Introduction
Everyone wants to be rich but there are few who get success. There are thousands of self-improvement, success, and money-making books. Many of the authors have attempted to put together some "integrated formulation" from their own experiences and from all the other sources available to them. Unfortunately, most of them -- if not all of them without exception -- are somewhat incomplete and sometimes even hopelessly misguided in some respects. I hope my attempt at formulating some money skills will become more complete than most. For more methods my doors are open for your suggestions !
7 Important Skills by Rich People:-
"Prosperous people practice seven financial secrets. I call them "secrets" not because very few of us are aware of them, but because very few of us use them. The secrets are, in reality, skills ... essential money skills that all wealthy people practice. I believe that if you learn these skills, wealth can flow into your life ... multiple streams of increasing prosperity. Wouldn't that be nice? Money to buy whatever you want ... houses, cars, travel, freedom. Surplus to share with the people you care most about. Security. Peace of mind. That's what these skills will bring you."
Skill 0: How 2 Overcome the denial of personal disadvantage
This may be the most important money skill of all. It is also a most important life skill. It's a central aspect of the most powerful success principle ever discovered. If you cannot master this skill, you may not make much progresss with any of the others. If you do master this skill, then all the other money skills will be easier to master.
A reader wrote me, "...How can anyone be expected to understand a phrase like, "Overcoming the denial of personal disadvantage?"" What may seem obvious once you've recognized it, may seem incomprehensible to someone else. Some people have "personal disadvantages." Some of them deny to themselves that they have these disadvantages. In order to handle this situation, they need to overcome the the denial of their personal disadvantages.
Skill 1: Thinking and speaking about money in enriching ways:-
In Rich Dad, Poor Dad Kiyosaki compares his "two fathers": his biological father who was a teacher and his mentor who was a businessman. The teacher was his "poor dad" and the businessman was his "rich dad." His poor dad said, "The love of money is the root of all evil." His rich dad said, "The lack of money is the root of all evil."
The quote below from Rich Dad, Poor Dad is extremely important. It powerfully illustrates what I call "Slavespeak" -- the phenomenon of certain words having hypnotic, stupefying, and debilitating effects on their users.
"Because I had two influential fathers, I learned from both of them. I had to think about each dad's advice, and in doing so, I gained valuable insight into the power and effect of one's thoughts on one's life. For example, one dad had a habit of saying, "I can't afford it." The other dad forbade those words to be used. He insisted I say, "How can I afford it?" One is a statement, and the other is a question. One lets you off the hook, the other forces you to think. My soon-to-be-rich dad would explain that by automatically saying the words "I can't afford it," your brain stops working. By asking the question "How can I afford it?" your brain is put to work. He did not mean buy everything you wanted. He was fanatical about exercising your mind, the most powerful computer in the world. "My brain gets stronger every day because I exercise it. The stronger it gets, the more money I can make." He believed that automatically saying "I can't afford it" was a sign of mental laziness."
Many people live their lives at the effect of unconscious "scripts" consisting of all kinds of "do's" and "don't's." About 15 years ago, I read Scripts People Live: Transactional Analysis of Life Scripts by Claude M. Steiner. This helped me considerably to overcome some personal scripts. When I was about 17 years old I told my father (who had much in common with Kiyosaki's "poor dad") that I could go into business. He proclaimed emphatically, "You will never succeed in business." After reading Steiner's Scripts People Live I realized that I had accepted my father's "curse" as a script which had prevented me from being as successful as I could have been.
Some very important ways of thinking about money can be found in the book Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence by Joe Dominguez and Vicki Robin There's a great deal of value here you'll find nowhere else.Skill 2: Improve your thinking
"For an idea which, at first, does not seem absurd, there is no hope." -- Albert Einstein
Thinking can be described as a process whereby in our brains we create maps, representations, models, or simulations of the "world out there." The more accurate our maps, etc., the more effective our thinkings tend to be and the more likely we are to achieve the results we desire. Thinking can also be described as recognizing and defining identities, similarities, differences, relationships, and patterns. Discovering causal connections (or recognizing those others have discovered) is an important aspect of thinking. This is closely related to discovering the origins, predecessors, or causes of things. Critical thinking, particularly the ability to question everything, is crucial to effective thinking. It helps a great deal if you can spot errors in the thinking of others (relatively easy) and in your own thinking (much more difficult!).
Prediction is a most important aspect of thinking, particularly related to money. You often need to make decisions about what to do and what not to do in order to make money, to not lose money, or to cut your losses. These decisions are based on probabilities of future prices going up or down, projects or programs working or not working, products achieving market acceptance or not, being able to sell something or not, etc.
