my journey to billionaire club[1]

MyJourneyToBillionaireClub.Com What Rich Teach Their Kids About Money That Poor & Middle Class Don’t?

Author: Asav Patel, Ahmedabad, India

If You Want to Discuss anything about this eBook or if you have any Query regarding any concept of this book than you can directly contact Author on – Investta.com – The Investors & Entrepreneurs Forum. Or you can give your feedbacks about the eBook directly to the Author (Asav Patel) at his Personal e-mail address [email protected] P a g e | 1

WHAT RICH & ULTR-RICH (BILLIONAIRES) TEACH THEIR KIDS

ABOUT MONEY THAT POOR AND MIDDLE CLASS DON’T?…!!!!

Do You want to become Rich (Millionaire, Multi-Millionaire) or Ultra-Rich

(Billionaire) one day in your life? Then learn the following 6 Lessons of Rich

people. These are the lessons that rich people teach their kids but poor and

middle class don’t.

Lesson: 1 Financial Statement ………………………………………………… 06

Lesson: 2 Asset Versus Liability……………………………………………… 11

: 2.1 Asset Classes…………………………………………………………….. 24

: 2.2 Business Mindset……………………………………………………….. 32

Lesson: 3 Active Versus Passive Income…………………………………… 40

Lesson: 4 Good Versus Bad Expenses & Debt……………………………. 51

Lesson: 5 Cashflow pattern of Rich, Middle class & Poor…………… 58




Lesson: 6 The Power of Corporate Structure……………………………… 67

A) Save Tax …………………………….. 73

B) Asset Protection …………………………….. 82

C) Create NEW Wealth in the Economy …………………………….. 90

The History of Money, Gold Standard & Modern Banking ………………… 103

Asset is More Valuable than Money …………………. 111

Myth: 1 Go To School . …………………… 116

Myth: 2 Get a Job ………………….. 121

Myth: 3 Work Hard to Earn More Money……………………………………….. 125

Myth: 4 Save Money …….. 128

Myth: 5 My House is my Asset …………. 132

Myth: 6 Get Out of Debt ………… 140

Myth: 7 Live Below Your Means ………….. 145

Myth: 8 Invest for the Long Term and Diversify ………….. 149

Myth: 9 Retire With Pension Plans …………… 153

Myth: 10 Capital Gains Versus Cashflow ………….. 156

Everybody wants to get rich one day in their life. But unfortunately, our

education system doesn’t teach us anything about money.

And that’s why when people leave their schools and colleges, they struggle

financially for the rest of their lives and live paycheck to paycheck. The

above are the 6 basic Lessons that Rich teach their kids but poor and middle

class don’t. Rich have knowledge of these 6 lessons since their Childhood

and that’s why they get rich when they grow older.




If you want to get rich, millionaire or even billionaire than always remember

these 6 lessons in your life. And impart these 6 lessons in your children also.

So that they can also get rich.

Also remember that there is a basic difference between 3 mindsets.

01) Middle Class Mindset

02) Rich (Millionaires & Multi-millionaires) Mindset &

03) Ultra-Rich (Billionaires) Mindset

The basic difference between these 3 mindsets are,

01) Middle Class Work Hard for Money -

Middle Class people have a common mindset and that is, Finding out a safe

and secure job, work hard at that job place for years, live paycheck to

paycheck and retire at the age of 65 years when you become old.

This mindset they derive from their parents and grand parents. For them,

job security is the ultimate thing in their life. And they become fearful when

they hear about ‘Job loss’ or changing the jobs.

These people have only one kind of skill and that is Earning money. These

people trade their time in exchange of money and receive a paycheck at the

end of each month in exchange of their time.

02) Rich Make their Money Work for them -

These are the millionaires and multi-millionaires. These people make their

money work for them hard rather than work hard in the economy. Making

your money work hard for you means Investments.

These people know that managing money (Investing) is as important skill as

earning money. Thus, these people are the Investors. These people invest

their money in vast variety of assets such as stocks, bonds, gold, real

estate, businesses, mutual funds, art, antiques, old wines, web properties,

domain names, paintings and many other assets.




These people know that investment is a game of getting rich and financially

free and that’s why they start investing in their very early lives. These

people know that the day you invest your money, it will start working hard

for you and make you rich and financially free over a period of time.

These group of people also teach their children the art of investing their

money since their childhood. During the same time middle class people

teach their children to work hard in the school to get good grades so that

they can get a good, high paying safe and secure job.

03) Ultra-Rich (Billionaires) Create New Money/Wealth (Legally) in

the Economy -

These are the Billionaires. And they have entirely different mindset than the

Rich and Middle class people. I mean these people literally create new

wealth in the economy.

I mean these are the people who neither work for money (Like Middle Class)

nor make their money work for them (Like Rich. Of course they invest their

money like rich but in different way). But these are the people who print

their own money in the economy and that is also legally.

So How These Ultra-Rich people create new wealth in the Economy?

How these Billionaires print their own money legally?

Well, the answer is – By developing successful businesses and later on

taking those businesses to the public. And by selling the shares of their own

company/business to literally millions of people they become ultra-rich.

In short, they are the wealth creators.




You will learn in each and every lesson that How the Middle Class, Rich and

Ultra-Rich use each and every Financial lesson in different way. The Financial

lessons are the same but the way of analyzing and thinking these lessons is

different. So Start reading these financial lessons one by one and

understand the 3 core mindsets or Middle class, Rich and Ultra-Rich

(Billionaires).




Lesson: 1 Financial Statement Basics

You must have heard the word ‘Financial Statement’ but probably know little

to nothing about it. The above is the simplified diagram of the financial

statement.

Once you leave your school and college, your Financial statement becomes

your Score card. This is because in the real life your financial statement

shows that how smart you are with your money.

Rich (And Ultra-Rich) people teach their children the basics of Financial

statement since their early childhood when they are in school. While Middle

class people never teach their children about the financial statement. And

this is the ONLY reason their children will also become middle class in the

future.




And how can a middle class person teach their children the basics of financial

statement? This is because he/she himself/herself doesn’t know anything

about the financial statement.

Let me explain you that What is Financial Statement and Why is it so

important to become rich in your life? Well, in simple words, Financial

Statement is a on paper record of your income, expenses, assets and

liabilities (In the next lessons you will learn in detail about these terms.).

A Financial Statement has two parts – Income Statement and a Balance

Sheet as shown in the figure. Income statement has all the details of your

various kind of Income such as Salary, Interest Income, Dividend Income,

Rental Income, Business Income or any other kind of Income. It also has all

the details of your all kind of Expenses such as Tax, Food, Clothes,

Telephone Bill, Credit Card payment, EMIs and many others.

Balance Sheet has two Columns – Asset column and a Liability Column. Both

of them have all the details about your Assets and liabilities.

The Middle class people think that there is only one financial statement and

that is their own. But well, this is a Myth. The Truth is that, any separate

financial entity has its own financial statement such as Real Estate,

Businesses….etc…

The basic characteristic of rich people is that, they play the game of money

in multiple financial statements and most of the time they never own their

valuable assets in their own name means on their own financial statements.

Another important characteristic of Rich people is that, they always think in

the financial statements. So whenever they think about starting their new

business or investing their money they think that in which part of the

financial statement that business or investment will fit and how it will make

him more richer? While middle class people don’t have any such kind of

mindset and that’s why they never think in the financial statements.




If you want to become Rich & Ultra-Rich (Billionaire) some day in your life

then always think in financial statements. Make the habit of thinking in the

financial statements. Rich teach their children to think in the financial

statements and that’s why their children also grow rich in the future.

Middle class people never think in financial statements and this is the only

reason of their financial struggle. Middle class people always focus on

Income. They always focus on earning money. They don’t have any element

or basic education or training like thinking in the financial statements and

that’s why they also don’t impart this knowledge to their children also and

thus their children also become middle class in the future.

But the kids of rich people always think in the financial statements. In fact,

anyone who is rich or going to be rich always think in the financial

statements.

Unfortunately, Financial Statement is something that is not taught in any

School. This is because the schools are designed to create employees and

self-employees who can run the businesses of rich people. If School will

teach everyone the basics of Financial statement than who will work like a

slave to run those businesses of the rich people? And that’s why the word

‘Financial Statement’ and its importance is not taught in the school. And this

is the reason why the word ‘Financial Statement’ is purposefully deleted

from the entire education system. This is because the rich people of the

starting of the industrial age (1800) knew that Financial Statement and its

knowledge is the gateway of becoming rich.

If you want to become Rich in your life than remember that, The Financial

Statement is the Gateway of becoming rich and Ultra-rich. Most of the

Financial advisors will tell you that which mutual funds and stocks you

should invest. But they will never tell you that You should first think in your

financial statement that weather the particular investment will fit in your

own financial statement or not?




Not the every investment will make you rich although every investment has

potential to make you very rich. This is because you don’t think in your

financial statements and simply buy the financial products without thinking

in your financial statements.

But the rich people are those who think in their financial statements before

making any investment in their life and that’s why they never fail in any kind

of investments.

You will be surprised by knowing that, it were the rich people of the

Industrial Age (Early 1800) who have designed our entire education system.

And they have designed our education system in such a manner that it will

never teach you the basics and importance of the financial statement to

keep you middle class or poor and financially struggling for the rest of your

life. This is because they did not want that all the people in this world learn

the ‘Financial Statement Basics’ – The Gateway of becoming Rich and Ultra-

Rich.

Remember that, The person who has basic knowledge and applications

about the Financial Statement can never die poor.

Exercises

Ex: 1 See your own Financial Statement today. And if you are a school going

or college going student and don’t have your own financial statement

(Ideally you should have) then see the Financial Statement of your Parents.

Ask your parents to show their Financial Statement to you.

Ex: 2 Now, go to the Internet and search for the Financial Statements of

Publically listed companies on the various stock Exchanges. Type the Search

keyword – Financial Statement of XYZ Company in Google Search box and

download and analyze the Financial Statement of the various companies.

Ex: 3 Take a Paper and Pencil and draw the Simple line diagram of the

Financial statement as shown in the above figure. And remember this




diagram very well. This is because the Financial Statement is the gateway of

becoming rich in your life.

Ex: 4 Teach your few friends, Children or parents the Financial Statement.

And Discuss the Financial Statement basics with other friends.

Ex: 5 Make a Habit to think in the Financial Statements. Means whenever

the topic of Investments, Money, Business, Job or Personal Finance is

discusses anywhere, think your own Financial Statement. Make this a Habit.

This is because Rich teach their kids to make a habit of thinking in the

financial statements.




Lesson: 2 Assets Versus Liabilities

These are the another two terminologies which are not being taught in the

school. And this is the reason most of the people remain middle class or

poor and struggle financially for the entire life.

If you understand the meaning and the difference of the two words Assets

and Liabilities than you can really become rich and ultra-rich in your life.

Rich people teach their kids the meaning of these two words very clearly

since their childhood and that’s why their children make excellent financial

decisions when they grow younger.

Diagram 1: Financial Statement Showing Assets and Liabilities.

Assets put Money into your pocket by generating cashflow while the

liability takes money away from your pocket by making expenses.




Asset means anything which appreciates in its value (Capital Gains) and / or

Put money into your Bank Accounts (Cashflow) weather you work or nor.

Liability means anything which depreciates in its value and / or Takes

money out of your Bank Accounts.

These are the basic differences between the Assets and Liabilities. In other

words, Anything which puts money into your pocket is an Asset while

anything that takes money out of your pocket is a Liability.

Rich people always buy Assets while middle class people always buy

liabilities and after that struggle financially. Remember that, rich are those

who spend their most of the life accumulating Assets.

Examples of Assets are – Stocks, Bonds, Gold, Real Estate, Mutual Funds,

Businesses, Art & Paintings, Rare Wined, Web Properties (Blogs, Websites &

Domain names), Intellectual properties, Copyrights, Patents ….etc..

Examples of Liabilities are – Debt, Car Loan, Credit card outstandings, EMIs,

Club memberships, Luxurious Cars, Watches, Clothes, Status Symbols,

Country Houses….etc…




Diagram 2: Rich Focus on the Asset Column While the Middle Class

focus on the Income (Hard Earned Money) and the Liability Column

Most of the middle class think that High Income is the indicator of financial

well beingness. Middle class think that people who earn high income are

rich. But this is a Myth.

The Truth is that, people who have more assets are rich. Income has nothing

to do anything with your wealthiness. The more assets you own, the more

rich you will become.

Rich people accumulate more and more assets in their life and that’s why

they grow richer and richer. While Middle class people have a false belief

that the higher they will earn, the richer they will become.




And that’s why middle class work harder and harder at their job places to

earn more income. This is because they think that the higher income they

will have, the more richer they will become.

Diagram 3: Financial Statement of the Middle class – Middle class

work hard for the Active income and focus on buying liabilities and

these liabilities make them expenses.




Diagram 4: Financial Statement of the Rich. Rich focus on growing

their Asset column. They create, acquire and accumulate more and

more assets in their asset column and these assets generate passive

income for them.

But well, Rich know that Assets make anyone richer and richer. The main

limitation of Job Income is that, the day you will stop working, you will lose

that entire income. But the advantage of owning the asset is that, once you

acquire the asset after that weather you work or not, sleep or travel the

world, your asset will keep generating passive income for you for the rest of

your life and for your future generations even after you.

And that’s why owning an Asset is the smart thing to do rather than working

hard at your job place to increase your income. Rich know this secret of

owning assets since generations and that’s why they teach their children




since their childhood the basic difference between assets and liabilities and

importance of owning the assets.

If you want to become rich in your life than always buy assets. Always focus

on growing the Asset column of your financial statement. This is because

rich always think of growing their Asset column of the financial statement.

While middle class always focus on their Income. Middle class always look

for the ways to increase their income. And that’s why they work hard at their

job places, do over time at their job place or even do the multiple part time

jobs to increase their income.

But they don’t know that the day they will stop working, their entire income

stream will suddenly disappear. Rich know this fact since their childhood and

that’s why they focus their time, money and energy to build their Asset

column. And once they build sufficient asset column, after that weather they

work or not, the money from their asset (Passive income) will keep flowing

into their bank accounts for the rest of their lives and even after that.

Have you ever think that why rich people don’t work for anyone else? Why

don’t they like to do a job? Is this because they are rich? Nope. This is

because the rich people know that working for someone else (Job) means

trading your time in the exchange of the money. And the day you stop

trading your time in the exchange of the money, your income will also stop.

But well, if you have spent your time and energy to build assets in your life

than after growing your asset column sufficiently, even if you stop working

for the rest of your life, the income will still keep coming from your asset

columns.

And this is the prime reason why rich people start developing their own

Businesses, Investments and Assets since their very early life. This is

because they know that the time is very valuable asset and that’s why they

use their time and energy to create assets (Businesses & Investments)

which can provide them unlimited cashflow weather they work, sleep or

travel the world in the future.




Now, just think in your financial statement and the financial statement of the

company for which you are working as an employee. Well, when you do a

job means trade hours in the exchange of your time, you are developing the

asset of someone else (The owner of the company) in exchange of a

monthly paycheck.

In other words, when you work for someone else. You are growing the asset

column of that person by putting your time and energy in that business and

thus making the owner of that asset/business more richer.

So if you want to become rich or super rich in your life than start developing

your own assets in your life. Never work for someone else (job) and trade

your time in the exchange of the money.

So How Rich people Grow their Asset Column?

Keep in mind that, rich always think in the financial statements mainly in the

Asset column of their financial statement. They always focus and work hard

to grow the asset column of their financial statement. This is because they

know very well that the asset column of the financial statement is the only

thing which can make anyone Rich or Ultra-rich.

You can grow your asset column by 3 ways.

01) Acquiring Assets out of your Hard earned money

02) Convert Something into Asset

03) Creating new Assets in the world

The first way to grow the Asset column is – you simply acquire assets out of

your income. Say for example, you buy stocks, bonds, gold, real estate,

mutual funds, web properties or any other asset out of your hard earned

money.

The second way to grow your asset column is, you convert something into

assets. Say for Example, if you have a bicycle then you can give it on rent.

Or if you have a good stamp collection then you can put your stamp




collection in exhibition and generate cashflow from it and thus, you have

converted something into the asset.

Diagram: 5: Ultra-rich (Billionaires) Create New Assets in their Asset

Columns by developing a successful business and later on taking it

to the public.

The third way to grow your asset column is, you create new assets in your

asset column out of scratch. Super rich people think in this way and that’s

why over the time they become billionaires. Creating asset means

developing businesses out of scratch or crating some kind of asset out of




nothing such as writing a novel, writing a book, recording a music, making

an art or painting or making an online application or anything like that.

You will have to use your mind very well to create assets out of nothing in

your asset column. Say for example, take the example of Bill Gates. He

developed the operating system for computers - Windows (Previously DOS)

which he created out of nothing. Take the Example of Larry page who

developed Google, the world famous search engine. See the authors, singers

and artists around you. All of they create assets out of nothing and become

rich.

Thus, Rich teach their kids to focus mainly on the asset column of their

financial statement. In fact, all the rich people around the world are busy

with growing the asset column of their financial statement. They put their

time, money and energy to grow their asset column.

In contrast, Middle class people put their all time, money and energy to grow

their income. And that’s why the more money they earn, the more hard

work they will have to do. But for rich, the more assets they will grow, the

more money their assets will generate and the less hard work they will have

to do.

So understand the basic difference between Assets and liabilities and spend

your time and energy behind growing your asset column.

