The Urgency of Owning Cash-Generating Assets According to Robert Kiyosaki
Robert Kiyosaki, a billionaire and author of Rich Dad Poor Dad and a billionaire, frequently talks about the importance of working for assets rather than money. Assets that produce cash flow and increase in value can help people become financially independent and break free from reliance on their jobs in Kiyosaki views. This article will examine Kiyosaki’s definition of assets and explain how to differentiate them from liabilities.
What Are Cash-generating Assets
An asset is considered cash-generating if it generates income without the owners active participation. Rental properties that bring in money from tenants stocks that yield yearly dividends or companies that run with little oversight are a few examples of such assets.
According to Kiyosaki having cash-generating assets enables people to increase their income and achieve long-term financial security. With the help of these resources people can earn money even when they are not working.
One of Kiyosakis main teachings is to distinguish between assets and liabilities. He cautions that a lot of people think of liabilities as assets by mistake. One common example of an asset is a personal residence. But if the house has maintenance expenses property taxes and a mortgage it becomes more of a liability because it spends money instead of making it.
According to Kiyosaki the primary distinction between an asset and a liability is that the former brings in money for the owner while the latter depletes it.
Also read:3 Tips for Sharia Stock Investment for Beginners
The Importance of Cash Flow in Personal Finance
Kiyosaki places a lot of emphasis on cash flow. He contends that steady income from assets that generate cash is necessary to reach financial independence. When there is a positive cash flow people are less dependent on their primary salary and can concentrate on more strategic or important life goals.
For instance a person can make enough money each month to cover their living expenses if they receive enough money from yearly stock dividends. They are therefore free to decide to retire early and are not concerned about losing their jobs. Additionally people can reinvest the income from these assets which promotes exponential growth and quicker wealth accumulation.
Strategies for Acquiring Cash-Generating Assets
Building assets doesnt always require large sums of money claims Kiyosaki. Nonetheless he constantly promotes saving money to invest in assets that generate income. Kiyosaki describes how in the early years of his career he personally diversified his assets. Saving money from his work as a Xerox salesman was his first step. He put a lot of effort into his work with the intention of escaping the limitations of corporate employment. After a while the cash flow from the real estate he bought allowed him to purchase a Porsche.
From Kiyosaki’s experience, here are some actionable steps to begin acquiring cash-generating assets:
- Keep Your Job Initially and Always Save Money
Dedicate a portion of your income to building assets while maintaining a steady job. - Invest in Cash-Generating Assets
Use the money you save to purchase assets such as stocks, real estate, businesses that don’t require daily involvement, or bonds (sukuk can be an Islamic alternative to conventional bonds). - Avoid Buying Liabilities
Do not buy items that drain your finances and do not provide growth or cash flow. Avoid purchasing things like cars, gadgets, or other depreciating assets. - Use Cash Flow from Initial Assets to Buy More Assets
Reinvest the income from your first cash-generating asset into acquiring more assets, allowing your wealth to grow exponentially.
Why Is This So Important?
According to Kiyosaki it is crucial to own assets that generate cash particularly in the modern world where living expenses are rising and economic uncertainty is growing. Dependence on a single source of income like a salary is deemed excessively hazardous. Building passive income-producing assets helps you live a better more financially independent life while also protecting you from these risks.
Also read:Money Management: Is It Important for Investors?
Conclusion
The quantity of assets you own that bring in money is more significant than the size of your paycheck according to Robert Kiyosaki. Building assets rather than depending only on a salary will help us ensure a stable financial future and open doors to a more tranquil and self-sufficient way of life. Let’s build our asset column by reducing our expenses and increase our investments.
References
Kiyosaki, R. T. (2024). How to build assets and not liabilities. GoBankingRates. Accessed from https://www.gobankingrates.com
Kiyosaki, R. T. (2024). What assets does Robert Kiyosaki buy? 40plusFinance. Accessed from https://40plusfinance.com
Kiyosaki, R. T. (2024). Urgency of having cash generating assets [Video]. YouTube. Accessed from https://youtu.be/SRXAL_gQnug
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