Learning from your own experience -- and, even more important, from the experience of others -- is another important aspect of thinking.
Yet another important aspect of thinking is to recognize that something you're doing isn't working and isn't likely to work, therefore you should do something different. You could also recognize that something isn't working very well (or as well as it could or should) and needs to be improved. You can apply the scientific method to come up with better formulas for what to do as follows: (a) State the problem (You may need to make some observations and ask some questions in order to do this.) (b) Research the problem (What will it take to solve the problem? What do I know and what do I need to find out?) (c) Form a hypothesis (Or a formula you can apply to solve the problem. The simplest solution is often the best.) (d) Test the hypothesis (Apply the formula experimentally to see if it works.) (e) Draw conclusions from the results (How well did the formula work? Do I need to do more experiments? Return to (a) or (b), if necessary.
To further improve your thinking, you need to think about how you think. You become aware of how others typically think and how you typically thought in the past. This is called "metathinking"Earl Nightingale points out that your mind is like a garden, which may be cultivated or allowed to run wild, but whether cultivated or neglected it must and will produce results. Good thoughts bear good fruits, bad thoughts bear bad fruits. You can lift your thoughts high. To lift your thoughts, you may need to renew your mind. And once you renew your mind, you will soar like an eagle. The sky is the limit. Energetic thoughts bring achievements. Choose your thoughts carefully to shape your character, life, and the results you produce.
Anxiety, fear, worry, and self indulgence tend to weaken and demoralize your body and damage your nervous system. Your body tends to obey your mind. So negative thoughts can ruin your body. Joseph Murphy points out you are the captain navigating a ship. You should give right orders to your subconscious mind. Uplift your thoughts to improve your destiny!
Skill 3: Numeracy
"People would rather commit suicide than learn arithmetic." -- Bertrand Russell.
"There are three kinds of people; those who can count and those who can't." -- Robert G. Allen
Numeracy is to numbers as literacy is to words. To succeed with money, it helps to understand numbers, to be able to deal with them and manipulate them, to use them to better understand certain important aspects of the world we live in, to use them to assess risk, and to use them to better predict the future.
If you haven't mastered addition, subtraction, multiplication, division, fractions, decimals, percentages, etc.,
For an overview of numeracy, see Numeracy and Adult Numeracy Down Under.
Understanding and appreciating PROBABILITIES is one of the most important skills, not only for succeeding with money, but in life generally. Says John Allen Paulos in his book Innumeracy: Mathematical Illiteracy and Its Consequences:
"And if you don't have some feeling for probabilities, automobile accidents might seem a relatively minor problem of local travel, whereas being killed by terrorists might seem to be a major risk when going overseas. As often observed, however, the 45,000 people killed annually on American roads are approximately equal in number to all American dead in the Vietnam War. On the other hand, the seventeen Americans killed by terrorists in 1985 were among the 28 million of us who traveled abroad that year -- that's one chance in 1.6 million of becoming a victim. Compare that with these annual rates in the United States: one chance in 68,000 of choking to death; one chance in 75,000 of dying in a bicycle crash; one chance in 20,000 of drowning; and one chance in only 5,300 of dying in a car crash."
Many money decisions -- which stock to buy, which money program to join, how much money to commit to the stock or program, etc. -- can be good or bad, depending on your ability to estimate risk and probabilities. According to Peter L. Bernstein, in his classic Against the Gods: The Remarkable Story of Risk:
"The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature. Until human beings discovered a way across that boundary, the future was a mirror of the past or the murky domain of oracles and soothsayers who held a monopoly of anticipated events.
This book tells the story of a group of thinkers whose remarkable vision revealed how to put the future at the service of the present. By showing the world how to understand risk, measure it, and weigh its consequences, they converted risk-taking into one of the prime catalysts that drives modern Western society. Like Prometheus, they defied the gods and probed the darkness in search of the light that converted the future from an enemy into an opportunity. The transformation in attitudes toward risk management unleashed by their achievements has channeled the human passion for games and wagering into economic growth, improved quality of life, and technological progress."
See also: Arithmetic & Numeracy, Mathematics & Statistics, Statistic
Skill 4: Understand money
Money can be understood in terms of what many consider to be its main functions:
(a) Medium of exchange;
(b) Unit of value/money as information;
(c) Store and transmitter of value.