Many Financial Advisors and Finance Gurus around the world advise you to

live below your means (It means Spend less than you Earn). Well, The

basic logic behind this personal finance advise is that, by reducing your

expenses, you increase your Cashflow (Income – Expense). And this

increased cashflow is used to buy more Assets. But for the most of the

people this advise doesn’t work. This is because they don’t divert their

Cashflow to grow their Assets. They don’t use their cashflow to create and

acquire more assets. And that’s why not the all the people in this world who

live below their means can’t become rich. Remember that, living below your

means will only make you rich if you are going to divert that cashflow to




grow your Asset column by either creating new assets or acquiring assets

out of your Cashflow.

Billionaires are Ultra-Rich (Billionaires) because of their Assets and

not Because of their Income

Now, let us discuss something about the billionaires. There are almost 1100

Billionaires in the world according to Forbes. Do you know that why these

people are Billionaires? Well, most of the people in this world think that they

are billionaires because they have earned those billions of dollars. But well,

This is not the Truth. The Truth is that, these people are Billionaire because

of the Net worth of their Assets in their Asset columns. They are Billionaires

because of the Valuations of their Assets in their Asset column is above a

Billion dollar.

Say for Example, Bill Gates is a Billionaire and world’s richest person

because his own stake (Shares/Asset) in his own corporation Microsoft is

worth of Billions making him Forbes Billionaire. So the moral of the story is

that, you don’t have to earn a billion dollars to become a billionaire. But you

need to acquire or create assets in your asset column which become worth

of billions in the future.

So focus on growing on your asset column rather than growing your Income

like Middle class.

Celebrities, Doctors & Lawyers are high Income professionals but

not all of them are Rich

Celebrities, Doctors and Lawyers are high income individuals. They earn lots

of money in their financial statements but still not the all of them are rich or

even billionaires. This is because they only earn high. The higher they earn

the higher they will pay in taxes and less they will accumulate. Most of the

high income professionals in this world have a false belief that they are Rich

because their income is high. And that’s why they never focus on growing

their Asset column of the financial statement.




But the truth is that, you can be rich only by acquiring more assets in your

asset column. You can not be rich by earning high income and without

accumulating assets. This is because the day you stop working behind your

hard earned income, it will suddenly stop while the income from your asset

(passive income) will keep flowing into your bank accounts weather you

work or not?

Diagram: 6: Biggest Offpaper Assets and Liabilities

Biggest Off-paper Assets and Liabilities

Some assets and liabilities are those which you can not write down or

include on your Financial statements. This is because they are intangible.

Here are they.

The Biggest Off-paper Assets are,

01) Time

02) Financial Knowledge

The Biggest Off-paper Liabilities are,




01) Spouse

02) Friends

Rich accumulate more Assets and less liabilities. And this is the reason why

true rich people understand the value of their time. They have been taught

since their childhood from their parents that, The Los Money can be

recovered but the lost time can never be recovered. And that’s why the rich

are time savvy. They spend their time in such a manner that it will produce

On-paper assets. No matter how smart you become financially but if you

become smart in your old age than there is no meaning. This is because you

have lost your time to become financially smart. And that’s why time is the

biggest asset.

Another great Off-paper Asset is your Financial Knowledge means Knowledge

about money and how it works. Right now you are reading this article and

gaining the Financial Education. This will be your biggest off-paper asset

which will make you rich in the future. If you are young today but don’t have

the Financial Education of money than your biggest asset –Time is of no

value. This is because you don’t know what to do with your time. You don’t

have any idea that you need to focus your time to grow the asset column of

your financial statement.

Now, let us talk about the off-paper Liabilities. Always chose your spouse

and Friends very carefully. This is because spouse and friends which are not

carefully chosen can be your biggest liability. They will suck your Biggest

Asset – Time and make you middle class or poor. You would have focus that

time to grow your Asset column otherwise.

Exercises

Ex: 1 Make the habit of thinking about the Asset column of your financial

statement. Before spending your time, energy and money always think first

that how will your this particular move will help to grow your asset column?




Ex: 2 Take a paper and pencil and draw the Financial Statement line

diagram on it. And think that How you can create new assets in your asset

column? Think of starting your own business.

Ex: 3 Take a paper and pencil and make a list of Assets in one column and

liabilities in the other column. Now, think that which are the assets that you

understand more? Focus on those assets and acquire more and more of

those assets and grow your asset column like anything.




Lesson: 2.1 Asset Classes

So now you understand the basic difference between Assets and Liabilities.

Assets put money into your pocket weather you work or not while liabilities

will take money out of your pocket. This is a simple definition of the asset.

You also know that, Rich focus their time and energy to create and acquire

assets. While middle class don’t buy assets but they actually buy liabilities to

look cool and rich.

So if you want to become rich in your life than you will have to acquire more

assets in your life. You will have to work hard to grow the asset column of

your financial statement if you really want to become rich one day in your

life.

Diagram: 42 - Financial Statement Showing 4 Basic Asset Classes

In this article, we will discuss about various types of asset classes. Here are

the 4 basic types of asset classes in the world.




01) Business

02) Real Estate

03) Paper Assets (Stocks, Bonds, Mutual Funds, Pension Plans..etc…)

04) Precious Metals (Gold & Silver)

There are several types of assets in this world. But the above are the 4 basic

types of assets.

Other Assets -

- Intellectual properties (Books, Music, Movies, Novels, Patents, Inventions,

Copyrights…etc..)

- Web Properties (Domain names, Websites, Blogs, Forums..etc..)

- Art & paintings

- Rare Wine

- Vintage Cars

- Collectibles (Stamps, coins, old coke bottles…etc..)

Business -

First of all let me tell you that, Business is an Asset class. A Business is an

asset because it puts money into your pocket weather you work or not. And

that’s why a Business is the asset. In fact, a business is the most valuable

asset class in this world. This is because the owners of the business can get

rich much faster than the owners of any other asset classes.




Diagram: 43 - Middle Class work hard for Money (Active Income)

while Rich Work hard to create & Acquire new assets and grow the

asset column of their financial statement (Passive Income)

Developing a Business is all about creating new assets in the asset column of

your financial statement. Bill Gates (Microsoft), Larry Page (Google), Mark

Zuckerberg (Facebook), Dhirubhai Ambani (Reliance), Henry Ford (Ford

Motors), Ray Kroc (McDonalds), Michael Dell (Dell Computers), Steve Jobs

(Apple) have created their own Assets – Their own businesses which are

multi-billion dollar empires today making them billionaires.

Business (& Real Estate) is the preferred asset class of the rich people. In

fact, 99.99% of world’s rich people own at least one business in the asset

column and that’s why they are rich and ultra-rich. So if you want to become




very rich in your life than develop at least one successful business in your

life.

Real Estate -

This is the second asset class which is preferred by Rich people. This is

because the rich can acquire this asset class by using good debt (Mortgage

Loan). Say for example, if the real estate property is worth of $ 5 Million

than a rich can acquire it just by putting $ 1 Million down (20%). This is the

main advantage of real estate investments.

You can use debt to acquire this asset and ultimately become more richer

than ever.

Paper Assets -

These are basically the assets of the Middle class and Upper middle class.

This is because these are the assets for capital gains only. The Examples are

– Stocks, Bonds, paper Gold and Mutual Funds or any other kind of paper

assets.

Rich also invest in these assets but not from their hard earned money but

from the passive income generated by their other cashflow assets

(Businesses & Real Estate). Thus, for Rich paper assets are the last asset

classes to acquire while for the middle class this is the first asset class to

acquire.

Today all the employees and self-employees around the world invest in this

asset class mainly for the capital gains. But unfortunately, investing for the

capital gains is the risky form of investing. While rich invest for both

cashflow and capital gains.

Precious Metals (Gold & Silver) -

After 1971, the US Government has removed the gold standard and the US

Dollar became free float currency means the US Government can print as

much money as it want according to the need of the economy after 1971.




And subsequently all the countries of the world have removed the gold

standard.

Thus, the more money the banks and governments from all around the

world will print, the price of the precious metals will go up more.

Well, of course Rich Invest in Gold. But the gold is not their primary asset

class. This is because it is the Capital gains asset class. It doesn’t provide

you any cashflow.

The problem with middle class people is that they invest in gold as a primary

asset class and that’s why they will have to depend on only one kind of profit

and that is capital gain. This is really a risky Investment strategy.

Diagram: 44 - Difference between Middle class and Rich Investing

(Middle Class Invest for the Capital Gains while Rich Invest for

Cashflow & Capital Gains Both.)




The Difference between Rich & Middle class investing -

The rich and middle class both invest in all of the above asset classes but in

the different way. After all, all of the above are the assets and as we have

learned in the previous lesson that to become rich, all you need to do is to

acquire more assets. So the more assets you will acquire, the more rich you

will become.

Thus, all of the above are after all the assets and can make you rich and

richer. But the only problem with the middle class is that, they buy

mainly Capital gain assets (Paper Assets & Precious Metals) from

their hard earned money which is a risky thing. This is because the

middle class have been taught in the school that Business is risky.

While Rich people mainly buy (or create) Cashflow (+ Capital Gain)

Assets (Businesses & Real Estate). And from the income generated

by their cashflow assets, they buy the capital gain assets like Gold

and Paper Assets (Stocks, Bonds & Mutual Funds).

This is the single difference that can make you rich or middle class in the

long run. Many middle class accumulate lots of assets in their Financial

statements but most of them are paper assets & Gold – the capital gain

assets only. And that’s why they will have to wait for years until the price of

the asset goes up.

While Rich primarily buy the cashflow (+ Capital gains) assets so the day

they acquire these assets, their income and cashflow also improves

immediately. Thus, they can enjoy their life very well as well as acquire

more assets from their increased income very easily.




Online Assets - Information Age Assets -

After the birth of the Internet in 1990, the entirely new asset class has been

created in world known as – Web Assets or Web Properties.

The Examples are – Websites, Blogs, Forums & Domain Names.

These web properties tend to appreciate so much fast that even high school

going kids started becoming millionaires before leaving their high schools. In

fact, today many self-made billionaires are in their twenties and thirties only

because of the web properties.

The founders of Facebook, Amazon, Google & eBay are the billionaires

today. The reason why web properties appreciate so much faster is because

the entire world is connected to the internet today which makes exponential

growth of the web properties in its valuations as well as the cashflow.

If you want to become very rich in your young age than try this asset class.

This is because it is the only fastest appreciating asset class in the world

which can make even a school going kid a millionaire or multi-millionaire

before leaving his high school.

Summary:

If you want to become rich than acquire any kind of assets. Keep

accumulating more and more assets out of your money. If you want to

become rich than the only thing you need to focus is on the asset

column of your financial statement and nothing else.

However, there is a huge difference between the middle class and rich

investing. Middle class invest primarily in the paper assets and gold

while the rich invest primarily in the businesses and real estate and

after that acquire other capital gain assets like paper assets and

gold.




So if you want to become rich than it is advisable to start a Business or real

estate investing first. This is because these are the cashflow assets which

can acquire other assets afterwards without much efforts.




Lesson: 2.2 Business Mindset

In lesson 2.1, We have learned that the Business is the preferred asset class

of rich people. And the rich people teach their kids since their childhood that

they should own a business first and later on acquire other asset classes

such as paper assets and gold.

We also learned in the previous lesson that, middle class mainly focus on

acquiring paper assets and gold first while rich focus mainly on developing

their own business first and after that they acquire and accumulate other

asset classes.

And this is the reason why people should have at least one privately owned

or a business on which you have at least 10% of the management control.

Thus, starting your own business should be the first thing you should do to

grow the asset column of your financial statement. And that’s why the

financial advise to get rich is – Start your own Business as early as possible.

Now, the only problem with starting and running a successful business is

that,most of the people don’t have any mindset to start and run a business.

Why Middle class Don’t have mindset to Own their own Business?

Because of the Education System. The entire Education system is designed

in such a manner that the schools and colleges will only teach and motivate

you to become employees and self-employees.

The reason why most of the people afraid of starting their own business

even though they know that it is very important asset class to own to

become rich is – Because Schools have trained them to become employees

and Self-employees.

When people leave the school, they leave their schools physically but they

don’t know that their school has imparted a mindset of becoming an

employee or self-employee. Over the time, the school has developed various




reflexes in your brain that you will feel fear when you think of starting and

owning your own business.

Diagram: 45 - School imparts different sets of keywords (Middle

class) in your mind while to become a rich you will need different

sets of keywords – The keywords of Rich.

So Which are those Reflexes that prevent you to start your own

Business?

01) Well, the first Reflex the school develops in you since childhood is,

Exam fear. In the exams, if you ask the answer of some question to your

friend or colleague, you will be punished. This kind of system is designed

because the school wants you to become employee or a self-employee

(Doctor, lawyer) in the future.




And that’s why you will have to do all of your work by yourself. While in the

real life, Businesses run with the team work. So by taking exams, Schools

are developing a false mindset and a reflex to not to do a team work.

This is because the schools know that if you will do a team work, you will

definitely become successful. And this is what a Successful Business

requires. Any successful Business in this world is the end product of a great

tea work. Before taking any key decision, the board of directors,

management team and key officials of any business discuss that issue and

after working on that issue as a team, they collectively take a decision.

And this type of mindset is EXTREMELY IMPORTANT to develop a

successful business which can work even without your presence generations

to generations.

But Schools have been designed in such a manner that, such kind of mindset

that is extremely important to develop a successful business doesn’t develop

in your mind. This is because the basic function of a school is to develop a

mindset in your mind of that of Employees & Self-Employees who have to

work hard alone by themselves for the business owners. And that’s why you

are not allowed to do a team work in your exams. And if you try to do it, you

will be punished in your school.

Now, when you leave your school, this mindset of working alone and

doing everything by yourself makes you a perfect employee or a

self-employee. And that’s why after leaving your schools and

colleges, you wander here and there to find a job. This is because

now you fear of doing a team work. This is because the school has

punished you or prevent you to do a team work in your childhood.

Now, take the examples of various Billionaires who are high school and

college drop outs. Say for Example, Bill Gates, Dhirubhai Ambani, Mark

Zuckerberg, Subhash Chandra, Steve Jobs, Henry Ford and many others.




These people have left their schools and colleges before completing their

education and that’s why the school system failed to develop a mindset of

working alone in these people. And that’s why these people did the team

work and made their fortunes. Today they are billionaires.

So if you want to start your own business than first of all think of doing a

team work. Try to understand that the school system has imparted this

mindset of working alone while you need to do a team work to become a

successful business owner.

And this is the reason why many small business owners don’t make any

fortunes from their businesses. This is because they do everything by their

own in their businesses.

02) Second reflex the school develops in you is, fear of thinking about

money. Our School system teaches us the following words repeatedly.

- Go to School

- Work Hard

- Get Good Grades

- Get a Job – The worst keyword that can prevent you being rich. The

Schools give you only one option to make money and that is job. And this

simple keyword is so much smartly incorporated into your brain by education

system that you can not think anything other than getting a job once you

leave your school. So first of all delete this keyword from your mind.

- Job Security

- Become a Doctor

- Job Safety

- Do it yourself

- Don’t ask for anyone’s help

- Be Self Dependent




- Don’t think about money during your school time…etc..

Thus, the above keywords are embossed in our minds when we leave a

school. Unfortunately, the schools don’t teach us the following words that

rich teach their kids.

- Financial Statements

- Assets

- Liabilities

- Good & Bad Debt

- Cashflow

- Active & Passive Income

- Investments

- Business

- Create Jobs

- Real Estate Investing…etc…

The above are the keywords that should be embossed in your mind if you

want to become rich and ultra-rich. But the above words are smartly

removed from the entire education system. So that you don’t think and

understand the game of money.

Thus, when you leave your school, you leave your school with the first set of

the keywords which are taught to you in school. And that’s why even after

becoming a high skilled doctor, you prefer to work as an employee at

government hospital or some privately owned multi-speciality hospital.

This is because in your sub conscious mind, the first set of keywords are

embossed by your schools. And over the time, these keywords have become

your subconscious (Spinal) reflexes.




While to grow rich, you will need to emboss the second set (Shown above)

of keywords in your mind. These are the keywords by which you can

understand money and the game of money. And that’s why rich emboss the

above keywords in the mind of their kids since their childhood.

It is the School which emboss the false keywords in your mind since your

childhood and that’s why when they enter into the real life, they fear of

starting their own business and can’t understand the game of money. This is

because the only keywords which are embossed in their mind are get a job,

job security, go to school, work hard, do it yourself…etc…

So now, if you want to start your own business than first of all remove the

above two reflexes from your mind which the school system has developed

in your mind. And after that incorporate a new mindset by learning and

understanding the new sets of keywords given in this lessons series.

Creating Your own Business is the Ultimate Way to Become Rich -

So now, you know that rich are rich because of their asset column. Rich are

rich because they keep acquiring more and more assets out of their money.

Rich accumulate all types of assets such as Businesses, Real Estate, Gold,

Paper Assets, Web assets and many other types of assets.

But the Business is the only Asset which is the most valuable asset that rich

people have. Creating a new business out of scratch is all about creating

new asset in your asset column. And the Business will generate passive

income for you from which you can acquire other Cashflow or Capital gain

assets to grow richer.

What common mistake the middle class people do is, they start acquiring

capital gain assets first like gold and paper assets (Stocks & Mutual Funds)

and that’s why they can’t grow rich than certain limit.

While rich teach their kids to develop a Business first and later on from the

passive income of their businesses, acquire other assets. Thus, start




developing your own business since your very young age and become rich

and financially free.

Middle Class people buy capital gain assets like gold and paper assets from

their hard earned active income. While rich people buy these assets from the

passive income generated by their ultimate Asset – Business. And this is the

core difference between the rich and middle class.

Diagram: 46 - Middle Class Work hard to earn money and Buy Capital

Gain Assets While Rich Work hard to create their own Asset

(Business) First which hires other Assets.

First of all you should develop your own Business first and later on

you should buy other assets to become rich while the middle class

do exactly reverse means they first of all buy capital gain assets like

gold and paper assets hoping that one day they will become rich and

later on start their own business…!!!

