In this blog post, you’ll learn about different ways to build assets. I discovered the concept of building assets after reading the book, Rich Dad Poor Dad by Robert Kiyosaki. Contrary to my beliefs at the time, he explained that your home is not an asset. At first, I rebelled and thought that this statement cannot be right; a building does hold value. Well, what he meant was that the home is not giving you any money. Mortgage, electric bills, etc. is costing you money every month. Therefore, it’s a liability. That does not mean that it’s better to rent than to buy, it just means that the home should not be seen as an asset. So what is an asset then?
Build Assets That Can Give You Positive Cash Flow
There are many forms of assets. For example, a real estate can be a kind of asset. Let’s say you rent out the property and you get a surplus of money after you’ve paid the expenses. Well, then that’s an asset. I remember one story that Mr. Kyiosaki told. It was the story of how he wanted to buy a new Porsche. He most likely had more than enough money to buy it with cash, but he decided to be creative instead. He invested in one real estate that could give him positive cash flow every month which would pay for all his car payments.
Other forms of assets can be stocks, businesses, books, software’s, etc. We choose to focus on selling books, which is a great form of asset. You can read more about how we went from working for active income to passive income here.
Build Assets Online
You can build assets online in many ways. Here are three ways to make passive income online:
- Affiliate marketing.
- Sell your own video course.
You can read more about these three ways to create passive income online in this blog post. Other ways to build assets online can be through drop shipping, selling T-shirts with Amazon merch, Amazon FBA, App development, etc. Online businesses are great because you can leverage both technology and outsourcing.
Create A Money Machine
In his book, Richest Man In Babylon, George Samuel Clason writes about how one should invest at least 10% of the income into a freedom fund. This freedom fund can also be called a money machine. The purpose of this money machine is to make money. It will work as an extra worker in the household if you’re patient and build it the right way. A misconception among lots of people is that you have to make a lot of money to become financially free. If that were the case how come that a lot of individuals that win millions in the lottery become broke after a few years. You’ve probably heard the same stories about sportsmen and rock stars like Mike Tyson and Michael Jackson.
The key to financial freedom is money management, and more specifically, creating a money machine. Theodore Johnson was a man that worked for UPS all his life. He never made more than $14 000 a year. Despite this, he managed to die with a net worth of 70 million dollars. How is that possible? I mean $14 000 x 100 (years) is only 1.4 million. The answer is that he tapped into what Einstein called the greatest force of the universe.
‘The most powerful force in the universe is compound interest.’
– Albert Einstein
In whatever way you decide to build assets, you can always leverage compounding. Build up you assets by reinvesting to the point where the money machine is big enough. After that, the money machine will most likely feed you and put a roof over your head for the rest of your life. Here is what a graph of compounding can look like:
In the beginning, it’s somewhat slow, but then it starts to take off like a rocket. Remember this chart whenever you need some motivation to continue to build your money machine.
At a certain point, you’re going to want to create multiple sources of income. One example of this could be that you go from only investing in real estate to putting some of the money into the stock market. Diversifying allow you to spread your risks. You’re not going to want to be the guy that loses all of his assets due to a stock market crash.
One thing that I think can be problematic with diversifying is that you can become sidetracked if you’re doing it too early. If you haven’t mastered one thing, going on to seven other things aren’t going to help you. So build up your assets in one area to where it is stable and then move on to next one.
Your Home Can Be An Asset
Remember how I began this blog post by mentioning that your home is not an asset. Well, the truth is that your home can be an asset as well. I remember being on a seminar where one man was talking about how he gets paid $800 to live where he lives now. He deliberately continued to talk about something else, but the audience quickly stopped him and asked: You must have meant that you pay $800, not get paid, right? He answered with a calm voice that he said get paid. Then he continued to explain that he had bought a big apartment house by putting down next to nothing in down payment (search for real estate, no money down deal). He rented out 3 out of 4 apartments and all of a sudden his home became an asset. A lot of people are also offering parts of their property as storage which makes their home an asset as well.
So, not everything is black or white. As the saying goes, if all you have is a hammer, then everything looks like a nail. Subscribe to this blog on the right side for more information about creating assets and freedom based businesses. Thank you for reading this blog post, feel free to share any comments you might have regarding it!