90/10

I would like to start off this post with a blank Income Statement and Balance Sheet.

(This image was taken from Rich Dad's Poor Dad's Guide to Investing by Robert. T Kioysaki)

The 90/10 rule is " 10 percent of the investors makes 90 percent of the money."(Kiyosaki,2013)

Why is this? What is the difference between one investor and another , in order for only 10 percent of them to make 90 percent of the money.

The answer is how you look at the picture above, and fill those colums. The question to ask yourself is how do you fill your asset colum, without ever having to purchase that asset? In my earlier postings I enduldged you in the concept that your assests pay off your assests which is why we studied the Three E's , and our goal of accumulating Excess cash was only possible because at that time our assests were paying eachother off , ultimately gereating more income, while having a stable excess cash flow. But how does someone manage to create excess cash , and fill one's asset colum up without paying for the asset, how can you start with nothing and end with something?

This concept is extremely important, because there is no wrong answer. It takes a lot of education and experience in becomming a investor, but it is the way an investor thinks that will differ oneself from being part of that 10 percent who makes all the money.  The trick of investing is not luck, you may find a lucky investment once, but how will you keep it a float? Investing is all about creating an investment from something, another investor cannot see.

Let me give you an example: For many people building their own business is a dream, so we will use that concept. Your business you've created it, you never purchased your business it was your own idea that you put together and turned into an Asset. Your buisness now , whatever it may be has bloomed off, not enough to make you rich but enough to keep you comfortable. (As a side note, please remember the difference between Secure, Rich and Comfortable, and why it is important to set yourself up for all three plans.)  This business is now generating an income, you have done what is needed to do, you have hired trusting employee's so the business does not demand so much of your Time another valuable asset. Now that your busines is creating an income it is paying off yourself while putting money in your income statement. Asset--> Income . Now with the business generating enough excess cash, you have done some research on a piece of land you wanted to invest in for years, you've done your fair amount of research and you pay for it with your business line of credit. The land ends up being a worthy investment like you believed, and you build a motel on it, which one day generates enough income to become a hotel, then a resort. This example would take tons of time, but it is just one way that you can use an asset to pay for another asset, you never had to take the money out yourself, you never had to pay for it yourself. You simple used your buisness, made your business pay it off, and created a new business within it that eventuall put you in the 10 percent making 90 percent of the money.

The concept I would like to leave you with today is how would you fill your asset colum? Think outside the box, think of ways you can earn money without spending money, using your assets to generate a cash flow to pay other assets off ultimately creating a rich life for yourself.

Education, Experience , Excess Cash

The concept I left you with prior to this blog post was the Three E's : Education, Experience , Excess Cash. I would like to further your knowledge on why these three E's are extremely essential in your journey towards becomming rich, in the exact order they are placed in.  We will start with :

Education : In life education is the key. Whether we would like to become great at something, or we would just like to further our knowledge about a subject , we do this by educating ourselves. "A Man willing to learn his whole life, will be the richest man."(Kiyosaki, 2013) Lets think of this logically, if you as a person are willing to never stop learning throughout the course of your life, do you believe that education can simply make you rich? No. It is how you use this education that will determine your success, this is where Experience  comes in.

Experience: Now that you have based yourself with all the education needed to start your journey, well you must now put it to use. The easiest way to grasp the 3 E's is to put it in terms of your educational map. For all those who have went, plan to go or who are currently in post-secondary schooling, many of your programs may offer a co-op.  Think of the three E's in terms of your program, first you need the Education so you have chosen your program, and are willing to educated yourself through it. Now that you have accomplished your first year and have furthered your knowledge it is time for your Experience this would be your co-op. Your school has set you up for success by using the three E's whether they knew it or not. Finally, once your co-op is done, your schooling is up, you've gotten all the Education and Experience you need, you have now set yourself up for the process of creating Excess Cash.

Excess Cash : Now we look at excess cash in the view of an investor, because in order to become a rich investor you need to have your assets pay off eachother, while your income your Excess Cash is exactly what it needs to be Excess. This is the money that when it comes in you can throw down on a worth investment , one that may take some risk , so this excess cash is money that can be lost, and it wont be needed to recover, because you've already bought assests that now pay eachother off and accumulate an income, where your excess cash generates its own income on its own.

I have laid out the three basics to further someones life in becomming rich. Now it is said that there is a rule called the 90/10 . This rule states that for every 90 Citizens only 10 will become rich. Why is that? If everyone knows the basics on becomming rich, learns the three E's , lives by them, what makes someone move from that 90 to the 10 % of those who become rich? I would like to encourage some feedback, on what you believe seperates someone between the 90/10 rule.