Exercises:

- Entirely remove the first set of keywords from your mind. Never think

about those keywords in your mind.




- Start learning and thinking the second set of keywords in your mind. This

is because these are the keywords which are required to win the game of

money. You can not win a game of money by using the first set of keywords.

- Develop a habit of doing everything in a team work. Start developing a

great team for your business.

- Develop a habit of thinking in the financial statements.




Lesson: 3 Active Versus Passive Income

The reason why most of the people in this world struggle financially and live

paycheck to paycheck for their entire life is, because they don’t know the

basic difference between the Active versus Passive income.

While rich people know this difference since their early years of life and not

only this but they teach their children this basic difference since their early

childhood and that’s why their children also grow rich.

Diagram: 7 – Active Versus Passive Income

Active income means the income to earn which you have to work hard and

the day you stop working for your active income, your this income stream

will be suddenly disappear. Say for Example your job income or the income

from your profession such as doctors, lawyers, accountants…etc…




The only problem with the active income is that, to maintain this income

stream, you will have to keep working hard for your entire life and once you

stop working behind your active income, it will be lost.

Passive Income means the income to earn which you will have to work

hard at once only. And once you do that hard work, your job is over. After

that weather you work or not, this income will keep flowing into your bank

accounts for the rest of your life and even after that.

In other words, Income generated by Assets is known as Passive

Income. Here you will have to work hard at once only to acquire or create

that asset and once you have that asset in the asset column of your financial

statement, your job is over. After that weather you work or not, the income

will keep flowing into your bank accounts forever.

The Examples of Passive income are Interest Income, Dividend Income,

Capital Gains, Business Income, Rental Income, Website/blog Income,

Online Applications Income, Royalties of Books, Music & Movies…etc..

Middle class people don’t know the concept of Financial Statement, Assets

versus liabilities and the difference between active and passive income. And

that’s why they teach their children to work hard in their schools to get good

grades and later on work hard at their job places to earn high income.

While Rich people teach their kids the difference between the active and

passive income. And teach their children to work hard for the passive

income. They teach their children to work hard to grow their Asset column

so that someday in life if they plan to not to work then also the passive

income from their assets keep flowing into their pockets.

And how can the middle class know the difference between active and

passive income? This is because our education system only teach us how to

earn money but it never teaches us how to make our money work for us.




Diagram: 8 – Middle Class Work Hard for Active Income

Diagram: 9 – Rich Work Hard for Passive Income




Both the Rich and middle class people teach their children to work hard in

their life. But the middle class teach their children to work hard for the

active income (Job, Profession) while the Rich teach their children to work

hard for growing the asset column of their financial statement and generate

passive income.

The main problem with working hard for the active income is that, here you

are trading your time in exchange of money. And the time in anyone’s life is

limited. So the day you will become old or disabled, your this income stream

will disappear from your financial statement.

But if you have worked hard and spend your time and energy to build your

own asset column than even if someday you stop working, your assets will

still generate money for you for the rest of your life and for your future

generations.

Say for Example – Business. A Business is an asset. And you will have to

work hard for once only to develop a successful business. After that you can

higher business managers to run and grow your business even without your

presence.

Another Example is – Royalties. A Writer/Author works hard at once only to

create a great novel or a book. After that weather he works or not, the

royalty income will keep flowing into his bank accounts for the rest of his life

and even after that. This is because people will never stop consuming his

novel/book and he will never stop making money.

So rich or Middle class, all have to work hard. But the basic difference is that

Rich work hard for growing their asset column and generating passive

income while the middle class work hard to increase their active income. And

that’s why in the long run, Rich beat the game of money.




Diagram: 10 – Ultra-Rich (Billionaires) Work Hard to create Assets

Now, let us talk about Ultra-rich (Billionaires) people. Ultra-rich people

develop a successful business out of scratch since their early life (20s) and

later on take that business to the public and grow it even larger.

Remember that, Rich people always think in the financial statements and

before working hard, they make sure that they are working hard to grow

their asset column and generate the passive income.

Also remember that the Active Income is not the indicator of how rich you

are. But it is the Asset column of your financial statement and the passive

income which are the indicators of how rich you are. Say for Example, a

Doctor earning lots of money from his medical practice is not necessarily

rich. He may be rich. But for that we will have to see his financial statement

and its asset column and the passive income.




Most of the time, middle class people consider those people rich who are

earning lots of income (Active income) from their jobs and spend lots of

money and buy expensive cars, mobiles, watches and clothes. But well, this

is the middle class thinking.

While Rich never predict anyone’s financial status from his cars, mobiles,

watches and clothes. But from his Financial Statement. It is the Asset

column and the passive income of anyone’s financial statement which makes

someone rich.

So never judge anyone’s financial status from his Active income. But always

think and analyze that how many assets that particular person really owns

and how much passive income his assets generate.

Diagram: 11 – Middle Class Afford Liabilities from Active Income




Diagram: 12 – Rich Afford Liabilities from Passive Income

Rich afford Liabilities and Luxurious Items from their Passive

Income While Middle class afford them from their Active Income

This is another great difference between rich and middle class. Rich, Middle

class or poor, every human being on this earth wants to buy luxurious cars,

expensive clothes, watches & mobile and want to do expensive shopping and

travel the world. After all we are human beings and we love to buy luxurious

items.

But Rich people first of all grow their asset column to such a level that from

that level their asset column throws sufficient passive income that they can

afford all of liabilities and luxurious items from their passive income while

middle class don’t have such kind of mindset or understanding of difference

between Active and Passive income and that’s why they try to afford

everything from their Active income which is really a dangerous thing.




The Smart thing is to grow your Asset column and generate passive income

first and after that afford all of those liabilities rather than affording liabilities

and luxurious status toys from your hard earned active income.

Hyper consumption Treadmill –

Diagram: 13 – Middle Class afford everything from Hard Earned money

while Rich have assets to afford everything

Ultra-Rich, Rich or Middle class – All of us are the Consumers. We love to

consume things. We love to do shopping, dating, travel the world, buy

luxurious cars, watches, clothes and status symbols.

This is because as a human being, we love to buy all the luxurious items in

our lives and love to enjoy our lives. In fact, Middle Class and Rich people




spend the same amount of money behind their consumer lifestyle. But there

is a vast difference between the way they earn.

Middle class have Active Income while Rich have Passive Income. Thus,

Middle class people afford everything from their hard earned active income

while on the other hand rich afford everything from their passive income.

Both Rich and Middle class work very hard and spend lots of money behind

their lifestyle. But the basic difference between the hard work of rich and

everyone else is that, Rich work hard to grow their asset column of their

financial statement first and from the passive income of their asset column

they afford all of the luxuries of their lives.

While the Middle class work hard to increase their income first and afford

everything from their active income. And this is the reason, the more they

spend money, the more they work hard at their workplace to earn more

active income and this goes on like treadmill, the treadmill of the

hyperconsumption.

One day comes when they have acquired so many liabilities from their active

income that they can’t afford all of these liabilities and thus they go to some

personal finance advisor or read some book on personal finance.

Now, the problem of taking advise from a personal finance book or

the advisor that, the book author or the advisor himself a middle

class person who will give the middle class advises to the middle

class person like to spend less than he earns, live below your means

and buy only the things that you really need and not you really want.

Unfortunately, these are the moral killing advises. And these advises are for

people who want to remain middle class only. Live below your means is a

great financial advise for you if you want to stay middle class for the rest of

your life. Understanding the difference between the need and want is really

beneficial if you want to kill your feelings of buying luxurious and status

items in your life.




But well, if you want to become rich and want to enjoy all the luxuries of

your life than these are not the financial advises for you. This is because

these financial advises will kill your moral, feelings and make you feel

depressed.

So What is the Financial Advise for people who want to be Rich as

well as enjoy all the luxuries of their lives?

Well, The Advise is - “WORK HARD TO GROW YOUR ASSET COLUMN

FIRST AND GENERATE PASSIVE INCOME FROM YOUR ASSET COLUMN

AND AFTER THAT AFFORD ALL THE LUXURIES of THE LIFE FROM THE

PASSIVE INCOME OF YOUR ASSET COLUMN”.

Affording the Luxurious Lifestyle with your Active Hard earned

Income is a Fool’s Plan.

So if you want to buy a luxurious car like Mercedes or BMW in your life or

want to afford luxuries in your life then grow your asset column first. First of

all work hard to create and acquire assets in your asset column of your

financial statement and after that afford all of these luxuries in your life.

Say for Example, when Rich want to buy a luxuries car, he first of all buy a

rental property and from the rental income of his rental property he will pay

his car loan payments. Or he will develop a Business first and from the

passive income of his business he will afford the car loan payments of his

luxurious car as well as other luxuries. While Middle class also buy a

luxurious cars but they afford all the car loan payments from their active

income and that’s why to make the car loan payments, they will have to

work harder and harder while the rich will still keep making the same

amount of money weather they work or not. This is because they work hard

to create and acquire more assets and these assets generate income for

them.




Exercises:

Ex: 1 Take a piece of paper and pencil and make a list of all the possible

types of Active income (means the income that will stop when you will stop

working for it) and Passive income (means the income that won’t stop

flowing into your bank accounts even if you stop working for it.)

Ex: 2 Teach your friends, kids, relatives, parents the difference between

Active and Passive Income. And tell them to work hard for the passive

income and not the active income.

Ex: 3 Find out your own Passive Income. Let me give you the Example. Say

for Example – Business. A Business Income is your passive income. So take

a break and think that which business you want to develop?

Ex: 4 Draw a Line diagram of Financial Statement on paper and make a list

of assets in the asset column from which you want to generate passive

income.




Lesson: 4 Good Versus Bad Expenses and Debt

So by far you know that your financial statement has two parts – Income

Statement and Balance Sheet. Income is of two types – Active and Passive.

While Balance sheet has two columns – Asset and Liability. You now

understand the basic meanings of the terms Financial Statement, Asset,

Liability, Active and Passive Income.

Now, let us discuss about the Expenses and Debt. There are basically two

types of Expenses and Debt – Good and Bad.

Diagram: 14 – Good Versus Bad Expense / Debt

A Good Expense or Debt is one which is Asset producing. Any Asset

producing debt or expense is known as Good Debt/Expense.

A Bad Expense or Debt is one which is Liability producing. Any Liability

producing debt or expense is known as Bad Debt/Expense.




Just see the above diagrams. According to the diagrams, any expense/debt

which produce assets at the end is known as a good expense/debt. While

any expense/debt which produce liabilities at the end is known as bad

expense/debt.

Rich people always do the good expenses while the middle class people

always do the bad expenses. Rich understand that, the Asset column of the

financial statement is very important to generate passive income and getting

rich. And that’s why they always do the expenses to acquire more and more

assets out of their money.

Middle class people only love to look cool and rich. And that’s why they do

the expenses and ultimately acquire liabilities which depreciate in its value

over the period of time and making them poorer.

If you want to become rich one day in your life than always do asset

producing expenses (Good expenses) and never do Liability producing

expenses (Bad expenses).

The Examples of Asset producing expenses are, Educational fees,

college fees, tuition fees, Stocks, Bonds, Gold, Businesses, Real Estate,

Mutual Funds, Web properties, Intellectual properties…etc..

The Examples of Liability producing expenses are Luxurious Cars,

Mobiles, Clothes, Travelling, Club memberships, Shopping, Country Clubs,

Luxurious Watches, Credit card debt, car loans, personal loans, Shopping

EMIs…etc..

Rich and middle class both do lots of expenses. But one type of expense

(Good / Asset producing) makes you rich while the other type of expense

(Bad / Liability producing) makes you middle class or even poor.

Rich people teach their children the basic differences between Good and Bad

expenses since their childhood and that’s why the rich think in financial

statements before doing any kind of expense. Before doing any kind of

expense, rich think in their own financial statement that weather this




expense will produce asset or liability in the future. And if that expense is

going to produce liability in the future then the rich will simply avoid that

expense.

This is the ultimate secret of the rich.

Diagram: 15 – Good Debt




Diagram: 16 – Bad Debt

Another great secret of the rich people is that, they understand the basic

difference between good and bad debt. Middle class people use debt (Loans)

to buy new cars, shopping, personal loans, club memberships and world

tours. They believe in buy today and pay tomorrow type of mentality. And

this is a bad debt. Once you buy a luxurious car by taking a car loan, within

4 years it will lose its 60% of value. And rich don’t like depreciating items

(Liabilities).

Rich people use debt (Loans) to buy Assets from it to add them into their

asset column to grow richer such as Educational loans, Business loans,

Loans to start or expand a business, loans to do the investments or any

other kind of debt/loan to acquire assets out of it. This is because rich know

that assets appreciate in its price over the period of time and also produce

passive income and thus make them richer.




Once the debt will be completely payed, the middle class will have liability in

their financial statement which will rapidly depreciate in its value and also

make expenses from their pockets. While the rich will have asset in the

asset column of their financial statement which will appreciate in its value

and also generate passive income and make them more richer than ever.

All the middle class people afraid to take Good debt. You just observe any

middle class. Any middle class will really enjoy and love to take bad debt.

But he will afraid of taking good debt. Say for Example, when it comes to

buy a new car, the middle class will readily take a huge car loan to buy a

new car but the same middle class will be afraid of taking a loan to start his

own business or acquire or develop any other kind of asset.

And for this, they will proudly give excuse that, this is because the business

is risky. But how can a middle class take a good asset producing debt? This

is because our education system has never taught us the difference between

assets & Liabilities, Active & Passive Income and the Good versus Bad Debt.

And this is the reason, when most of the people enter into the real life, they

afraid of taking good debt which produce assets at the end.

But to become rich, the middle class need to do exactly reverse means

taking more and more asset producing debts and less and less liability

producing debts.

What happens when the middle class find themselves in a deep debt that

they can’t repay? Well, they go to some financial planner, advisor, debt

counselor or some blog on the internet and these financial planners will tell

them that debt is a bad thing and you should get out of it as early as

possible and never take it again in your life. Well, getting out of bad debt is

really a good financial advise. But never taking a debt is not a sound

financial advise. The financial planners and advisors won’t tell you that never

take a bad debt. And this is the reason after going into a deep bad debt, all

the middle class people become so much scared of taking a debt that they

teach their children not to take any kind of debt in their lives.




And that’s why one more generation of middle class generates in the world.

A generation which afraid to take any kind of debt and think that not taking

a debt is a wise financial decision.

While rich people teach their kids since childhood that if they want to

become richer and richer like their parents than they will always have to buy

assets out of their money (Good Expense/Debt) and never buy liabilities out

of their money (Bad Expense/Debt).

Rich people teach their kids that there is not any problem in taking a debt if

that debt ultimately produces asset. In other words, kids of rich people know

since childhood that there is not any problem in taking a debt if you are

going to buy assets out of that debt.

This is the advantage of thinking in the financial statements. Middle class

don’t have any element or training to think in the financial statements and

that’s why before taking a car loan or buying anything they never think that

weather the thing they are going to buy will fit into their Asset Column or

the Liability Column and what will happen if the asset column or liability

column of their financial statement will grow?

In other words, if you want to become rich and super-rich than always focus

on the Asset column of your financial statement. Always spend your money

to buy more and more assets or grow the existing assets in your asset

column (like business). If you never think in financial statements and never

focus on growing the asset column of your financial statement than you can

never be Rich…!!!

Exercises:

Ex: 1 Take a paper and Pencil and draw the line diagram of a Financial

Statement and write down the various assets you own and the various

liabilities you own in your financial statement. And after that think of

increasing assets and reducing liabilities.




Ex: 2 On a piece of paper, write down all of your monthly expenses and

after that differentiate between Good and Bad Expenses. If you really want

to become rich than eliminate all of your bad expenses and increase the

good expenses. Of course, Basic expenses like food, clothing, Internet

connection and housing rental are not counted towards the bad expenses.

Ex: 3 Teach your friends, kids, parents and relatives the difference between

the Good and Bad Expenses. Draw the line diagram of Financial Statement

and teach your friends, kids and parents the difference between Good and

Bad Expenses and Debt.




Lesson: 5 Cashflow Pattern of Rich, Middle Class and Poor

The Cashflow pattern on your financial statement will determine that

weather you will become rich, middle class or poor in the future. And

suppose if you are a born rich or inherited a fortune by any means such as

lottery, parents or spouse than also your cashflow pattern will determine

that weather you will grow richer, middle class or even poor.

Cashflow means the flow of money in your financial statement. Cashflow

literally means the circulation of money in your financial statement. It means

that in which direction the money is flowing onto your financial statement.

Now, the above is the layman’s simple definition of the Cashflow. In

sophisticated language, Cashflow means Income – Expense. So suppose if

you earn $ 3000 every month and your monthly Expense is $ 1000 than

your cashflow is $ 1000 every month.

Diagram: 17 – Cashflow Pattern of Asset




Diagram: 18 – Cashflow Pattern of Liability

Now, how you divert this cashflow will determine that weather you will

become rich, middle class or poor. This is because rich, middle class and

poor all have different kind of cashflow patterns on their financial

statements.

Thus, from the Cashflow pattern of anyone’s (Individual or Business)

Financial Statement, you can predict the financial future of that person. Well,

yes. If you can understand the cashflow pattern than you can become a

Financial Astrologer…!!!!




Diagram: 19 – Cashflow Pattern of Poor

Cashflow Pattern of Poor

See the above diagram. The above line diagram is a Cashflow pattern of the

poor person. See in the Financial statement of the poor person. See that

everything the poor person earns will be spent for basic lifestyle expenses.

Thus, a poor person works hard and bring money to home every month via

salary or paycheck and at the end of the month, he spends all of his money

and thus become poor. Nothing goes towards Asset column which is the

ultimate key to become Rich.

