Financial Intelligence article
What you need to know about wealth

"If you can't get your dreams from the job you are doing, you need a check-up from the neck up." -- Casey Combden

What do you plan to do to become wealthy? I know you want to be wealthy. What did you do today to increase your wealth?

Did you pursue your career, chasing that next promotion to increase your income?
Did you buy a lottery ticket, looking for the windfall?
Did you buy or sell shares on the stock market, looking for "the big one" that will set you free?
Did you scan the obituary column, looking for that big inheritance?
Did you suffer an accident, hoping for a big insurance or lawsuit settlement?
Did you become self-employed, chasing the dream of ownership and freedom?
Did you increase your investments, enjoying the income your money makes for you?
Did you clip coupons from the paper, saving money at the supermarket?
Did you work smarter instead of harder, multiplying the rewards from your work?
Did you lie on a sunny beach somewhere, waiting for your passive, residual income cheque to arrive?
Did you comparison shop for an item, knowing you paid the lowest price?
Did you read an article on the Internet that will teach you what you need to know about wealth?

Any or all of these activities can increase your wealth. But only a few of them can make you wealthy. How can you tell the difference?

Knowing the comparative effectiveness of various wealth creation strategies is a matter of Financial Intelligence, what I call FIQ. You have probably heard many times about the benefits of having a high IQ, your mental age as a ratio to your physical age. FIQ is what you know about finances, money, wealth and success. These are topics that are not discussed much in school, so I write about them here.

Do you think there is something about wealth that is known to wealthy people but not to the general public? Well, there is.

“I’d rather have one percent of the effort of a hundred people than a hundred percent of my own.” - J. Paul Getty

Leverage. Working smart. Getting paid for the work of others. Passive income. Residual income. These are the things the wealthy know.

"Hey!", you say, "I know those things! What kind of scam are you selling me here?"

You say you know those things, then why aren't you doing them? To know and not to do is not to know. If you "know" the path to wealth, but don't walk along it, then you have a low FIQ. How do you raise it? Learn.

The four sources of income

Robert Kiyosaki, in his book Cashflow Quadrant, revealed to the world what the wealthy know. There are only four ways in this big, wide world of ours to make money. This is a book you need to read. Kiyosaki teaches what the education system doesn't. Once you know this stuff, you can't unlearn it and you can't pretend it isn't true!

Rich Dad's Cashflow Quadrant: Rich Dad's Guide to Financial Freedom by Robert T. Kiyosaki & Sharon L. Lechter		Rich Dad's Cashflow Quadrant: Rich Dad's Guide to Financial Freedom by Robert T. Kiyosaki & Sharon L. Lechter

Kiyosaki uses the diagram on the book cover to describe the only four ways to make money:

The vast majority of folks in the world are on the left side of the quadrant, they either work as Employees or Self-Employed people, the accepted figure is 95%. The other 5% earn their living on the right side of the quadrant. The people on the right side are the ones that know things about wealth that those on the left do not know. They hold about 95% of all wealth.

Here is how the quadrants break down:

Employee

• Trades their time for money, either hourly or on salary
• Works for a system
• Not paid what they are worth
• They are paid what the job is worth
• There is an absolute earnings ceiling for every job
• Lose your job – lose your income

Self-Employed

• Trades time for money
• The self-employed person becomes the system
• Earnings are totally up to your own effort
• Subject to up and down business cycles
• There is still an earnings ceiling based on how much work you can do and how much you can charge
• Don’t work – lose your income

Business Owner

• Owns a system that generates income
• The Business System allows them to make money even if they are not there
• Only limited by the degree of leverage they can exert
• Don't work – your income continues and might even grow

Investor

• Invests in multiple Business Systems
• Does not work for money; the money works for them
• Earnings are passive and not dependant on personal effort
• Don't work
• This quadrant is the goal of all people

"Financial Freedom is when your passive income equals or exceeds your desired lifestyle." - Casey Combden

Your goal is to become an Investor and have your money generate sufficient earnings for you to live on, this is Financial Freedom. It is difficult for people on the left side to move to the Investor quadrant because they trade time for money and have a natural ceiling on their earnings. A Business Owner can more easily become an investor as passive income increases.

How to move right

Moving from the left quadrants to the right is a matter of knowledge, attitude and thinking.

You need to read the right books, listen to the right things and associate with the right people.

Search out books written by people that have achieved wealth and success in life. Many of them are more than happy to share their stories and their philosophies. Learn from them and change your way of life so that you are prepared to get what they have. Just as important, shun the writings and opinions of people in the 95% group. If you don't, you might get what they've got.

Be careful who has your ear. Radio talk shows and the guys on the loading dock are very entertaining, but they don't know what the 5% know. They can't tell you how to be successful. Even television business pundits and school teachers and professors, make sure they have experienced success before you let them into your mind.

Watch your conversations. It is said that "Small minds talk about people; mediocre minds talk about events; great minds talk about ideas." Make sure your discussions aren't dominated by the latest Hollywood marriage or breakup, or last night's newscast.

That brings us to association. If you have children (or if you were once a child), you probably have told them (or been told) not to hang around with people that will be a bad influence. That is excellent advice. But most of us don't know it is good advice because we don't follow it!

If I want to develop anti-social behaviour, I find a street gang to join. If I want a cold or fever, I hang out with someone that is sick. If I want to be wealthy, don't you think I should hang around with some wealthy people? In most cases, our income is within 10% of the average income of our five closest friends. These are the people we know. These are the people we take advice from. These are the people holding us back from having success. Nice as they might be, you have some friends that you just can't afford!

Harsh? You bet. But we can only move to a new way of thinking by changing the way we are thinking. We just don't know what we don't know. Expand your social circle, find someone whose accomplishments you admire and introduce yourself. Discuss ideas.

"95% of what you know about business, life and success comes from people in the 95% group." -- Casey Combden

Action plan

Now you know what you need to know about wealth. Here is your Action Plan Checklist:

• Identify which quadrant(s) you earn your income from
• Critically examine the things you are currently doing to create wealth for yourself
• Eliminate the ones that won't work, start doing some things that will work
• Make a written commitment to take steps towards the right side of the quadrant
• Read Kiyosaki's Cashflow Quadrant book
• Visit the library and borrow books written by wealthy and successful people ()
• Make changes in your daily conversation and in who you listen to, turn off that talk radio station
• Associate with people that are successful or working to become successful
• if you are interested in beginning a personal and professional development program designed to move you to the right quadrant

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Paul Maclauchlan
"You can work hard and get something or work smart and get everything." - Casey Combden
Last change: Mon Nov 13 22:46:23 EST 2006

All material Copyright © 1994, 2008 Paul Maclauchlan