What's Your Business? image

What’s Your Business?

Are you buying assets or liabilities?

When I talk to people about their financial situation, there are a few phrases that I hear frequently:

  • "I need a raise."
  • "If only I had a promotion."
  • "I'm going back to school for more training to get a better job."
  • "I've been working a lot of overtime to make ends meet."
  • "I'm thinking of getting a second job."

In some circles, these are considered reasonable and sensible ideas. But the problem with these statements is that they focus on the income column of the personal financial statement instead of the asset column.

income and assets

While it makes sense to make more money, it is only helpful if you use the money you make to purchase cash-flowing assets that in turn help you make more money. The problem for most people—the reason why most people struggle financially—is that they rely on their job for income rather on their investments in assets.

The problem for most people is that they have no financial foundation.
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When you have to cling to your job in order to survive, you're unable to take any risks. The problem is that relying on others to give you a living is the biggest risk of all. When downsizing happens, you no longer have income come in. And when that happens, you realize all the "assets" you thought you had are really liabilities.

Your car eats you alive. Your $1,000 golf clubs aren't worth $1,000 any more. Your biggest "asset," your home, becomes your biggest liability as you pay the mortgage each month and real estate taxes each year but have no income coming in.

When middle-class people lose their jobs, they generally become poor people very quickly. Middle-class people think a good job is a sure financial foundation, but it’s not. It’s a delusion.

Rich dad taught me, "Becoming rich and financially secure means minding your own business."
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Financial struggle is often the direct result of people working all their lives for someone else. Many people have nothing to show for all their efforts at the end of their working days.

Of course, this is what they're trained to do.

Our current educational system focuses on preparing young people to get good jobs working for others. Their lives will revolve around finding a good wage to fill their income column while filling their liability column with all sorts of gadgets. They will become engineers, scientists, cooks, police officers, bankers, and so on. Their profession will earn them money while they mind someone else's business.

When I ask people what their business is, they generally tell me what they do. They are confusing their profession with their business. The reality is that most people have a job, not a business. They manage or work for other people's businesses.

Rather than go to school to become what they study, I encourage people to mind their own business by focusing on their asset columns.

For some, this means owning your own business. If you know cooking, start a restaurant. If you studied engineering, start a firm. If you're an accountant, hire other accountants and build a bigger client base.

At the end of the day, however, I don't encourage anyone to start a business unless they really want to. Knowing what I know now about running a company, I wouldn't wish that task on anyone. The odds are very much against success. Only start one if you really want to.

The good news is that you don't have to start your own business to mind your own business. Keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home.

Minding your own business is simple when you think of it this way: keep expenses low, reduce your liabilities, and diligently build a base of solid assets. These assets can include:

  • Businesses that don't require a personal presence
  • Stocks
  • Bonds
  • Cash-flowing real estate
  • Notes (IOUs)

Royalties from intellectual property such as music, scripts and patents
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Really, an asset can be anything as long as it has value, produces income or appreciates, and has a ready market.

By minding your own business and focusing on your asset column, you'll find your path to financial security and wealth much clearer and surer.

If you're ready to begin investing in your financial future by minding your own business, I encourage you to start by investing in your financial education. By building your financial knowledge base, you will be well-equipped to begin building your asset base.

Today is the day. Start minding your own business.

For additional help, check out our free, financial education community here.

Original publish date: October 24, 2012