Why the Rich Get Richer & The Poor Get Poorer?

Ikitokea Mwenyezi Mungu aamue kuwafilisi wakazi wa Dunia, wote tuliopo duniani tuanze moja. Ukweli ni kwamba walio matajiri wa sasa ndio watakua matajiri tena hapo baadaye. Huku wale maskini wakibakia kuwa maskini. Tatizo sio mali walizo nazo tatizo ni akili walizo nazo.

 

One of the reasons the rich get richer, the poor get poorer, and the middle class struggles in debt is because the subject of money is taught at home, not in school. Most of us learn about money from our parents. So what can a poor parent tell their child about money? They simply say "Stay in school and study hard." The child may graduate with excellent grades but with a poor person's financial programming and mind-set which was learned while the child was young.

 

Money is not taught in schools. Schools focus on scholastic and professional skills, but not on financial skills. This explains how smart bankers, doctors and accountants who earned excellent grades in school may still struggle financially all of their lives. Our staggering national debt is due in large part to highly educated politicians and government officials making financial decisions with little or no training on the subject of money.

 

Because students leave school without financial skills, millions of educated people pursue their profession successfully, but later find themselves struggling financially. They work harder, but don't get ahead. What is missing from their education is not how to make money, but how to spend money-what to do after you make it. It's called financial aptitude-what you do with the money once you make it, how to keep people from taking it from you, how long you keep it, and how hard that money works for you. Most people cannot tell why they struggle financially because they don't understand cash flow. A person can be highly educated, professionally successful and financially

illiterate. These people often work harder than they need to because they learned how to work hard, but not how to have their money work for them.

 Money is one form of power. But what is more powerful   is financial education. Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth. The reason positive thinking alone does not work is because most people went to school and never learned how money works, so they spend their lives working for money. I am concerned that too many people are focused too much on money and not their greatest wealth, which is their education.

 If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer through the changes. If they think money will solve problems, I am afraid those people will have a rough ride. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone. Most people fail to realize that in life, it's not how much money you make, it's how much money you keep. We have all heard stories of lottery winners who are poor, then suddenly rich, then poor again. They win millions and are soon back to where they started. Or stories of professional athletes, who, at the age of 24, are earning millions of dollars a year, and are sleeping under a bridge by age 34.

 

The one and only rule to getting rich is: You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people struggle financially because they do not know the difference between asset and a liability . Despite what a lot of people know, your car and your house are not assets.

“Assets are simply things that create cash-flows directly to your pocket.  It’s something that gives you money. Your car and your house do not give you money, right? In fact, you have to pay for your house mortgage and your car loan. That’s why, your car and your house are liabilities, not assets.”

A good example of an asset is income generating properties.

Liabilities, on the other hand, are things that take money out of your pocket. These are things that you need to pay for, things that you owe, and things that you need to buy. So your car, your clothes, your cable tv…are liabilities.

Then you need to buy as many assets as you can and reduce your liabilities in order to create wealth.

 Source: The book Rich Dad Poor Dad by Robert Kiyosaki