What is it that truly separates the wealthy from everybody else?
Is it the circumstances they’re born into?
How about the college they went to or the city they live in?
Perhaps it’s the size of their salary, their friends, political connections or the number of hours per week they work?
The Magic Key
My favorite indication of what truly separates the wealthy from the poor and middle class comes from Andy Tanner’s book How to Invest With No Money.
Andy invites readers to think about extremely wealthy people (people like Warren Buffet [billionaire investor] or Richard Branson [billionaire founder of the Virgin family of companies]) and then poses this question:
“What if we took away all of the wealth of these people. We went into their bank accounts and businesses and took every last penny. Where do you think they would be in five years?”
The answer is obvious; these people would not stay down and out for long. They would bounce back and probably quite quickly.
How would they do it?
By using the same thing they used to become wealthy the first time. The one thing that we couldn’t take away from them when we stripped them of their assets: their financial education.
Continuing The CLIMB
Financial education and the willingness to act on it is the key to financial success and today we delve into this third and probably most important stage of creating financial freedom.
C – Choose
L – Liability (Debt) Elimination
I – Intelligence Gathering
M – Maximize Income
B – Beat the Rat Race
Financial education opens up a whole new world of possibility: the world of the wealthy.
This exciting new world has always been there, but you may not have realized that it’s possible to become part of it.
When you went to school you learned all kinds of things.
But chances are you never learned how to manage a checking account let alone how to manage investments, handle debt or reduce your taxes.
Since your money isn’t all going to pay off debt anymore you now have the means to join the world of the wealthy. All you need now is people to show you how to play. People who can teach you the critical financial skills nobody taught you in school.
Think of everything you’ve learned up to the point of getting out of debt as a bachelor’s degree in personal finance.
Now it’s time to start pursuing your financial master’s degree.
What is a Financial Master’s Degree?
This doesn’t mean you have to aspire to be like Warren Buffet or Mark Zuckerberg.
Financial freedom doesn’t require that you be obscenely wealthy, only that you have enough wealth to provide you with the time and resources to pursue more important things in life.
Learning to become wealthy doesn’t need to be the primary focus of the rest of your life.
But just as there was a season for focusing on getting out of debt, now is the season to focus on learning how to manage your finances in such a way that you won’t have to focus much time or energy on them later.
This involves learning things like how to:
- Grow your assets
- Develop income from your investments
- Develop skills that can provide extra income
- Protect your money from erosion by inflation, taxes and management fees
- Limit your losses during market shocks
Part of your financial education should also include learning about external factors that can have a significant impact on your wealth. Things like current events and government policies.
Earning Your Financial Master’s Degree
All of that probably sounds like a very tall order. And it is.
If becoming financially free were easy everyone would do it. It takes maturity, patience and persistence to learn all that you need to know.
Learning to play in the world of the wealthy is like learning anything else. It will be uncomfortable at first.
There will be unfamiliar terms and concepts.
You may be tempted to give up and just settle for the easy things that your HR specialist or friends tell you to do with your money.
But stick with it. Before you know it you’ll be understanding concepts that were giving you trouble only weeks earlier. And eventually you’ll find yourself gaining confidence to start taking your first steps into the world of the wealthy by implementing some of the things you’re learning.
What to Study
The two most important ingredients in obtaining a good financial education are good teachers and personal experience.
As a general guideline for teachers I would recommend ignoring financial advice from anybody that has a TV show, works for the Federal Reserve or federal government or any financial advisor who collects a 1-2% fee and has no better advice than to put your money into mutual funds.
Instead look for reliable advice from these sources:
- Investing/Financial courses
Note that in general these sources will require some investment from you. Don’t let that deter you.
Having personally invested a lot of money into my own financial education over the past five years I will attest that spending money to get access to people who know what they are talking about is one of the fastest ways to gain entrance into the world of the wealthy.
Rather than overwhelming you with a long list of things you could study I’m going to recommend just two resources to kick off your financial master’s degree program:
- Read Rich Dad, Poor Dad by Robert Kiyosaki. There is a reason this book has sold over 26 million copies worldwide. In this book you’ll discover why so many hard working people will never get ahead and what you can do to avoid falling into that trap.
- Sign up for a free subscription to Palm Beach Daily (PBD). PBD is a quick daily read that will give you insight into everything from the latest financial trends around the world to advice on how to enhance your productivity. (NOTE: Because this is a free publication you will see ads mixed in with the content. Just ignore them and focus on the good stuff.)
If you’ll start with those two resources* and then do some research on your own you’ll find that one source will lead you to others and your education will just keep growing.
A Lifelong Journey
Your financial education isn’t something that will last a few weeks or months. It’s a process and a journey.
Again, it shouldn’t be the primary focus of the rest of your life.
But it does need to be enough of a priority that you learn to manage your finances in such a way that you can achieve the financial freedom that will provide the time and resources to dedicate to more important things.
So don’t delay, start studying today. Increase your financial IQ and earn your passport into the exciting and liberating world of the wealthy!
You’ll never regret the things you learn and no one will ever be able to take them away from you.
*If anyone is interested in tips on other resources that might be useful to you feel free to contact me and we can discuss specific options that might be appropriate for your situation.