Suppose if today you are rich because of inheritance or by any other means

(Such as Lottery) and if your Cashflow pattern is like this than you are in

danger. You are in danger of becoming poor in the future. And you urgently

need to modify your Cashflow pattern.




Diagram: 20 – Cashflow Pattern of Middle Class

Cashflow Pattern of Middle Class

See the Above diagram. The above diagram is a Cashflow pattern of typical

middle class people. It is almost same like poor people. The only main

difference is that, the middle class first of all buy liabilities (Expensive Cars,

Expensive Travels, mobiles, luxurious items, credit cards, bad debt, personal

loans, club memberships, country club memberships, exclusive clubs…etc..)

from their hard earned money (Active Income) and after that these liabilities

make recurrent expenses and takes money out of their financial statements

from the expense column.

The typical middle class mentality is that, the more they earn the more

liabilities they acquire and these liabilities do tremendous expenses over the

time and that’s why to afford these liabilities they need to work harder and

harder at their workplace to earn more and more money.

The main difference between the rich and middle class is that, Rich afford

every liability from their Passive Income while the Middle class afford their

all liabilities from their Active Income. And that’s why weather rich work or




not, they can afford liabilities for the rest of their lives while middle class

have to work hard until they want to afford those liabilities.

Unfortunately, What most of the financial advisors and Finance gurus advise

people is that - “Live Below your means”. Well, this is really a cool

theoretical advise but practically it is impossible to follow. After all, we are

human beings and we love to drive expensive cars, buy expensive mobiles,

travel the world and date with beautiful women in expensive restaurants.

Thus, Rich or Middle class all of us love to buy new cars, clothes, expensive

watches, dating and travel the world. The only difference is the Cashflow

pattern and the type of Income. The cashflow pattern of middle class person

is in such a manner that he afford all of these luxuries and liabilities from his

hard earned active income while a rich person afford everything from his

passive income. Because his cashflow pattern is designed in such a manner.




Diagram: 21 – Cashflow Pattern of Rich

Cashflow Pattern of Rich

This is the Cashflow pattern of Rich. See the above diagram. Rich first of all

acquire assets out of his money and grow his asset column. This is because

rich knows the secret that Asset column is the only thing in the life which

can make anyone rich. And that’s why rather than focusing on the Income

like Middle class, Rich buy assets out of his hard earned money.

And because of this, over the time their Assets grow and start throwing

passive income into their financial statements and from this passive income,

the rich again buy more and more assets and grow richer and richer.

One day comes when the passive income from the Asset Column of the rich

crosses the monthly expense of the rich and from that day, he stops working

hard for the money to earn active income. This is the day of Financial

Freedom. Because from this day, weather he works or not, the money will




still flow into his financial statements from his Asset column in the form of

passive income.

Rich and Middle class both love to buy luxurious cars, expensive watches,

clothes, foods, dating and status toys. But well, the basic difference between

the two is the Cashflow pattern. Middle class afford every luxury from his

Active Income while Rich afford every luxury from his Passive Income.

This Cashflow pattern difference of Rich and Middle class makes all the

differences in the future. Over the time, Middle class can’t afford all the

luxurious for his entire life because one day comes when he won’t work as

hard as he used to work when he was young. And from that day, he will

suddenly lose his active income. But well, Rich has worked hard to grow the

asset column of his financial statement and generate the passive income.

And that’s why even the rich will stop working someday, he will still continue

affording all of the luxuries and status toys for the rest of his life and even

after his death (Means his future generations will also afford the same

luxurious items).




Diagram: 22 – Cashflow Pattern of Ultra-Rich

Cashflow Pattern of Ultra-Rich (Billionaires)

The Cashflow Pattern of Ultra-rich is also obviously the Asset Column

focused just like rich. But there is one major difference that makes them

Ultra-rich.

See the above diagram. Well, Rich people acquire assets (Stocks, Bonds,

Gold, Real Estate, Businesses, Mutual Funds, Art, Web properties…etc..)

from their Income while Ultra-Rich people simply create Assets out of

nothing in their Asset columns and these assets start generating passive

income for them.

Say For Example – Bill Gates, The founder of Microsoft and world class

Operating system – Windows. Bill Gates has created Asset (Microsoft &

Windows) in his financial statement and his this single asset has grown to




such a level that he is today world’s most richest person since last more

than 15 years.

Larry Page had created the Asset in his Asset column known as Google. Mark

Zuckerberg also had created the Asset in his Asset column known as

Facebook and Dhirubhai Ambani also had created an Asset in the Asset

Column of his Financial Statement known as Reliance Industries.

The rest Cashflow pattern is the same as that of rich. Means Ultra-rich

create Assets in their Financial Statements–> Generate Passive

Income –> This Passive Income acquire other Assets (Stocks,

Bonds, Gold, Other Businesses, Art, …etc..)

Rich acquire assets out of their money while the ultra-rich create assets

which generate huge passive income and from this passive income they

acquire other assets and grow more richer…!!!

Exercises:

Ex: 1 Take a paper and pencil and draw the financial statement on it and

also draw your current cashflow pattern. Now, see that weather your current

cashflow pattern is that of rich and Ultra-rich? If yes than stick to it. If now

then think that how you can change it?

Ex: 2 Draw the Cashflow pattern of your friends, parents and family

members on paper and see that weather they are affording their luxurious

lifestyle from their Hard earned Active income or from the Asset Column

generated Passive Income.

Ex: 3 Teach the Cashflow Pattern or Rich and Ultra-Rich to your friends,

parents and Kids. If you are the young adult having kids than it is extremely

important to teach all of these Cashflow patterns to your Kids.




Lesson: 6 The Power of Corporate Structure

The Rich teach their children the power of structure and various corporate

strategies since their early life and that’s why their children use this power of

corporate structure to save more tax, protect their assets and even create

new wealth in the economy.

While Middle class don’t know the power of the corporate structure and

that’s why they don’t impart any kind of financial education about the

corporate structure to their children.

To use the power of corporate structure, you need to be master in the

financial statements. You must have trained your mind to think in the

financial statements to use this power in your favour to grow rich.

You must understand the difference between the active and passive income,

assets and liabilities, Good versus Bad Debt and the Cashflow pattern of rich,

middle class, poor and ultra-rich. Without having the knowledge of these

things, you can’t understand use the power of the corporate structure in

your favour to grow rich.

What is The Company?

Well, to understand the power of the corporate structure, you first of all

need to understand that what it means by a Company? All of you must have

heard the word – Company right?

But Suppose what if I ask you that – Do you own a Company?

What will you think in your mind if I ask you this simple question? Well, of

course by reading or hearing the word ‘Company’, in your mind huge

buildings, large infrastructure, huge machineries, huge offices, Big factories

and huge manpower will come….Am I Right?




Diagram: 23 – The Company is nothing but a file having some legal

documents in it.

Well, This is not the Truth. The Company is just a folder/file of some

legal documents of Company registration details and other company

incorporation certificates in it and nothing more than that.

Well, Yes. A Company is only a file of some legal documents inside it and

nothing else. It is not necessary that you must own huge buildings and large

infrastructure to start your own Company. You can register and start your

own company without owning anything by showing your home as your

company address. And even if you are living in a rental house, you can still

show it as your company office and register a company with your

government.

Registering a company is a fortnight process and it will require just few

thousand rupees of expense and nothing else.




Anyone in this world can start his own company (A File having some legal

documents inside it) if he is a tax payer. And nothing else.

Diagram: 24 – Individual & a Company has a different Financial

Statement

The Company has its own Financial Statement -

So owning your own company is not a big deal. You just have to consult

some corporate lawyer or the chartered accountant and he will do all the

legal formalities and documentations to start your own company.

Remember that for the law, The Company is the separate financial entity

just like you. So your company will have its own Financial Statement. So

once you own a Company, you will have now two financial statements in

your control – Your and Your Company’s.




This is the trick. This is what actually rich people want. This is what actually

the rich people want to teach their children – Means playing in the multiple


Rich people teach their children everything about the financial statement

because they want themselves and their children to play in the multiple


This is the real difference between the rich and middle class. Middle class

play the game of money in just one financial statement while rich play the

game of money in multiple financial statements and that’s why,

- The Rich pay Less taxes than the Middle class

- The Rich can protect their Assets/Wealth very well

- The Rich can create new wealth (Printing your own money legally) in the

economy

In the subsequent lessons, I will explain you one by one that how exactly

rich people do this by using the power of the corporate structure?

What is The Corporate Structure & Corporate Strategies?

Well, the corporate structure is nothing but the arrangement of various kind

of companies with each other.

The Corporate strategies are nothing but the arrangement of the financial

statements of the rich and their various companies in such a manner that

this structure can save lots of tax, protect the wealth/assets of the rich and

can create new wealth in the economy.

In the subsequent lessons, We will see that how the rich use this power of

corporate structure and design various corporate strategies to grow

extremely rich?




If you Want to Become Rich, Own as many Companies as Possible

Thus, it is clear that to become a rich, you MUST MUST need to own a

company. Then and only you will have multiple financial statements and by

controlling the cashflow between these multiple financial statements, you

will save more tax than the middle class, protect your assets and create new

wealth in the economy and become richer and richer.

So if you don’t own a Company than first of all register at least one

company. First of all start playing in multiple financial statements.

Remember that the company is the gateway of becoming rich and ultra-rich.

And yes, Don’t worry. You don’t need lakhs and crores of infrastructure to

register and start your own company. You just need few thousand rupees to

start your own company. After all a Company is nothing more than a

folder having some legal documents inside it.

Here are the 3 Powers of the Corporate Structure that Rich people use in

their favour to get Rich.

Power: 1 Save Tax

Power: 2 Asset Protection

Power: 3 Create New Wealth in the Economy

In fact, the Rich people teach their Children these 3 powers of the Corporate

structures since their school life. While during the same time, Middle class

people teach their children that how to find a safe and secure job and what

is the importance of doing a job?

While the Kids of Rich are learning the power of Corporate structure, the

Kids of Middle class are learning how to write a successful job letter and

getting approved for the dream job….!!!

Exercises:

Ex: 1 Consult some good Corporate Lawyer or Chartered Accountant in your

city and ask him about the charges and documents required to register a




company. Don’t worry. Most of the Accountants will advise you to not to

register a company. Don’t believe in them. This is because they are nothing

but the middle class people. So even though they know everything about the

company registration, they don’t know the above basic lessons on money.

Ex: 2 Now, decide the objective of your company. I mean in which sector

you want to start your business? You can consult your Corporate lawyer for

this.

Ex: 3 Teach your Children, Parents and Friends the power of corporate

structure. Teach and educate them that what is basically a Company and the

corporate Structure?




Power: 1 Save Tax using corporate Structure

So now, you understand the power of the corporate structure. Rich own

companies and play in multiple financial statements and save lots of tax.

Middle class people work hard to earn more money. They focus on increasing

their income but they don’t realize that the more money they will earn, the

more tax they will have to pay. While rich know the power of the corporate

structure and the advantage of playing in the multiple financial statements

since years and that’s why they use this knowledge of the corporate

structure to pay less taxes.

In fact, today world’s many Fortune 500 companies are the ZERO Tax

Empires developed by their founders. These companies virtually pay little to

no tax in comparison to their annual revenues (Income). Let me explain you

that how the rich save lots of tax legally by owning a Company and how the

middle class struggle so hard to earn more money and still end up paying

lots of taxes.




Diagram 25 Financial Statement of an Individual – The Individual Pays Tax

First

See the above Diagram. The above diagram is of the financial statement of

the middle class. The middle class work very hard and focus all of their time

and energy to increase the income. And the higher they earn money, in the

higher tax brackets they will fall and the higher tax they will pay.

Different Tax Laws for the Individual and a Company

For the Individual and for a Company the Tax laws are different. Well, yes.

This is true. For Rich, the tax laws are different while for the middle class

people, the tax laws are different. And the tax laws favour the rich people.

Here is the difference between the tax laws for the individuals and the

companies.




The Individual will have to pay Tax FIRST from his Income. And after paying

the tax, whatever remains at the end, the individual can spend. Thus, for

the Individual the first expense is the Tax. While the Company will have

to pat Tax LAST from its Income after deducting all of its expenses. So For

the Company, the Tax is the last expense.

Diagram: 26 Individual & Company Financial Statement – The Individual

pays tax first while the Company pays the tax last.

Thus, whenever the middle class receive a paycheck, some amount of

money is already deducted from his paycheck every month as a tax even

before he sees that money.

Now, Let us understand how Rich use this knowledge of tax differences

between the companies and the individuals. Let us discuss it with one

Example.




Diagram: 27 Financial Statement of a Middle Class Doctor

The above statement is of a doctor earning high Income. This doctor earns

Rs.1 Crore every year from his medical practice. See in the above financial

statement the income of this doctor. He earns Rs.1 Crore from his medical

practice by working at some multi-speciality clinic.

The problem is that, this doctor is well educated but don’t have any

knowledge of the financial statements, assets, liabilities and the power of the

corporate structure. This is because he comes from the middle class family.

And his parents had taught him since childhood that to become rich, he will

have to work hard at school to get admission in the medical school and after

that becoming a doctor, he will have to work hard to earn more money. And

that’s why this doctor works very hard and focus his all the time and energy

to increase his income.




Now, see in the Expense column of the above financial statement. This

doctor falls under 30% Tax bracket. And that’s why every year, he will have

to pay Rs.30 Lakhs as a tax to the government first. The Tax is the first

expense of this doctor. And after paying Rs.30 Lakhs, only Rs.70 Lakhs

remains at the end and from this 70 lakhs, he will have to do all of his

expenses.

Thus, this doctor earns very high and people also think that he is earning

very high so he is rich. But the reality is that, he end ups paying lots of

taxes from his hard earned money. This is because he receives all of his

income on his own financial statement and that’s why very little money goes

towards long term investing and building some serious wealth in comparison

to his income.

Diagram: 28 Financial Statement of a Rich Doctor

Now, see the above diagram. The above diagram is of a Doctor who is

coming from the rich family. He also earns Rs.1 Crore a year just like Doctor

1. But he comes from the rich family. And that’s why since his childhood his




rich parents have imparted the basic lessons of money, financial statements,

assets, liabilities and the power of the corporate structure to him.

And that’s why this doctor has decided to play the game of money like rich.

This doctor has decided to play the game of money in the multiple financial

statements to use the power of corporate structure and to save more tax

than Doctor 1.

See the above diagram. This second doctor owns his own Company – XYZ

Health Care Private Limited. So he plays in two financial statement – His

own and his Company’s. Thus, he has shown on paper that he is the

employee of his company and receives salary from his company every

month. And he receives all of his medical practice income in the name of his

own Company – XYZ Health Care Private Limited.

Thus, the multispeciality Hospital in which he works issue all of his payments

in the name of his own company via cheques and bank drafts. Thus, every

year he receives his entire 1 Crore income on the financial statement of his

own Company – XYZ Health Care Private Limited.

Now, as you know that the individual has to pay tax first and the company

has to pay taxes last. So to save tax, what this doctor do is, He takes only

Rs.50000 of monthly salary from his own company. And keep rest of the

money in his own company. So How this will benefit to save the tax?

Well, This will benefit like this. He receives just Rs.6 lakhs of annual income

on his financial statement in the form of salary from his own company even

though he himself makes all of this 1 Crore. And the rest Rs.96 lakhs will be

in the financial statement of his own Company.

Now, at the end of the year, he will have to pay 30% tax on his 6 lakh

income and that is just Rs. 1.80 Lakhs. Now comes the company tax. So as

you know that for the company tax is the last expense. This is because the

tax laws favour the rich and the companies. For the companies, all the

expenses are tax deductible.




So What he will do is,

- His newly bought car will be shown as his Business Vehicle

- His New Laptop will be shown his Business Equipment

- His International and Domestic Travels will be shown as his Business

meetings and Business travels

- His Investments will be shown as the Capital Expenses to expand his own

Business.

- And so on.

And from this 94 lakhs, his company will do almost 90 lakhs of expenses

mostly to acquire new assets (Stocks, Bonds, Gold, Real Estate, Mutual

Funds) and other lifestyle and travel expenses and at the end only 4 lakhs

will remain and on this 4 lakhs his company will pay 30% tax and that will

be Rs.1.20 lakhs only.

Thus, his total tax liability will be Rs.1.80 + Rs.1.20 = Rs. 3 Lakhs Only…!!!

Thus, the Doctor 1 and 2 both earn the same amount of money. But first

doctor ends up paying Rs.30 lakhs of tax while the second ends up paying

just Rs.3 lakhs of tax.

This is because the second doctor has the knowledge of the power of the

corporate structure. His rich parents have imparted the knowledge of the

financial statements, assets, liabilities and the power of the corporate

structure in him since his school time. And that’s why he learned from his

rich parents to play the game of money in multiple financial statements.

While the first doctor learned from his parents to work hard for money to

earn more income and play the game of money in the single financial

statement only. He doesn’t have any knowledge of financial statements,

assets, liabilities and the power of the corporate structure and that’s why he

ends up paying 10 times more than the Rich Doctor.




Diagram: 29 – Financial Statement – Large Corporations – ZERO TAX

STRATEGY

Today world’s biggest companies and businesses are the ZERO Tax empires.

They pay little to no tax to the governments by using this strategy. This is

because everything the companies of rich people earn will be spend to either

expand the business, to acquire more assets and to support the lifestyle of

the owners of those companies and later on shown as Business Expansion

expenses, Business Equipment expenses and Business Vehicle Expenses.

Remember, that it is the middle class people in any country who pay the

highest tax. While rich people are those who use this knowledge and pay the

least tax legally by using the power of the corporate structure.




So Start playing in multiple financial statements and save more tax legally

like rich.