Without money, if people want to exchange goods and services, they barter. "In exchange for filling my car's gas tank I'll work for you for an hour." In most cases this simply wouldn't work because party A doesn't want what party B has to offer in exchange. With the use of money as an intermediary (or go-between), a wider variety of transactions become possible, increasing the chances that more people will satisfy their needs.
To facilitate exchanges of goods and services, it helps if we have a sense of the worth or value of things. I might value my time at $15 an hour. In that case, if someone offers to pay me $15 an hour or more, I would consider working for him or her. If offered less, I would probably decline the offer. Similarly, I might value a loaf of bread at $1. Money as a unit or measure of value helps us to make better economic decisions. In the absence of money it would be much more difficult to make sensible economic and financial decisions. How things are currently priced by most people provides indispensable information for guiding economic and financial decisions.
The store-of-value function of money makes an important dimension to economic and financial life much easier. It enables us to produce a surplus in the present, to save the surplus, and to "move" it to different places or into the future. Money makes it easy to transfer value from place to place or present to future.
In Your Money or Your Life, Joe Dominguez and Vicki Robin provide four perspectives of money:
(a) The street-level perspective (practical, physical realm);
(b) The neighborhood perspective (emotional/psychological realm);
(c) The citywide perspective (cultural realm);
(d) The jet plane perspective (personal responsibility and transformation).
The street-level perspective (practical, physical realm) includes the physical aspects of notes and coins and all our financial transactions: allowances, jobs/paid employment, banking our checks, balancing our checking account, credit cards, insurance, buying a house, investing, assets and liabilities, etc.
The neighborhood perspective (emotional/psychological realm) includes beliefs and myths about money: what you have to do to get money, money as security, money as power, money as social acceptance, money as evil, etc. "Economic correctness" is at this level. So is money as a problem for couples to fight over and as a cause to break up their relationship. You can also get murdered for your money.
The three main functions of money I've described above can be assigned to the citywide perspective (cultural realm). So can "economic bogeymen" such as GNP (gross national product), CPI (consumer price index -- a measure of inflation), cost of living, recession, depression, economic expansion, bull and bear markets, etc. Ideas about using gold (and other precious metals) as money belong to this level. So does complementary currencies -- see Complementary Money System.
The jet plane perspective (personal responsibility and transformation) involves letting go whatever you think you know about money. At this level money becomes something we trade some of our life energy for.
See also "Unconstitutional Money" and The Economic Rape of America.
Skill 5: Understand value
"I conceive that the great part of the miseries of mankind are brought upon them by false estimates they have made of the value of things." -- Benjamin Franklin
There are two main "theories of value":
(a) Labor theory of value -- the classical theory that the value of any good derives from the value of the labor used to produce it. Karl Marx and many socialists and communists adhere to this theory. (b) Subjective theory of value -- something is worth whatever people are willing to pay for it. Austrian economists and many capitalists adhere to this theory. Value (like beauty) is in the eye of the beholder.
When you buy something with the purpose of making money, it's because you expect or hope its price will increase. (When you sell something short with the purpose of making money, it's because you expect or hope its price will decrease.) Prices often depend on how large numbers of people (the market) value things. Some price changes reflect changes in valuation by large numbers of people (the market).
Supply and demand affects prices. Droughts can result in rising prices of certain commodities. Competition often results in lower prices as in the computer industry. Monopoly-like economic power can result in increased prices.
The value of a money-making program to me is based on how much money I make with it. See Risk Meter.
Skill 5A: Understand life energy
Your life energy is that which animates your body. You and only you control your life energy. This has profound implications which are further explored in How to Discover Your Freedom. Life energy enables you to perform purposeful and productive activities.
Whatever life energy you've expended in the past is gone -- except for the money and other values, including knowledge, that you've saved and accumulated and are available for present and future use. The life energy available to you is a function of: (a) What you've saved and accumulated in the past in forms that can be carried forward; (b) The time you have available during the rest of your life on earth; (c) The "quality" of this time.
Under (a) you could include family connections, friendships, knowledge, skills, reputation, money, and any other assets that can be carried forward for future use. To think of your time left on earth (b) as limited is to think like a "deathist" who says, "Nothing is as certain as death and taxes." (See Health Freedom & Life Extension and Fiscal Freedom. The "quality" of the time (c) you have available is basically a function of your physical and mental health plus your knowledge and skills.
The limited view of life energy expressed by Dominguez and Robin is grossly mistaken and impoverishing. Life energy is unlimited. There are no bounds to the extent to which you can increase your life energy by improving your knowledge, skills, and health, and by extending your life. Their notion that "money = life energy" is also inaccurate. It's more accurate to say that you can save and accumulate some of your life energy as money and in other forms and transport it into the future.
