Real Estate Investor Magazine South Africa November 2018 | Page 64

WEALTH CREATION
Six Basic Rules of Investing
How to put your extra money to work for you
BY ROBERT KIYOSAKI
O
ne of the things I love most about my work is seeing
people move from the left side of the cashflow quad-
rant to the right side of the quadrant.
The process of moving from being an employee or self-
employed to a business owner or sophisticated investor is a
bit like that of a caterpillar turning into a beautiful butterfly.
It takes time, and often requires a total transformation in
mindset and behaviour.
One of these behaviour changes is understanding what
to do when you have more money suddenly at your disposal.
Whether it’s from an inheritance, a raise or bonus, or some
other source, the temptation for those on the left side of the
quadrant can be to, at best, follow conventional advice about
money, or, at worse, to spend it on liabilities like cars or
vacations.
Such conventional advice could be to increase your
contributions to your 401(k) or to continue to live below your
means. I’ve written a lot about both these topics, and it should
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come as no surprise that I don’t condone either of them.
If you’re facing a windfall in new money, now is the perfect
time to put into place the rich dad fundamental: invest in
cash-flowing assets.
But in order to do that, you need to understand some basic
rules of investing. Here are six of them to master, taught to me
by my rich dad.
Basic investing rule #1: Know what kind of
income you’re working for
Most people think only of making money. They don’t realize
that there are different kinds of money to work for. For years,
rich dad drilled into me that there are three kinds of income:
Ordinary earned income: Generally earned from a job via a
paycheck. It’s the highest-taxed income, and thus, the hardest
to build wealth with due to high taxes and the fact that you’re
trading time for money. Your ability to earn is based on how
long you can work.