Summary

01) Rich receive all of their income on the financial statements of their own

companies. They do everything in the name of their own companies and

they themselves take very little salaries from their companies on their own

financial statements and pay very little tax. They use the income of their

companies to acquire more and more assets as a pre-tax expenses and pay

almost nil tax from their companies. Because nothing left at the end of the

year on their company’s financial statement to pay any tax.

02) Middle class people depend on the government tax breaks which are

very minimal. Say for Example, In India the Individual tax breaks under

Section 80C are just Rs. 1 Lakh maximum. And these middle class focus

their all the time and energy to save this 1 lakh of tax every year. This is

because they play in the single financial statement and that is their own

financial statement. While Rich think big and play in multiple financial

statements and use the power of corporate structure to pay less taxes and

acquire more assets.




Power: 2 Asset Protection Using Corporate Structure

The second power of the corporate structure is – Asset Protection. Rich

protect their Assets/Wealth by using this power of the corporate structure

very well from following events.

- Divorce

- Sue

- Legal law suits…etc…

Only Building the Asset column is not sufficient to become rich. You will also

need to protect your assets from events like Divorce, Sue and Legal Law

Suits.

This is because the richer you will get, The more people will look at your

assets and try to grab your assets from you by illegal or fraudulent ways.

High Income Earning Middle class people don’t have any kind of financial

knowledge to protect their assets while Rich know that how to protect their

assets very well.

How Rich Protect Their Assets by Using the Corporate Structure?

Well, Here is the secret of how rich protect their assets using the corporate

structure. Well, as I have already told you in the previous lessons that rich

play the game of money in the multiple financial statements to save tax.

Now, another advantage of playing the game of money in multiple financial

statements is, Rich don’t own any Asset in their own name. But they own

everything in the name of their companies. And that’s why during the time

of Divorce, sues or legal law suits, Every Asset that the rich have build

during their entire life are owned by their companies. And companies are the

separate financial entities according to laws. Thus, the Asset Column of the

Financial Statement of the rich is empty. It does not contain any asset.

While all of their assets are owned by their own companies.




In other words, Rich develop their assets in the asset column of the financial

statements of their own companies. Thus, Rich own nothing in their own

name but they own everything in the name of their companies. They legally

don’t own any asset. But they just control the assets via their ownership

control over their companies.

Example -

Let us discuss this by one simple example. Akshay has started his own

Restaurant Business. But he come from the typical middle class family so he

doesn’t know the power of corporate structure and importance of playing the

game of money in different financial statements.

And that’s why His Financial Statement will look like this.

Diagram: 30 Akshay owns his Restaurant building in his own name.




In the above financial statement, Akshay owns his Restaurant Building (Real

Estate) in his own name. And that’s why the Asset column of his financial

statement shows his restaurant building as an asset.

He also do all the investments like Stocks, Bonds, Gold, Mutual funds..etc..

in his own name. And that’s why you can see all of these assets in his own

financial statement.

Most of the Small Business owners play the game of money like this only.

They own everything in their own name which is very risky. They don’t know

that in the event of divorce or Sues, their Asset column will be affected.

Legal law suits will directly affect their asset column.

One day, one of his regular customer did a sue on Akshay. And he end up

losing his entire restaurant building to settle that sue.

Now, take the Example of Sandip. Sandip has also recently started his own

restaurant business. But he comes from rich family and his rich parents had

taught him since his childhood the power of corporate structure.

And that’s why he understands the power of corporate structure and decided

to play the game of money in multiple financial statements to save tax as

well as protect his assets. Here is the Corporate structure that Sandip has

developed to protect his core asset of his Restaurant Business – Restaurant

Building.




Diagram: 31 – Financial Statement of Sandip – A Smart Business

Owner

Sandip has registered two companies before starting his restaurant

business. As you now know that a company is nothing but a file/folder

having some legal documents in it and nothing else.

So Sandip has registered two companies – A Food Business Company & a

Real Estate Company. So the Financial statement of Sandip will look like

this.




Diagram: 32 Financial statement of Sandip showing controlling shares of

his 2 companies.

See the Diagram No.2. In the diagram 2, the restaurant building of Sandip’s

Restaurant business is owned by his own Real Estate Company. And his own

Food Company which will do the restaurant business will be shown as on

rental basis.

Thus, the Food Business company pays rental to his own Real Estate

Company which owns his restaurant building. Thus, every month all the

profits from his food business company is siphoned out into his real estate

company.

You can see that there are no assets in the asset column of the financial

statement of his Food Business company. And all the profit is siphoned out




from his food business company to his real estate company which owns his

restaurant building. And this real estate company is used to do his various

real estate and other investments.

Thus, it is the real estate company of Sandip which owns his every asset

mainly real estate. And that’s why Sandip doesn’t own any asset in his own

name but in the name of his real estate company.

One day, one customer of his restaurant sued his Food Business company

because of the quality of food. But well, his food business company did not

have any assets in its asset column and ultimately gone for the Bankruptcy.

Now, what happened to his Bankrupted Food Business Company?…Nothing….

After all it was just a file having some legal documents of his company

registration inside it.

So after few weeks, Sandip registered a new food business company and

again started his restaurant business in the same restaurant building owned

by his own real estate company. The only thing was changed was the name

of his restaurant.

This is how the rich protect their Assets.




Diagram: 33 – Asset Protection Strategies of Ultra-Rich (Billionaires)

How Billionaires protect their Wealth?

Billionaires and the founders of Fortune 500 companies protect their assets

just like the above way. The only difference is that, the above is the over

simplified example.

Billionaires and the founders of the fortune 500 companies play the game of

money in literally hundreds of Financial Statements. They have registered

literally hundreds of companies and their assets are owned by their

hundreds of companies and not by them. And that’s why during the sues,

their assets become protected ‘Bullet-Proof"’.




So if you want to protect your Assets like rich than learn the power of the

corporate structure and play the game of money in multiple financial

statements.




Power: 3 Create New Wealth in the Economy using the Power of

Corporate Structure – Print Your Own Money Legally

This is the ultimate power of the corporate structure. You can create new

wealth in the economy if you have the knowledge of this power. In Layman’s

language, You can print your own money in the economy legally by using

the corporate structure.

Rich are wealth builders while the Ultra-Rich (Billionaires) are the wealth

creators. Billionaires are billionaires not because they have earned billions of

dollars by their companies. They are billionaires because they have printed

billions of new dollars in the economy legally by using the power of

corporate structure.

Bill Gates is a Forbes Billionaire and world’s richest person having net worth

of US $ 60 Billion not because he has earned $ 60 Billion in his life via

Microsoft. This is because he has printed $ 60 Billion from his Microsoft.

So How Ultra-Rich create new Wealth in the Economy by using the power of

corporate structure?

How you can print your own billions of dollars legally in the economy by

using the corporate structure?

Well, You can create new wealth in the economy (Print your own Money) by

developing a successful business by registering a company and later on

taking that company to the public and by selling the stocks/shares of your

company to literally millions of people, you can create new wealth in the

economy and become a multi-millionaire or even a Billionaire.




Diagram: 34 – Middle Class Work Hard For Money

The secret of printing your own new money in the economy legally is taking

your business to the public and listing it on the various stock exchanges in

your own country as well on the stock exchanges of other countries.




Diagram: 35 – Rich Make Their Money Work For Them (Investments)




Diagram: 36 – Ultra-rich (Billionaires) Create Their Own Money

Middle class spend their whole life to buy shares of other companies, invest

in mutual funds, diversify and hold for the long term. But well, Kids of the

rich people have been taught since their childhood that they can not

become ultra-rich by simply buying the stocks of someone else’s

companies but they can be ultra-rich by selling the shares of their

own companies to literally millions of other rich and middle class

people. And that’s thy this knowledge of the power of corporate structure is

imparted to the kids of rich people since their childhood by their parents and

mentors.

While the Children of Middle class people are studying hard in the

school and forced by their parents to work hard to get good grades

so that they can find a good job or a profession (Doctor, Lawyers),

the parents of rich business community are teaching their children

this ultimate power of corporate structure – How to Print your own

money Legally?




Rich know since their childhood this secret of corporate structure. Rich have

been taught by their parents and mentors since their school time that the

real power of the corporate structure is – One can print his own money by

developing a business and later on taking that business to the public. And

that’s why since early life, ultra-rich people focus only on developing a

successful business and later on taking that business to the public.

Middle class don’t have such kind of financial knowledge. For them, the

Billionaires are billionaires because they are hard workers. For Middle class,

Billionaires have earn their billions of dollars by doing businesses. But well,

the Truth is that, these billionaires have printed their own new billions of

dollars in the economy by taking their businesses to the public.

Bill Gates (Microsoft), Larry Page (Google), Dhirubhai Ambani (Reliance),

Lakshmi Mittal (Arcelor Mittal), Mukesh and Anil Ambani (Reliance), Michael

Dell (Dell) and all the other Forbes Billionaires are billionaires because they

have developed successful businesses out of scratch and later on taken their

businesses to the public. And by selling the partial ownership (Shares) of

their companies to literally millions of small to large investors, they became

billionaires.

These people are now billionaires because their own stake

(Ownership/Shares) in their own publically listed companies/businesses are

worth of Billions making them billionaires.

Bill Gates is a Billionaires because his 8% Stake in his own publically listed

Company Microsoft is worth of Billions. Mukesh Ambani is a Multi-Billionaire

because his own stake in Reliance Industries is worth of Billions of Dollars.




Diagram: 37 – Billionaires Are Wealth Creators

These Billions of Dollars are not earned by their owners. But these

Billions of Dollars are printed legally in the economy by their owners.

These Billions of Dollars are the VALUATIONS of the stake of the

billionaires in their own publically listed

companies/businesses/corporations.




Diagram: 38 Middle Class Earn Money, Rich Make their Money Work

for Them & Ultra-Rich print their own money Legally

Middle class people think that these people are lucky because they have

EARNED billions of dollars in their lives. But well, the Truth is that, these

are the Wealth Creators. And by using the Power of Corporate Structure,

They have PRINTED Billions of Dollars by taking their Businesses to the

Public.

Remember that, Nobody can earn billions of dollars in their lives. Very few

people like Tiger Woods, The famous Golf Player can earn a billion dollar in

their life time. But well, to earn this much, Tiger Woods will have to pay lots

of tax and ultimately he won’t stay long in the billionaire club. If you want to

become ultra-rich (Billionaire) in your life than you will have to simply print

this much of new money in the economy legally by using the power of the

corporate structure.




Now, let us discuss in Financial Statements that, How Rich people create the

new wealth in the economy by using this knowledge about the corporate

structure.

Let us discuss that what rich people teach their children about corporate

structure in financial statements that their children become billionaires ?

So Here we Go…..!!!

Diagram: 39 Financial Statement of Rich – Individual (Rich and his spouse)

& his own Company

The above is a corporate Structure that a typical rich use. I mean the rich

play in the multiple financial statements. In the above diagram, you can see

total 3 financial statements of a rich person. One is his own financial

statement (Individual), the second is the financial statement of his wife

(Individual) and the third is his Company’s Financial Statement.




This rich couple has promoted a company. As you know that A Company is

nothing but a file having some legal documents inside it and most of

the time this file remains in the drawer of your desktop.

You can see that, the Husband owns 90% shares of the Company in the

Asset column of his Financial statement while the wife owns 10% shares of

the Company in the Asset Column of his Financial statement.

Thus, right now the whole the company is fully owned by this couple – 90%

by a Husband and 10% by a wife.

Diagram: 40 Shareholding Pattern of the Company – Right now all the

shares are owned by rich and his spouse.




Now, see the above diagram. This is the pie diagram showing the

shareholding pattern of the company. You can see that right now there are

only two owners of the company – 90% Owner is Husband and 10% owner

is a wife.

Now, the couple works hard for a decade to develop a business, hire people

of various skills under their company and grow their business. After working

hard behind their company for a decade, they plan to become extremely

wealthy. So they plan to take their company to the public.

They have plan to sell the 30% of their company to the public. Ok So What

happens is the couple sells 30% of their company to the public? What will be

the new shareholding pattern of a company?




Diagram: 41 Shareholding pattern after selling 30% of the company

So after taking a company to the public and selling 30% of the shares of

that company, the new shareholding pattern can be like above.

The Husband will have 65% stake in his new listed company (Because he

sold his 25% shares to the public) and a wife will have 5% stake in her new

listed company (Because she sold her 5% shares to the public). And the

public will have 30% of the shares.

Now, you will ask that then how a Husband can become a Billionaire by

selling just 25% of his shares? Well, the founders of the publically listed can




become billionaires anytime when the share price of their listed companies

go high and the valuation of their own stake in their own listed companies

cross the 1 Billion mark.

Say for Example, post listing the valuation of the 65% stake of this Rich

person is US $ 500 Million and he sold the shares to the public at $ 10 per

share. And now, after few years the share price of his company doubles to $

20 because of the good financial results of the company, then his net worth

will also double and cross the $ 1 Billion mark.

Thus, by taking his business to the public, his net worth shoot up to $ 500

million which now become $ 1 Billion because of the rise in the share price of

his own listed company. And this additional $ 500 Millions are printed newly

in the economy because the share price of his listed company doubles in few

years of listing. This is not the hard earned money. But this is the Valuation

of his Asset (His stake in his listed company) going up. And this is the newly

printed money in the economy. So every time the share price of the owners

of the listed companies go up, the new wealth is created in the economy and

they get richer and richer.

This is how the ultra-rich print their own money in the economy legally.

[ Important NOTE: The above is the over-simplified example of taking a

business to the public. In the real life one more stage will come in between

before taking your business to the public and that is the stage of Angel

Investors or Venture Funding. Once you develop a successful business at

small scale, you will have to go for Venture Capital Fund to raise money for

your business. Venture Capitalists also known as Private Equity Players will

infuse capital in your business to make it sufficiently large that you can take

it to the public and hit the stock market. So if you seriously want to become

a billionaire in your life than keep this step in your mind. After developing a

successful business at small level, go to the Venture Capitalists first and

convince them to invest in your business. Taking a Business to the public is

the third and last step. Here for the simplicity of the discussion, I have




omitted this very important step. But the serious readers should always keep

in mind this step. Once you develop a small business, search for venture

capitalists and angel investors in your own city, state or country and try to

negotiate the terms with them.]




The History of Money, Gold Standard & Modern Banking

The History of Money, Gold Standard, Modern Banking and taxes is very

important to understand the basics of money and learning important

financial lessons. The History of money is very interesting. And

understanding the history will help you to answer many of your financial

queries.

The History of Money and Modern Banking System evolved like this.

01) Barter -

This kind of trading is since the history of mankind. It is older than 9000

B.C. Bartering means exchange of goods with each other rather than money.

There was not any concept of money at that time. So suppose if you give 3

eggs to the shoe maker, he will give you a pair of shoes. And if someone

gives you 2 chickens, you will provide them some kind of goods or service.

This is how people used to trade.

But unfortunately the problem with such kind of system was that, how can

you say that 3 eggs are equal to a pair of shoes? Thus, there were several

disputes in such kind of trading.




02) Cowry Shells – A Trade currency -

After that in 1200 B.C., China started trading in Cowry Shells. Thus, these

Cowry shells were the first currency just like a bank note in your pocket.

After that Cowry has served as a medium of exchange and served as money

through out the history until the middle of 20th Century.

03) Silver&Leather Currency -

In 500 B.C.m Silver started first time as a medium of currency.

04) Gold Coins as a Currency -

Now, the real history of money started. In around 200 B.C., Gold started as

a currency. The Emperors started gold coins as a trading unit. And that’s

why every good or service in the economy had some value that was equal to

some amount of gold.




Gold and silver were an integral part of business and trade as far back as the

early civilizations of Sumer (the land between the rivers Euphrates and Tigris

in what is now Iraq) and Egypt.

But up to the 6th Century BC, the gold was traded as weight of the metal.

But the first coin was made in 6th Century BC.

And thus, The Gold was the First Real Money. It is because the gold was

the valuable metal. And it was not easily available in the world. And that’s

why it was unique and the chances of counterfeiting were less. And that’s

why the gold started as a trading unit.

After that, Gold became the world wide accepted currency.

As the Civilization, evolved, the transactions became large sized and that’s

why huge amount of gold started trading and changing hands.

Unfortunately, the gold is a heavy metal and that’s why transferring gold

from one country to another country with safety was very difficult.

And that’s why traders started the new concept and that was, they started

depositing their gold with the reputed jewellers and in the exchange of that

the jewelleres started giving them the on paper signed paper stating that

this paper owner will be paid this much amount of gold instantly. And this

was the first paper money.

Thus, the first bankers were jewellers. After that, people like this concept so

much that they started depositing their gold with the jewellers and started

taking paper money from their jewellers. And this is how over the time,

paper money had took over the entire trading system and gold just became

the idle asset sitting in the bank reserves.

1816, The UK started the Gold Standard -

In 1816, the UK started the Gold Standard means any currency is valued

with some amount of gold to protect it from the inflation. And that’s why the

original bank notes were backed by some amount of gold and you would be




able to exchange with your bank for gold if you don’t have any trust in the

bank notes of your government bank notes.

This is how the inflation used to control.

Saving Money was the Golden financial Advise during the Gold

Standard -

Thus, During the Gold Standard, Saving money was the Golden financial

advise. And that’s why your parents and grand parents used to teach you to

save money.

This is because during the gold standard, saving money means saving gold,

the real money. And that’s why if you save money during the gold standard,

you definitely become rich and not only this but you also stay rich.

1971, The USA removed the Gold Standard -

In 1971, President Nixon had removed the Gold Standard and that’s why the

US Dollar stop became money any more but it became debt. President Nixon

in 1971 declared that,

“The United States will no longer redeem their dollars with the gold because

the US Dollar is backed by the full faith of the US Government”

This means that after 1971, the US can print as much money as it want

according to the need of the economy. Thus, today the Dollar is a piece of

paper without having intrinsic value in it. And this was the cause of

Inflation.