Skill 6: Understand work and its history
"I don't like work -- no man does -- but I like what is in work -- the chance to find yourself. Your own reality -- for yourself, not for others -- what no other man can ever know." -- Joseph Conrad
"The return from your work must be the satisfaction which that work brings you and the world's need of that work. With this, life is heaven, or as near heaven as you can get. Without this -- with work you despise, which bores you, and which the world does not need -- this life is hell." -- W.E.B. Ddu Bois
It's worth it many times over to buy Your Money or Your Life by Dominguez and Robin just for what they say about "work" in Chapter 7. They quote >>>from Working by Studs Terkel:
"This book, being about work, is, by its very nature, about violence -- to the spirit as well as to the body. It is about ulcers as well as accidents, about shouting matches as well as fistfights, about nervous breakdowns as well as kicking the dog around. It is, above all (or beneath all), about daily humiliations. To survive the day is triumph enough for the walking wounded among the great many of us... It is about a search, too, for daily meaning as well as daily bread, for recognition as well as cash, for astonishment rather than torpor; in short, for a sort of life rather than a Monday through Friday sort of dying."
Most importantly, Dominguez and Robin indicate that for most of human history (and prehistory) people have had to work only two to three hours a day to survive. To me it seems that, given all the machines and technology available in our "modern" world to do all kinds of work, it shouldn't be necessary for anyone to work more than about one hour a day to be able to survive comfortably!
Most people seem to think that work is what we do for a living and that in order to work you must have a "job." Dominguez and Robin indicate that the way most people define work is part of the problem. You can start deconstructing your idea of work by reading The Strange "Job" Concept. Dominguez and Robin quote from Benjamin Kline Hunnicutt's Work Without End:
"Since the Depression, few Americans have thought of work reduction as a natural, continuous, and positive result of economic growth and increased productivity. Instead, additional leisure has been seen as a drain on the economy, a liability on wages, and the abandonment of economic progress."
Confusing "be" and "do" is also part of the problem, according to Dominguez and Robin. "What do you want to be when you grow up?" You're supposed to answer that with what you want to do. So most people think and talk in terms of, "I'm a doctor, a nurse, a policeman, etc." It would be more accurate to think in terms of, "I'm a human being who sometimes does medical work, etc." Dominguez and Robin suggest we redefine "work" as "any productive or purposeful activity, with paid employment being just one activity among many..." They emphasize that "breaking the link between work and money" opens us up to many other options.
Skill 7:Please Don't work for money; have money work for you
"Money is the seed of money, and the first guinea is sometimes more difficult to acquire than the second million." -- Jean Jacques Rousseau
The first lesson Kiyosaki emphasizes in Rich Dad, Poor Dad is that rich people don't work for money; they have their money work for them. Personally, I'm satisfied when my money earns a 10% return per month for me. If my money isn't providing this kind of return, I start looking elsewhere. For examples of how you too can achieve this kind of return, see Risk Meter.
Fortunately, you don't even need to have money in order to make money work for you. There are millions of people in the world with "surplus" money that's not being put to very good use. You can organize your money-making activities so that some of this OPM (other people's money) works for you. For a general approach to achieve this, see Zero-Risk Money-Making.
See also Make Money Work for You in Millionaire Report #7.
Skill 7A: Work to learn More and More:-
Many people are in a situation such that the only practical way for them to be able to pay the bills at the end of the month is to work at some "job" ("just over broke!"). Many of these people work at essentially "dead-end jobs." I once worked for a publishing company. After about 10 days of working there it was clear to me that working there was of limited benefit to me... unless I could learn a great deal which I could apply elsewhere to make money for myself. It so happened that this company sold their products through direct-mail marketing. So I decided that it would be worth my while to work for the company if I could learn about marketing, particularly writing advertising copy that sells. I worked for the company for nearly two years, learning all I could. After I left them I wrote two books, The Economic Rape of America: What You Can Do About It and Wake Up America! The Dynamics of Human Power. I published them myself and started selling them. Later I also wrote most of the Build Freedom Reports. Selling these books and reports eventually became a thriving business. Much of the success stemmed from what I had learned while working at the publishing company.
The moral of the story is that if your situation is such that you have to work for money, then be sure to put yourself in a position that enables you to learn what will later enable you to make much more money. Learning is the basic thing. So first do then deserve!
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