until you achieve financial freedom." By this he meant that learning to invest is more important than learning a profession. Unfortunately, learning a profession is what most education in our schools is built to do. Our schools are good at training employees but not investors who understand how money works. The result is an army of people who are afraid of money and investing, and who, for their living, rely on those who understand money and investing, like their employer or their landlord.
Rich dad also said, "When you learn a profession, let's say to be a doctor, you learn how to work for money. Learning to invest is learning how to have money work for you. The moment you have money work for you, you have your ticket to freedom."
Learning to invest
My poor dad didn't know how to make money work for you him. He spent his whole life working for money. He was a good man and a hard worker, but he struggled financially all his life. If he had been my only example on money, I would have grown up to be like him. Thankfully, my best friend's dad, my rich dad, taught me much different things about money and investing.
One way he did this was through the game Monopoly. Over and over again, he'd say, "One of the great formulas for wealth is found in this game: four green houses, one read hotel."
Monopoly is a cash flow game. For example, having one green house on a property you own could make you $10 when someone lands on it. Then, two houses could make you $20. Three could make you $30. And a hotel could make you $50. Basically, more green houses and red hotels means more cash flow. It’s a simple game, but an important lesson.
Valuable investing lessons from my rich dad
My rich dad played Monopoly in real life, and he often took his son and me to see his real life houses and hotels. Watching my rich dad, I learned many valuable lessons about investing, some of which are:
Investing is not risky
Investing is fun
Investing can make you very, very rich
Investing can set you free from the struggle of earning for a living and worrying about money
In other words, if you are financially educated, you can build a pipeline of cash flow for life by investing—a pipeline that produces cash in good times and bad times, in markets that both boom and bust.
Don't risk your future by believing the lie that investing is risky. It's not, and you can be free. Today, I encourage you to begin your financial education and to move from the risky life of an employee to the financially free life of an investor. Read some books, attend a seminar, find a coach and a mentor, and start small by applying the lessons you learn. That is the path to financial freedom.
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