And after that the entire world had removed the gold standard from their

currencies. Today very few countries follow the gold standard.

After 1971, Savers are Losers -

Thus, After 1971, the rules of money have been changed. This is because

the modern money is not a money in the true since. The Modern money




does not have any gold back up. Your government can print it as much

according to the need of the economy.

So today if you save money than it means that you are saving depreciating

item which will lose its value over the period of time making you poor.

Today Asset is more valuable than money. So the Modern Financial

Advise after 1971 is – Save & Invest.

Today also you save money but don’t forget to invest that money otherwise

the inflation will erode its purchasing power.

How the Modern Money is Created by Banks? – The Fractional

Reserve Banking -

So now, you know that your money is not a real money after 1971 and it is

a debt now. So have you ever think that how the modern money is created?

Well, whenever you, your government or any business in your country takes

any kind of debt/loan, the new money is created in the economy at that time

and when you pay off your debt, that money disappears.

This is known as Credit System.

Suppose you have a credit card in your pocket and you swipe it for $ 100, at

that time the $ 100 is created newly in the economy. You feel that your bank

has given you this money from its own pocket. But it is not the truth. This $

100 is newly created because you have borrow it to buy something.

Whenever you take a car loan, home loan or any other kind of loan, that

money is newly created in the economy. This is because previously this

money was not in the economy.

Whenever a Government borrows money by issuing bonds, the new money

is created. Thus, whenever you or the government or the businesses in the

economy borrow money, the new money is created in the economy our of

thin air and pushed into the circulation. And this newly printed money dilutes




the purchasing power of the existing money in the economy by causing the

inflation.

Rich Know How to Create New Money by Using Good Debt & to Get

Richer -

Rich people know that after 1971, the rules of money have been changed.

And that’s why get out of debt and never borrow money from anyone is now

no longer an effective financial advise to get rich.

In fact, after 1971, two types of debts created in the economy – Good Debt

& a Bad Debt.

Any Asset producing debt was a good debt while any liability producing debt

was a bad debt. Thus, What Rich do is, by borrowing money to acquire

assets, they print new money in the economy. And after paying this debt

they become the owners of the valuable assets and get richer than ever.

Rich never afraid of taking a good debt. While Middle class in this world still

think that a debt is bad. In fact, all the financial advises today are age old

financial advises. They will tell you to not to borrow money and get out of

the debt.

Well, this advise is partially true today. Means You should get out of bad

debt and stay away from bad debt only. But you should take as much as

good debt to acquire more assets and getting richer.

Fractional Reserve Banking -

Today the new money is created in the economy by factional reserve

banking. Means banks can lend 10 dollars for every 1 dollar of deposit.

This means that suppose if you deposit $ 100 in your bank than the bank

can give $ 1000 amount of loan. But well, if you deposit just $ 100 in your

bank than from where did this additional $ 900 come from?

Well, This additional $ 900 are created out of thin air. In other words, these

additional $ 900 are created newly out of thin air.




So bank will give you 4% interest every year on your $ 100 deposit. And

that is $ 4 every year. Now, the bank will lend $ 1000 to the people for

various purposes and charge 10% interest rate. So the bank will make $ 100

every year from this $ 1000.

Thus, from your deposit of $ 100, you will make $ 4 every year and the bank

will make $ 100 every year from it. This is known as the fractional reserve

banking.

In 2008, the US Government has printed US $ 1.2 Trillion out of thin

air and pushed it into the circulation. You can see the massive

expansion of US Monetary base in the above diagram.

Thus, since 2007, the US Monetary base has been expanded from $ 800

Billion to US $ 2 Trillion. So How Fed Chairman Bernanke printed $ 1.2

Trillion out of thin air?

Well, in the normal condition when the US Government issues the Treasury

Bonds, the investors and countries around the world buy it like China, India,

Japan…etc.. And this is how the new money is created by borrowing it from

the others.

But $ 1.2 Trillion is such a massive amount that there was virtually no

demand of US Treasury securities by other countries of the world and that’s

why the US Government has issued Treasury bonds worth of $ 1.2 Trillion




and the Federal Reserve has bought it from the US Government and created

$ 1.2 Trillion.

In other words, the US Government has printed treasury bonds and

itself has bought the same bonds. In Layman’s Language, the

troubled bank has printed its own money and give the loan to itself.

Moral of the Story:

This is how the modern money is printed in the economy today. Central

Banks and Governments from all around the world are printing money out of

thin air and pushing it into the circulation.

So What Should be the Financial Advise for you?

Well, the Asset is always more valuable than the modern paper money. The

modern money is a paper money. It’s not the real money. So if you are the

owner of some kind of asset than never sell that asset. Because the asset is

something which is likely to appreciate but the money will depreciate

because of the inflation.

Acquire more and more assets out of your money. Save money but don’t

accumulate money. Rather than that use your saved money to buy assets

and grow the asset column of your financial statement.

The moral of this entire article is that, You should focus on creating and

acquiring assets in your life. Never focus on earning money. But spend your

time and energy to create and acquire assets. This is the only way to

become and stay rich for generations to generations…!!!




Asset is More Valuable than Money

Which is more Valuable – Asset or Money?

For the Rich, Asset is more valuable than money (Now Currency) while for

everyone else, Money(Currency) is more valuable than the Asset.

Let me explain you why Asset (Stocks, Bonds, Gold, Real Estate, Mutual

Funds, Businesses, Web Properties, Intellectual Properties…etc.) is more

valuable than money?

Well, This is because Asset is something which keeps appreciating in its

value forever while money is something which will lose its purchasing power

over the period of time because of the inflation.

In 2003, the Gold price was US $ 300 per ounce and in 2010, it is $ 1200

per ounce. This means that in 2003, you would able to buy the some

amount of goods and services for $ 300 and today in 2010, you can buy the

same amount of goods and services for whooping $ 1200. And this is the

depreciation of money by four times in just 7 years because of the inflation.

So it means that if today (In 2010) you have $ 1200 in your pocket than

after 10 years, you won’t be able to buy the same amount of goods and

services in the economy. But if today you have 1 ounce of gold (Or any

other Equivalent Asset such as stocks, bonds, real estate, websites, blogs,

art, mutual funds…etc..) in your pocket than even after 10, 20, 50 years you

will be able to buy the same amount of goods and services from the

economy. In fact, you will be able to buy much more amount of goods from

your assets in the future.




Diagram: 48 - Old Financial Advise – Save Money. Modern Financial

Advise – Save & Invest Money

In other words, Assets preserve and increase your purchasing

power. While money reduces your purchasing power because of the

inflation.

And this is the reason why Rich people focus on the Asset column of their

financial statement rather than the Income (Like Middle Class people) and

accumulate more and more assets out of their money.

Rich buy assets in exchange of their money while middle class save and

accumulate money thinking that one day they will become rich. See the

rules of money have been changed after 1971 when the US president Nixon

has removed the Gold Standard and made US Dollar the free float currency

and later on the entire world has removed the gold standard.

Middle class people are savers and the savers are losers because the money

that you save in your bank accounts will eventually lose its purchasing power

over a period of time because of the inflation making you poor.




So the smart thing is to create or acquire assets. Rich people know this

secret of money and assets since their early life and that’s why from very

early life they spend their time and energy to either create assets or acquire

assets out of their money. Whenever rich have surplus money on their hand,

they simply buy assets out of their money. They keep accumulating more

and more assets in their asset columns rather than saving more and more

money like middle class.

In True Sense, Money is not your Asset but it’s your liability. This is

because your saved money which sits idle into your bank savings accounts

will ultimately lose its purchasing power and the value because of the

inflation.

While the Asset not only beat the inflation but also appreciate in its value as

well as provide you a steady passive income. Thus, acquiring assets is one

time hard work and after that weather you work or not, money will keep

flowing into your bank accounts (Passive Income).

While Saving money is a life long process. No matter how much you save, if

you are not going to buy assets from your saved money than ultimately you

are going to be poor in spite of how much you save.

Rich teach their kids since their childhood that the Asset is more valuable

than money and that’s why they should always think to grow the asset

column of their financial statement rather than focusing on the Income

(Active Hard Earned Income).

While Middle class people teach their kids since their childhood to focus only

on the income and nothing else. And that’s why they force their children to

work hard at school to get good grades and after that find a safe and secure

job and work hard at the job place to earn higher monthly income. The

middle class people think around the Income. They focus their time, energy

and mind to increase their Income. And to increase their income they take

more and more educational degrees and work over time at their jobs or take

part time jobs to increase their income.




But they don’t know that this is the active income and the day they will stop

working for their active income, their entire income stream will be suddenly

disappear. Plus their saved money will also lose its purchasing power over

the period of time. The inflation will erode the purchasing power of their

money.

While Rich know that Asset is more valuable than the Income and that’s why

they focus their mind, time, money and energy to create and acquire more

and more assets and grow their asset column. They also know that building

the Asset column is thee one time hard work only and after that their Asset

column will generate passive income for them to maintain which they won’t

have to work any more.

So after building the Asset column, even if the Rich will stop working, the

money will still keep flowing into their bank accounts for the rest of their

lives and even after that.

So if you want to become rich than give more importance to create and

acquire assets. To become rich, you need to focus on growing the Asset

column of your Financial Statement. By only saving lots of money, you can

not become rich. But to become rich, you need to acquire assets out of your

saved money.

One most common and age old financial advise in this world is – Live below

your means. It means that spend less money than you earn. Most of the

people spend more than they earn by scratching credit cards and taking

excessive bad debts like personal loans, car loans and shopping EMIs. And

that’s why finance gurus from all around the world teach their children to

live below their means. They advise people to spend less than they earn. So

that they can save more money. But This Financial advise was effective once

upon a time in this world means before 1971. But after 1971, this Financial

advise is no longer effective to ensure any kind of financial success in your

life because USA has removed the Gold Standard (The Gold Back up to the

Dollars) in 1971. In fact, if today you follow this advise and save lots of




money than you will surely be in financial trouble in the future. Because you

are accumulating (Saving) Something (Money) which is going to depreciate

over the period of time because of the inflation. And that’s why the Modern

Financial Advise is – Don’t Live Below your means. Spend most of

your money to create or acquire assets and grow your asset column

so that in the future your Asset column generates passive income for

you which can make you financially free and rich.

Asset is Always more Valuable than the Money.




Myth: 1 Go To School to work hard, get good grades & get a good job

Reality: Go to School But not to get good grades to get a good job

once you leave the school but to learn the basic vocational education

only.

This is one of the most commonest Myth among the Middle class people.

They set a mindset to their children since their childhood that going to

school, work hard and getting a good job once you leave your school and

college is the ultimate way of financial success in anyone’s life.

And that’s why since childhood, their parents force and punish them to work

hard at school and don’t let their kids to focus on anything else except the

school education.

While Rich people know that School education is very important but not for

getting rich and financially free but for the vocational education only

(Languages & Mathematics). Our Schools give us two kind of Education.

01) Vocational – The skill of reading, writing and calculating the numbers

and sums.

02) Professional – In Colleges they give us some kind of professional

education such as Medicine, Engineering, Software, Lawyers, Art..etc..

Rich know that the Schools (& Colleges) are lacking in one kind of Education

and that is -

--> Financial Education – The knowledge about What is Money, How it Works

and the Power of the Corporate Structure and thinking in Financial

Statements and understanding the meaning of basic financial terms like

Assets, Liabilities, Active & Passive Income, Good & Bad

Expenses/Debt…etc…

Why Schools don’t teach us Financial Education?

The only thing that I learned from my school about money, Business &

Investing was – It is Risky.




While when I entered into the real life, I realized that not having Assets

(business and investments) in the Asset Column of the Financial Statement

is Risky. In fact, today my school mates whose parents have build Asset

columns (Stocks, Bonds, Gold, Mutual Funds, Businesses, Real Estate..etc..)

for their children are more financially safe and secure than me and those

children whose parents have taught them to depend on the job security.

Diagram: 46 - Middle Class Work Hard to Earn Money While Rich

Work Hard to Develop Businesses

Schools are training people to become Employees to work for the

Businesses owned by Rich People.

This is because our age old school system is designed and manipulated by

the rich people of the starting of the Industrial age (1800). During the

starting of the 19th Century, the industrial age was started in Europe and

the rich industrialists of that time needed people of various specific skills in

mass volume to run their industrial age businesses. And that’s why they

have decided to take the financial education out of the school system so that




the people who work hard in the school can never become more than

employees of the large corporations.

Rich people of the world still know this history and the facts about the school

system. They know that Schools are important for the vocational education

like languages & Mathematics but the schools are not the right place to learn

the financial education – The knowledge about how money works.

And that’s why the rich people impart the financial knowledge to their kids

separately along with their school education.

Thus, the school system is designed to brain wash the young generations to

think only about becoming employees & Self-employees once they leave the

school and work hard for the rich who own the businesses.

Ultra-Rich (Billionaire) people are High School or College Drop outs

The Following famous Billionaires & Entrepreneurs are the high school or

college drop outs. And still they have made a fortune and become rich. This

is because the school fail to change the mindset of these entrepreneurs

because these entrepreneurs have left the schools and colleges before the

education system can change their mindset and turn them into the

employees.

- Bill Gates – Microsoft

- Steve Jobs – Apple

- Michael Dell – Dell Computers

- Dhirubhai Ambani – Reliance

- Henry Ford – Ford Motors

- Larry Ellison – Oracle

- David Neeleman – Jet Blues

- J.D. Rockefeller – Standard Oil

- Ray Kroc – McDonald’s




- Ralph Lauren – Polo

- Tom Anderson – MySpace

- Mark Zuckerberg – Facebook

- Larry Page – Google

- Walt Disney – Disney Land

- Thomas Edison – General Electric

- Jerry Yang – Yahoo

- Subhash Chandra – Zee Networks

- And many many more……

Your Financial Statement is your score card once you leave your

school. This is because it shows that how smart you are smart with your

money. Your Banker will give you a loan not by watching your educational

degrees but by watching your financial statement and that’s why rich teach

their children the basics of financial statement and develop the habit of

thinking in the financial statements.

Moral:

The moral is that, Motivate your children to go to school to take the

vocational education. But don’t force them to work hard to become

employees and work like a slave at rich people’s businesses.

Rather than that, also teach your children the basic lessons of money during

their school time that the rich people teach their kids. So that in the future

they can also become rich and financially free.

So rather than focusing and working hard only on getting good grades in the

school, it is advisable to become financially smart. It is advisable to be smart

with your money also. So that when you enter in the real world, you don’t

have to live paycheck to paycheck.




Remember, that it is not your educational degrees which will make

you rich one day. It is the Asset column of your financial statement

which will make you rich one day. So focus on Growing the Asset

Column of your Financial Statement to become Rich & Financially

Free one day in your life.




Myth: 2 Get a Job

Reality: Why to do a job when you can create jobs, Save more taxes

and use other people’s time to get rich quick?

One of the most stupid financial advise that the middle class people give

their children is – Get a Safe & Secure Job, Work Hard and earn high

income.

In fact, the entire education system will give you just one option to make

money in your life and that is – Get a Job. When I was in School, my

classmates who came from the middle class background were all the day

talking about getting a good high paying safe and secure job after finishing

their school and college education. This is because their middle class parents

had taught them that getting a high paying job is the most wise financial

decision one can take.

While Rich people know that one can not be rich and financially free by doing

a job only. And that’s why they teach their kids to create jobs by starting

their own businesses rather than doing job at someone else’s business to

make the owners of that business rich.

What is the Problem with Doing a Job?

The biggest problem with doing a job is that, You will pay the high taxes and

remain middle class and poor. You can never get rich by doing a job. This is

because it is the employees of any country who pay the highest amount of

tax.

And that’s why some middle class people advise their kids to become a

doctor, lawyer or Chartered Accountant so that they can earn high income

and become financially free. But well, again the problem with being a self-

employee professionals is that, you will pay even higher taxes than the

employees.

Self-employees like doctors and lawyers pay the highest amount of tax. And

they form the major portion of the tax revenues of any government.




Being a Doctor or a Lawyer is not a bad thing. After all, the economy needs

the quality medical and legal services. The only problem is with the mindset

of the people. Even if many people become doctors and lawyer, their

mindset is still that of the middle class people and that’s why rather than

starting their own business and company of medical or legal services, they

prefer to do a job at some government hospital or at some multispeciality

hospital owned by a pharmaceutical company at higher pay scale.

And that’s why these high skilled people earn lots of money but still end up

paying more in taxes and thus accumulate less in assets.

While Rich people have different mindsets and that’s why even they take

professional qualifications like Medicine and Lawyers, they will still focus on

creating and acquiring assets in the asset column of their financial statement

to grow more rich.

On the other hand, Business owners and Investors are the people

who pay the least taxes to the governments legally because they use

the power of corporate structure to save more taxes. While people

having middle class mindset don’t have any knowledge about the

Financial Statements, habit of thinking in financial statements and

focusing on growing the Asset column and many other things about

Money and Financial Education which are required to grow rich.

Some Business owners and Investors use the power of corporate structure

so much wisely that even after earning lots of money, they virtually pay no

taxes at all.

Thus, if you will chose to become an employee or self-employee, you will

end up paying higher taxes to the government and nothing else.

Rich know the fact that, the tax laws favour the Business owners and

Investors who by creating or investing in Businesses create new jobs in the

economy. And that’s why rather than doing a job, they teach their kids to

own businesses and the power of the corporate structure to save more




taxes, protect their assets and create new money in the economy legally by

taking their businesses to the public.

The Government provides the maximum tax benefits to the Business owners

and Investors and the least tax benefits to the employees and self-

employees.

Is there really something like a ‘Job Security’ in the World?

NO. There is nothing like a job security in the 21st Century. The idea of

having a safe and secure job was an Industrial age idea. And this is

the information age.

The Idea of having a safe job used to work before 1990 means before

starting of the Information age. But today, depending on the job security is

the most stupid thing you can do.

This is because when you have a job, you have only one client and that is

your boss. But when you own a business, you have literally hundreds and

thousands of clients – Your customers. So if one client (Customer) will fire

you, there won’t be any problem. But if your boss fires you, you are in a big

trouble.

Job is for Financially Illiterate People

Without having financial education you will have to get a job. And this is the

reason why schools don’t give you the financial education. This is because

then you will be automatically diverted towards getting a job even after

becoming a doctor or a lawyer.

What most of the Middle class people do is – They go to School –> Work

hard –> Get good grades –> Go to colleges –> Get good graduation degrees

–> Get a job and start earning money –> After few years again go to some

other college for specialty degrees –> Take another job which will pay higher

salary than the previous job –> Work hard their through out life –> Live

paycheck to paycheck –> Struggle Financially And so on and on.




The only focus of the middle class people is to increase their income by any

means. While Rich people focus on different thing – The Asset column of

their Financial Statement.

What Rich people do is – They go to School –> Work hard to take vocational

education –> Simultaneously take the financial education from their parents

or mentors –> Learn the power of the corporate structure –> Go to College

–> Start developing their own Business (Asset) during their college time or

start running their family business –> Take the Graduation degree from their

college or even drop out because they know that it is of no value –> Hire

more employees and use their time to grow their own business –> Take

their Business to the public because they have learned the power of the

corporate structure –> Become multi-millionaires and even billionaires and

financially free –> Now, there businesses are running even without their

presence –> So weather they work or not, the money will still keep flowing

into their bank accounts –> They focus on acquiring more assets and grow

the asset column of their financial statement.

Moral:

- Rich teach their children since their school time that doing a job is the

most stupid thing anyone can do in his life. Rather than that they teach their

kids to create businesses, save more taxes and create new jobs in the

economy.

- The job is the highest risk profession

- Learn the basic lessons on money and master them as early as possible in

your life means now so that you can become rich and financially free one

day in your life.




Myth: 3 Work Hard to Earn More Money

Reality: Rich & Middle class both work hard. But the Middle class

work hard to increase their Income while rich work hard to increase

the Asset Column of their Financial Statement

This is one of the most common myth about money that middle class people

pass on generations to generations. And this is the reason why their

generations remain the middle class, work hard and live paycheck to

paycheck and still struggle financially.

So What’s problem in working hard for the money? After all Rich and Ultra-

rich people like Bill Gate, Mukesh Ambani, Lakshmi Mittal, Anil Ambani,

Michael Dell, Donald Trump and all the other billionaires also work hard.

Than why working hard for the money is a myth?

Diagram: 47 - School Teach Us to Work Hard for Money While to

Become Rich, We need to Work Hard for Assets




Rich & Middle class both Work hard – But Middle class work hard to

increase their income while Rich work hard to increase their Assets

Everybody in this world should work hard. And there is nothing wrong in it.

But the main difference between the rich and everyone else is that, The rich

work hard to create and acquire more assets in their asset column. The rich

work hard to grow their asset column of their own financial statement. While

Middle class work hard to earn more money and increase their income.

Diagram – of the above

What’s the problem with working hard for income?

Well, there are two problems of working hard for the money.

01) The harder you work for your income, the more you will pay in taxes.

02) Working hard for money (And to increase your income) means you are

working for the Active income means you will have to keep working hard for

the rest of your life and if you stop working hard for the income or fired by

your company, your that income will suddenly disappear.

What is the advantage of working hard for the Assets?

There are two advantages of working hard for Assets.

01) The harder you work to create more assets in your asset column, the

less you will pay in taxes because you are working for creating assets

02) Working hard for Assets means you are working hard for the Passive

income. And that’s why it is the one time hard work only. So once you do

this hard work, your job is over. After that weather you will work or not, that

passive income generated by your assets will keep flowing into your bank

accounts for the rest of your life and even after that.

Thus, rich and middle class both work hard. But there is a huge difference

between their hard work. Initially the hard work of rich and middle class

looks the same but in the long run, the hard work done by rich overtake the

hard work done by the middle class.




Both Rich and middle class teach their kids since their school time to work

hard in their lives. But the Middle class teach their kids to work hard to

increase the income while rich teach their kids to work hard for the Assets.

They teach their kids to work hard for growing the asset column of their

financial statement by creating and acquiring more and more assets.

And this is the ultimate advantage of understanding the basics of financial

statement and words like Assets, Liabilities, Cashflow, Active & Passive

Income and the power of the Corporate Structure.

Second Job to increase Income – The Foolest Ides

Many Middle class people start a second job to increase their income. This is

because now they are married and have children. They say proudly that, I

am scarifying my personal life for my children. They say proudly that, I am

doing it for the future of my Children.

Well, This is the most foolest thing that one can ever do. Rather than doing

a second job to increase your income, increase your financial education and

wok hard to grow the asset column of your financial statement. And also

impart the financial education to your children during their school time.

Moral:

If you want to become rich in your life than simply work hard for Assets.

Work very hard to grow the Asset column of your financial statement by

creating and acquiring more and more assets.

This is because Assets generate Passive income which flow into your bank

accounts even if you stop working one day, travel the world or die.

Working hard to increase your income is a Fool’s Plan.




Myth: 4 Save Money

Reality: Saving Money will not make you Rich anymore if you are not

going to buy Assets out of your Saved Money – So The Modern

Financial Advise is – Save & Invest

‘Save Money’ is the age old Golden financial advise. And the people who

save money are really wise people. And it was saying that, those who save

at least 10% of their monthly income won’t have any financial trouble in the

future.

Thus, ‘Save Money’ is the golden financial advise. And after all, the old is

gold.

But well, unfortunately, After 1971, the gold (money) doesn’t remain gold

anymore. The Gold become separated from the money. The “Gold Standard”

had been removed by President Nixon of USA in 1971 and followed by that,

all the world has followed the same rule.

Today Gold is different and Paper Money (Currency) is different. So What all

these have related to this golden financial advise – Save Money?

Well, the problem is that, after 1971 the money stop being money and

became currency. The money became debt after 1971.

In layman’s language, After 1971, the central banks and Governments from

all around the world can print as much money as they want according to the

need of economy. And that’s why one new silent wealth killer came into this

world which was Inflation.

Because of the printing activity of the governments and central banks

around the world, the more money is printed and pushed into the circulation

which is now diluting the purchasing power of the existing money in the

circulation by causing hyperinflation.




Diagram: 48 - ‘Save Money’ – Old Financial Advise. ‘Save & Invest

Money’ – Modern Financial Advise

So What all these have to do with our ancient financial advise – Save

Money?

Well, After 1971,

SAVERS ARE LOSERS…!!!

The Modern Financial Advise is – Save & Invest.

This is because if you spend your entire life just to save money and not

investing it to acquire or create more assets, the purchasing power of your

saved money will be eroded by several folds because of the inflation.

Unfortunately, Money is not the Asset any more but money becomes

Liability after 1971….!!!!

Well, Yes. I know that this is really a breaking statement and hard to engulf

and believe. But this is the Truth – Your Money is not the asset anymore

after 1971.




This is because according to the definition of Asset, an Asset is something

which puts money into your pocket weather you work or not as well as

appreciate in its value over the period of time.

Now, after 1971, because of the inflation, your money doesn’t appreciate in

its value over the period of time and provide you any income. And that’s

why your Saved Money is your Biggest Liability. Because the value of

your saved money will go down markedly because of the inflation.

Rich know this fact about money since 1971. Rich know that the rules of

money have been changed in 1971 by President Nixon when he removed

‘The Gold Standard’ and remove the back up of money with gold.

While Middle class still don’t know that the rules of money are changed. The

money is no longer a money anymore. But it is just a piece of paper without

any intrinsic value in it. The government can print as much money as it want

according to the need of the economy.

So What Rich Teach their Kids about Saving Money?

Well, Rich teach their kids to save money but also don’t keep your saved

money with you. They teach their kids to create or acquire assets out of

their money to grow the asset column of their financial statement.

This is because the rich know that, Money can not make anyone Rich. It

is the Assets which can make anyone Rich.

And that’s why you should not only save money but rather than Save &

Invest your money to buy more assets out of your money. Buy Stocks, Gold,

Bonds, Real Estate, Businesses, Mutual Funds, Art, Web properties, Rare

wines or any other type of asset from your saved money.

Don’t just play the game of money like Middle class anymore. Saving money

was an effective financial advise once upon a time but not now.

The problem with School system is that, it will teach you only one thing

about Assets (Businesses & Investment) and that is –Risky. And that’s why




the most of the people save good amount of money but they afraid of buying

more assets out of their money.

While Rich teach their children the basics of financial statements, ability to

think in the financial statements and the difference between various financial

words like Assets, Liabilities, Active-Passive Income and Cashflow…etc..

Moral:

Save Lots of Money. Saving Money is really a good thing. But don’t just keep

this money with you. Buy Assets out of your money. Create Businesses out

of your money. Invest your money in stocks, gold, bond, real estate, mutual

funds or any other Assets. Use your saved money to grow the asset column

of your financial statement if you want to become rich someday in your life.

Modern Financial Advise is – “Don’t only Save Money But Save & Invest

Your Money”.




Myth: 5 My House is my Asset

Reality: Well, Your House is not your asset but it is your Biggest

Liability because it doesn’t put money into your pocket weather you

work or not.

Diagram: 49 Your House is not your asset but the liability because it

doesn’t put money into your pocket every month but takes money

out of your pocket by making expenses

This is the biggest Myth about Assets and money in the history of mankind.

Today most of the people in this world still believe that the house in which

they live is their biggest asset.




But well, if you understand the financial statements and the cashflow pattern

of the money in the financial statements than you will find that your house

in which you are living is not your asset but it is your liability.

Basically the house in which you live is the Asset of your,

- Government &

- Your Mortgage Lender.

Diagram –> Asset puts money as income and house keep money out of your

financial statement

Diagram –> Government’s and mortgage lender’s financial statement – your

house is their asset and not yours.

Just see the above two line diagrams. The above two line diagrams show

that every month your house takes money out of your financial statement by

making various kind of expenses. While for the governments and banks

(Mortgage lenders), your house makes passive income in their financial

statements as tax income and mortgage payment and interest income.

Thus, in reality, your house is the asset of your government and your

mortgage lender.

But the Government is giving Tax breaks Under Section 80C &

Section 24 (b) in India -

Many Financial advisors and tax planners will give you this advise. They will

tell you that buy a bigger home and take a bigger home loan because the

government is giving you the tax break.

Under Section 80c, You can save up to Rs.1 lakh of tax on the principal of

your house in India and Under Section 24(b) you can save up to Rs.1.5 lakhs

of tax on your interest payment on your housing loan every year in India.

In fact, many people take home loans only for this purpose only and tell

proudly to their friends that they are saving tax smartly.




But well, these fool people really don’t know that to save just MAXIMUM

Rs.2.5 lakh of annual tax, they are taking more than 20 lakhs of loan…!!!!

It is true that, by using Section 80c and 24b, you can reduce your taxable

income by Rs.2.5 lakhs. So say for example if your taxable income is Rs. 4

lakhs than your taxable income will now be just Rs. 1.5 Lakhs.

So you will save a tax on Rs.2.5 lakhs of your Income.

Now, just think that how much tax you have to pay on your 2.5 lakhs of

Income in India at the rate of highest tax slab bracket and that is – 30%? –

Rs. 75,000.

So to save MAXIMUM Rs. 75,000 of tax annually, you are taking a

home loans of literally lakhs of rupees?…!!!!!

And Is this what your Financial Advisor or the Tax Advisor or the Accountant

or a Banker told you?

Is this what you tell a smart tax planning?

To save just Rs. 75,000 of tax annually, you are going into a deep debt.

So don’t give such kind of excuses anymore. And if someone tell you that he

is saving tax smartly by taking a home loan that tell that fool to read this

article.

But the House appreciates in its value and give you the Capital Gains

-

Many Middle class people, your bank, your government and even financial

advisors will argue this. They will tell you that your house is your biggest

asset by giving you the above reason.

In fact,

- Your Government will give you more tax breaks on buying a home by give

you home loan tax benefits




- Your Banker will also tell you to take bigger mortgage loan to buy a bigger

house for you by telling you that, after all you are buying an Asset and that’s

why it is the investment of your money.

In fact, most of the people in this world mainly in India still have a false

belief that,

Myth: The Price of Real Estate go in One Direction Only – UP…!!!

Reality: The Price of the Real Estate can go in any Direction – Up or

Down. The price of any asset in this world can go in two directions –

Up & Down.

Most of the Middle class people buy bigger home by fooling themselves that

after all they are buying an asset out of it. After all they are investing their

money in the real estate and on the top of that, the government is also

giving the tax break on home loans.

But well, This is The Biggest Trap by your government & banks. Basically

the Banks and the governments are fooling you. They are giving you the

false information. They are hiding the right information from you.

Just see the USA Housing Bubble burst in 2006. Before that the people in

the USA were also used to think that the price of real estate can go in only in

one direction and that is up. And that’s why they used to buy homes worth

of $ 200,000. And today they have already paid up $ 150,000 in their home

equity and the price of their homes is just $ 50-80k. Because there is no

buyer in the economy which is ready to pay more than $ 200,000 for those

houses.

The same thing can happen in India or any other country also. And that’s

why depending on the Capital gains of the real estate of your house and

thinking that it’s your asset is a bad idea.




You are Emotionally Attached with your House -

Now, suppose think that the price of Real estate can go in only one direction

and that is up. Now, in that case also your house can’t be your asset. This is

because suppose if you have bought an excellent house in good locality for

Rs. 1 crore and in 3 years its price will double to Rs.2 crores than will you

sell it?

Of course not. This is because you are now emotionally attached with your

house and that’s why you are not going to sell your house. And suppose if

you sell your house than probably you won’t be able to buy back it in the

future.

While if you have 1 crores of Shares of Reliance Industries which doubles in

its price to Rs.2 crores than you can sell it and again buy it when the market

goes down.

You can also do the same thing with gold or any other asset.

But you can not do the same thing with your House. Because you are

emotionally attached with your house.

So One Should not Buy a House for Life Time & Live in the Rental

Apartment/House Only?

Well, NO. Rich don’t teach their children such kind of moral killing things. In

fact, Rich motivate their kids to buy luxurious houses and enjoy their lives.

So here the Rich advise is not that – You should never live in your own

house because it’s a liability.

The logic of understanding this difference is that,

You should not give the first priority to buy a home. Just think in your

financial statement and think that What Advise I had given you in the

lessons on money & Financial Education?

Well, I told you that if you want to become rich in your life than focus only

on thing – Asset Column of your Financial Statement.




So first of all build the Asset column of your financial statement. Work hard

to build the asset column of your financial statement to such a level that

from that level it can throw sufficient passive income by which you can

afford all of your monthly home loan (mortgage) payments.

Rich afford their luxurious houses like this. So that they don’t need to work

hard to pay those monthly mortgage payments. This is because their

mortgage payments are afforded by the passive income from their Asset

column of their financial statement.

What Most of the Middle class will do is,

Take a Job –> Work Hard –> Earn High income –> Take a Big Home loan

and buy a big house –> Work more and more hard for 15-20 years to pay

the monthly loan payments of their home –> Ultimately they fail to build

some serious wealth because all of their hard earned money goes to pay

those home loan payments –> Remain middle class or poor.

Rich play the game of money like this,

Have Basic Financial Knowledge –> Start Focusing on building their own

Asset Column First –> Create Businesses & Do Investments –> Grow the

Asset column large –> The Asset column will start generating passive

income –> Put a Down payment –> The Passive income from their asset

column will afford the monthly mortgage payments of their house –> After

that weather the rich work or not he will be still able to pay his mortgage

payments. This is because his Assets are affording his Liability (House).




Diagram: 50 - Your Rental Property is Your Asset because it puts

money into your pocket.

Well, The house in which you live is your liability. But if you own a rental

property which gives you positive cashflow after deducting all the expenses

like tax and mortgage payments than its your asset.

This is because your rental property can put money into your pocket weather

you work or not.




Moral:

Your House is not your asset but it’s your biggest liability. This is because

every month your house takes money out of your financial statement.

Middle class buy a house from the first day of their career or during their

early career years and after that struggle hard to pay the mortgage

payments of their house. Now, this money would have gone to build the

asset column and becoming rich and financially free.

Rich first of all work hard to grow their asset column first. And once their

asset column starts throwing sufficient passive income, they buy a house

and pay their monthly mortgage payments from the passive income from

their asset column.

Thus, Rich and Middle class both love to buy expensive houses and both of

them buy a dream house for them also. But Rich remains rich even after

buying a luxurious house while a middle class remain middle class or even

become poor after buying a luxurious house.




Myth: 6 Get Out of Debt

Reality: Get Out of Bad Debt only But take more and more Good Debt

Whenever you read some personal finance book or a blog, they will teach

you and motivate you to get out of debt. They will tell you that get out of

debt and never take any kind of debt if you want to become financially free.

They will also teach you that how you can get out of debt by cutting down

your credit cards, earning more income and many other things. Well, at a

first look this sounds really a cool financial advise. But unfortunately, setting

such kind of mindset really affects your growth.

This is because this financial advise is for a bad debt only. While in the real

life, the two kinds of debt exists – Good Debt and a Bad Debt.

Diagram: 51 – Good Versus Bad Debt




A Good Debt is one which puts money in to your pocket. A Good Debt is

one which is used to acquire the assets and when you pay this debt, you

become the full owner of some kind of Asset.

Say for Example, the debt that you take to grow your business is a good

debt. This is because it is used to grow your asset – Your Business. A Debt

that is taken to buy a rental property is a good debt because after paying

this debt, you will become the owner of that rental property which will

generate endless cashflow for you.

A Bad Debt is one which take money out of your financial statement and

makes you poor. A Bad debt is one which is used to acquire liabilities and

when you pay this debt, you will become the owner of the liability which will

not only depreciate in its value markedly but also will make you expenses.

Say For Example, The Car loan is a bad debt. This is because after paying

your entire car loan, you will become the owner of something which will lose

its value. A newly bought car will lose almost 60% of its value within first 4

years. Credit card debt used to do shopping and buy products which are

depreciating is a bad debt.

Should You Cut Down Your Credit Cards?

- Of course yes. If you are financially illiterate.

- Of course No. If you are financially educated.

A Credit card can be your good as well as bad debt. So if you don’t

understand the difference between the good and bad debt and if you don’t

have any kind of knowledge of financial statements and habit of thinking in

financial statements and the difference between the words like assets and

liabilities than it is better to cut down all of your credit cards and stay away

from it.

This is because the credit card is the highest interest debt which can make

you even Bankrupt.




Thus, cutting down credit cards is the financial advise for the Middle

class people.

While Rich people don’t need to cut down their credit cards. Not because

they are rich and have good bank balance. But because they have the clear

understanding of good versus bad debt. Rich use their credit cards to take a

good debt and become more richer than ever. This is because rich always

buy Assets out of their credit cards.

Rich always use their credit cards to acquire assets like Domain names, web

properties, Business debt, payments to buy assets…etc.. And that’s why they

grow richer when they pay off their credit card outstanding.

While middle class use their credit cards to buy liabilities which depreciate

faster and lose their most of the value within first few years of buying.

Thus, if you are going to use the credit card debt to acquire assets than

have a credit card. No problem in it. In fact, the entire money supply of the

world is debt today. This is because in the 1971, President Nixon of America

removed the gold standard and dollar became debt followed by all the

currencies of the world became debt.

So whenever our government take a debt from public by issuing bonds, the

new money is created in the economy. Whenever you scratch your credit

card to buy things worth of Rs.1000, the new 1000 rupees are created in the

economy at that time and when you pay that 1000 rupees back to your

bank, that money disappears from the economy.

So whenever you, me, businesses or the government borrows money, the

new money is created in the economy and whenever we pay that debt, that

newly created money disappears.

Thus, when you take a car loan of Rs. 5 lakhs, this 5 lakhs are newly created

in the economy. And when you pay back this loan, this money disappears.

This is known as Fractional Reserve Banking. In short, the entire world

grows like this only.




Rich know this fact about the money and that’s why they use the debt to

acquire more assets and grow richer. Rich use debt to expand their

businesses, buy profitable rental properties or acquire any other kind of

assets and thus become richer and richer.

While middle class people take huge loans to buy cars, travelling abroad,

shopping and to acquire several other kind of liabilities and become poorer

or remain middle class only. And that’s why following financial advises about

debt are for middle class only.

- Get out of Debt

- Cut down all of your credit cards

- Stay away from Debt

- Never Take Debt

The above are the financial advises for the middle class people only. Rich

can’t follow the above advises. This is because if they will also start following

the above advises than how they will become richer? Basically rich use debt

to get more richer.

How Rich Use Debt to get Richer?

Well, Rich use debt to get more and more richer. Say for Example, the rich

puts Rs.1 Crore as a down payment to acquire the Rental Property (Asset) of

Rs. 5 Crore (20% Down payment).

Thus, he takes a loan of Rs.4 Crore to acquire the asset. This is known as

leverage. So he acquires the asset worth of 5 crores by putting just 1 crore

down. Now the rental income from that real estate will pay off all of that

mortgage loan. So rich don’t have to pay the mortgage loan payments from

his own pocket or from his hard earned income.

So after 10 or 15 years, the rich will have the Asset which will be worth

more than 5 crores. This is because during such a long time horizon, the




price of real estate will also appreciate making him richer. Also the rentals

will increase improving his cashflow.

On conservative side, within 15 years the price of that property will at least

doubled if not tripled. So after 15 years he will have an asset worth of Rs.10

Crores minimum. And all of this is from the investment of just Rs.1 Crore.

Ok. Now, let us talk about Middle class people. The Financial advisors advise

middle class people to not to take a debt and rather than that invest money

in the mutual funds via SIP.

Now, just tell me that how much money you will have to invest today in

Mutual Funds to grow it to 10 crores after 15 years? Let us assume that

Indian Equity will give you 20% Compounded annual return.

Around 85 Lakhs. So suppose if you today invest 85 lakhs in mutual funds

than after 15 years it will become 10 crores.Well, this is really cool. But do

you know that how much money you will need to earn to save Rs.85 lakhs?

Almost double. This is because you will have to pay almost 40% tax on your

hard earned income. Thus, growing rich without taking a good debt is almost

impossible.

While if you have use Rs. 1 crore to take 4 crores of debt than you will not

only able to acquire the asset of 5 crores but you will also have tax benefits

of 5 crores for investing just Rs. 1 crore.

Rich people take lots of good debt to expand and grow their businesses. This

is because business is an asset which pays off all of their debt.

Moral:

Learn to use good debt. Increase your Financial IQ and understand the

difference between good and bad debt. Always take a good debt to grow

richer and stay away from the bad debt.

A Good debt will make you richer while a bad debt will make you poorer.




Myth: 7 Live Below Your Means

‘Live Below Your Means’ is the most moral killing and psychologically

disturbing personal finance advise that various personal finance authors

and bloggers give people.

In fact, many personal finance gurus say proudly that they are living below

their means and that’s why they are financially free. And people should also

live below their means to become rich and financially free.

Well, than what is the meaning of being rich if ultimately you are going to

live below your means? It’s like,

Live Poor but Die Rich…!!!

In fact, nobody wants to live poor and die rich. Such kind of financial advises

look really good when you advise someone to live below his/her means. But

when it comes to you, its really a moral killing financial advise.

Well, it is true that most of the people in this world have to live below their

means because they are deep in debt and their income is very low.

The logic behind the advise - ‘Live Below your means’ is that, by living below

your means you are decreasing your expenses and thus improves your

cashflow (Income – Expense). Now, this is really a good thing. Increasing

your Cashflow by reducing your expenses is really a good idea.

In fact, Fortune 500 companies also cut down their un necessary expenses

to increase their Cashflow. But unfortunately, most of the people don’t know

that what to do with this Additional Cashflow?

Remember that, Live Below your means will only work for you if you

are going to divert your increased cashflow to buy more assets and

grow your asset column.

Most of the people blindly follow the advise of the financial planners and live

below their means. This really improves their cashflow. But this doesn’t help




them to get rich and financially free. Because they don’t acquire assets out

of their improved cashflow.

In fact, they don’t have any knowledge about the words like Cashflow,

Assets, Liabilities and Financial Statements and that’s why even after living

below their means they don’t become rich in their financial statements

because they don’t acquire any assets.

What You should do if you don’t want to Live Below Your Means?

Rich, Middle class or poor, nobody wants to live below their means. And

that’s why both middle class and rich buy more liabilities, luxurious items

and status symbols from their money.

This is because its a human nature. We love to drive expensive cars, wear

expensive watches and travel the world. Rich, Middle class or poor all of us

love to enjoy great lifestyle. But well, the rich and middle class play the

game of money differently to afford their lifestyles. Here is how.




Diagram: 52 - No need to Live Below Your Means. Increase Your

Asset Column and afford every luxury from the Income generated by

your Assets

Middle class Person –> Loves to live a lavish lifestyle –> Study Hard –>

Get good degrees –> Get Good High Paying Job –> Earn more –> Afford

Luxurious lifestyle from Hard Earned Income –> Wants to upgrade lifestyle –

> Work more hard –> Get a Second Job –> Improves Income –>

Upgradation of lifestyle –> Finished –> Now he can not upgrade more from

this level because one day has only 24 hours and he can not work more than

18 hours a day –> Not only this but to maintain current lifestyle he has to

work hard 15 hours a day –> He can’t stop working because if he stops

working, he won’t afford his luxurious lifestyle

Rich Person –> Loves to live a lavish lifestyle –> Study hard –> Parents

have given financial education –> Don’t do job but start focusing on growing




the Asset column of his financial statement –> Start a Business as

developing a Business is all about creating new assets –> Work hard to

create and acquire assets –> Generate Passive income from his asset

column –> Affords luxurious lifestyle from his passive income –> Wants to

upgrade lifestyle –> Buy More Assets –> Passive Income will improve –>

Upgrades lifestyle –> Again wants to improve lifestyle –> Again buy more

assets and generate more passive income –> Upgrades lifestyle –> And so

on and on –> One day he stops working –> Still he and his children will be

able to afford the same level of lifestyle without working hard because their

assets afford their lifestyle and not the hard earned income.

Moral:

Thus, the rich don’t have to live below their means. This is because they

know that they need to acquire more and more assets to expand their

means.

If the rich want to upgrade their lifestyle, they will acquire assets first and

generate passive income from their assets and after that buy liabilities from

that passive income. In other words, for rich, their assets afford all of their

liabilities.

Middle class people buy liabilities from their hard earned money and that’s

why they need to keep working hard to afford those liabilities and lifestyle

And if they stop working, they will have to compromise with their lifestyle

and live below their means.

So if you want to live like rich than spend your time and energy to create

and acquire more and more assets in your life. Grow the asset column of

your financial statement such a large that the passive income generated by

it can afford all of your expenses and liabilities.




Myth: 8 Invest for the Long Term and Diversify

Reality:When you Invest for long term in Paper assets, you are

investing for the Capital Gains which is very risky. Diversification is

for those financially uneducated investors who don’t know what they

are doing

One of the most common financial advise is, Invest in Mutual Funds,

Diversify your investments and Invest for Long term.

This is like a ‘Buy, Hold & Pray’ Advise.

Problem with Investing for Capital Gains -

The only problem with the paper assets like stocks, bonds and mutual funds

is that, you only have control over one thing and that’s when you sell. You

don’t have any other control than this. This is known as investing for the

capital gains. Means depending on the price of that asset going up. Here you

don’t have any other kind of control over that asset.

Say for Example, if you buy a stock of Reliance Industries, What you are

investing is investing for the capital gains. You don’t have any kind of

management or cashflow control over the Reliance Industries. And this is

very risky. And this is like a gambling. It is because to make profits from the

Reliance Industries or any other stock, you will have only one option and

that is wait for the long time to increase the valuations of the stocks of that

company (Capital Gains). And this is what I call investing for the Capital

Gains.

Now, let us discuss about the Mukesh Ambani and other directors of the

Reliance Industries who are also the shareholders of Reliance Industries just

like you and me. Their main advantage is that, they have more control over

the business than you and me say for example control over the management

team, control over the assets of the companies, control over the cashflow

and profits and several other controls. So the owners of that business can




take out any amount of money from the company whenever they want

because they have more control over Reliance Industries than you and me.

This is true for any paper asset. This is true for any stock. When you buy a

stock from the stock market, the only control you have is on the selling. And

the only profit you can make is the capital gains. And that’s why this form of

investing is very dangerous.

Today most of the employees and self-employees are investing for the

capital gains and that’s why they have stay invested for the long run.

This is the Middle class investment strategy. While Rich teach their kids to

promote their own companies and do the business from their company, take

their company to the public and sell the shares of their own companies to

literally millions of people.

Thus, Stock investing is a really profitable game if you are on selling side. So

promote your own companies, do a business from your company, have a

better control on your asset and sell the shares of your company to people.

This is what the rich teach their kids about the stock investing.

Problem with Investing in Mutual Funds -

The financial advise – Invest in mutual funds for long term and diversify is

also a financial advise for the middle class people. Here also you invest for

the capital gains only. Means the only control you will have on your

investment will be – Sell.

Mutual Funds do nothing but divert all of your money towards the financial

markets.

While Rich teach their kids to Invest for Both the Cashflow & Capital

Gains.

The problem with investing in mutual funds that, you put your money and

take 100% of the risk and the fund house makes money by charging various

expenses from you. So weather you make money or not from your




investments in the mutual funds, your fund house will definitely make

money weather you win or lose.

Today when I see the various Personal Finance bloggers around the world,

many of them are earning lots of money from their Authority Blogs. They are

running their own successful blog businesses. But basically they invest like

middle class. Means they invest all of the profit of their blog business to buy

mutual funds.

While I personally don’t like to invest for the Capital Gains. So I keep re-

investing the profit of this blog to hire more writers and create more unique

and quality content for this blog. This also improves the Cashflow.

Why should I invest in mutual funds and stocks for capital gains when I have

a full control over my Blog Business – My Own Asset? This is because the

more I invest in my own asset (This Blog), the more cashflow it will generate

and thus more richer I will get.

Of course, if your business is large enough and you don’t want to grow it

anymore than definitely go for investing in the mutual funds and assets for

capital gains only.

Problem with Diversifying your Money -

This is another most widely distributed financial advise. The advise is,

Diversify your money. Well, If Bill Gates had diversified his money than

today you and me would not be using Windows.

The point is that, Diversifying your money is really an effective

financial advise for the Middle class people only.

If somebody is a middle class and financially not educated much than

Diversification is really a good financial advise for him. This is because

according to Warren Buffet,

“Wide Diversification is only required when the Investor Doesn’t Understand

what He/She is Doing”




But if you know that what you are doing than Diversification is not the

financial advise for you.

The Basic Difference Between the Rich & Middle Class Investing -

The basic difference between the Rich & Middle class investing is, The Rich

Invest for the Cashflow (& Capital Gains both) While the Middle class Invest

only for the Capital Gains (Buy, Hold & Pray).

Investing for Capital Gains is a form of gambling. This is because here you

will have to depend on the price of the asset going up. When you invest for

the Capital gains, you don’t have any control over your asset except selling

it.

While Rich Invest for Cashflow means they invest in their own businesses to

generate Cashflow or invest in rental properties or any other asset on which

they have a more control can can generate passive income from it.




Myth: 9 Retire With Pension Plans

Reality: You can not retire with the modern pension plans (Defined

Contribution Plans). You will have to build your own retirement

corpus by your own

One of the commonest Myth about money is, Invest in Pension plans for

years and get retire on them. Well, This was the financial advise which was

really effective before 1974. But after 1974, you can not retire on the

pension plans anymore.

What Happened in 1974 with our Pension Plans?

Well, in 1974, The US Government has changed Defined Benefit Pension

plans into Defined Contribution Pension Plans.

And after that the entire world has also changed this rule. So now most of

the countries of this world have defined contribution Pension Plans.

This small change in the rule has changed the pension plans and the entire

concept of the pension. Defined Benefit Pension plans means you work

whole of your life for the government or a company and for your entire life

hard work, you will get a definite paycheck for the rest of your life. So

Defined Benefit Pension plans were the real pension plans.

But Define Contribution Pension plans means what you will get after your

retirement is, all what you put in the pension plans for your entire working

life.

This means that, to become retire and financially free, you will have to pay

some amount of money every month or a year in the pension plans for 10,

15 or 25 years. These pension plans divert your this money towards the

stock market and make capital gains and build the retirement corpus for

you. And after your retirement, you will get your own invested money and

nothing more than that.




So What is the problem with Defined Contribution Pension Plans?

Well, The main problem with the Defined Contribution pension plans is, they

divert your money towards the stock market to generate capital gains for

you. Now, This is really risky for the people. This is because the main object

of the defined benefit pension plans was to provide safety and security after

the retirement.

And that’s why these pension plans should be risk free. But now, the

problem is that these pension plans are no longer the defined benefit

pension plans but they are now the defined contribution pension plans. So

they diver your money towards the stock markets to generate high returns.

The problem with such kind of investing is that, what if during the time of

your retirement, the stock market crashes?

Well, This is not just the prediction or fear. But this really has happened in

USA in 2008. Because of the US Recession and market crash in 2008,

literally trillions of dollars of wealth of pension plans have been shrink and

that’s why today the baby boomer generation is in trouble.

The baby boomer generation had dream about financially peaceful

retirement but now many baby boomers are saying that is the market won’t

recover in few years than they will have to keep working for the rest of their

lives to meet the ends.

So The Modern pension plans are nothing but the machines to divert the

money of large number of small investors to the stock markets.

Today, No Investment is a SAFE Investment in this world. Even if

you plan to stay away from the stock market, virtually all the

financial products have equity component in it. So virtually all the

financial products will divert your money towards the stock market

which is really a risky thing.




Thus, this is a time to become financially literate. The Rich teach their kids

the basics of financial statements and the meaning of the words, Assets,

Liabilities, Cashflow and active-passive income. They teach their kids the

importance of growing their Asset column of the financial statement so that

they don’t have to depend on anyone after their retirement.

Moral:

This is the time to become financially literate and start doing your own

investments by yourself. Learn the basic financial education and develop the

skill of investing your money.

Rather than depending on the pension plans and mutual funds to build your

retirement, it is better to develop your own businesses and cashflow assets

on which you have full control. So even after your retirement, you will still

continue making money from your businesses and cashflow assets.

The key of successful retirement is, you start building your own

cashflow assets portfolio (Businesses, Rental Properties, Intellectual

Properties, Web Properties…etc..).




Myth: 10 Capital Gains Versus Cashflow

Reality: Middle class invest for the Capital Gains While the Rich

invest for Cashflow and Capital Gains Both

There are basically two forms of Investing.

01) Investing for Capital Gains

02) Investing for Cashflow (& Capital Gains Both)

Unfortunately, most of the people in this world know only one form of

Investing and that is Investing for Capital gains. In fact, all the financial

products available in the market (Mutual funds, Stocks, Pension plans,

ULIPs, