If you want to make six or seven figures a year, what would you rather have: assets or income?
Now, before you answer that question, you need to understand what assets are. Robert Kiyosaki explains assets in his book, Rich Dad, Poor Dad. However, many people have misunderstood his message.
Let’s take a closer look at assets and income one step at a time. If your income is low six figures, then you could have 100% of that coming from income. But if you’re making above six figures, then part of it must come from leverage, not just work. So what is leverage?
Leverage means you’re making some money from systems, staff, real estate and other assets.
In other words, you’re using other people’s money, time, computer systems, etc, to make more money. For example, you could borrow money from the bank and use the loan to make some investments.
The money you make after paying off the loan is the result of your investment after using money leverage. So if we go back to the first question, you need more than income to make more than six figures.
And if you want to make seven figures a year, at least 30% must come from leverage. So if you want to make a solid seven figures, you need about 60% coming from leverage. So how can you increase your leverage?
The Rich Dad, Poor Dad Message
This is the part that people get confused. You can increase your leverage with assets, but people are unclear about what assets are. Rich people acquire assets while the poor and middle class acquire liabilities that they think are assets.
People read the book and think the Rich Dad Poor Dad message is telling them to buy real estate. That’s not true. Kiyosaki is telling us to acquire assets, not liabilities.
Liabilities will lose money, like buying a car. You don’t make more money after selling your car. However, assets will make you money, like buying investments. Entrepreneurs will take it a step further and create assets.You can’t sustain millionaire or billionaire status through work alone. You need to leverage assets to make money. Click To Tweet
Assets can include many things.
Your customers, intellectual property, territory, investments, and key connections are your assets. You can also leverage other people’s money, resources, customers and connections. Those are assets too. But your brand reputation is key.
Brand reputation is like personal branding, like your name. Do you think my company name is worth more, or my name is worth more? You probably don’t even know the name of my company. But you know my name, Dan Lok. So my name is an asset that will become more valuable as time goes on.
Ten years from now, my signature is going to be worth a lot. If I want to borrow money from the bank, my signature will be worth something.
So, as you can see, operating as a millionaire is different than operating as a billionaire. The more income you want to have, the more assets you need to acquire.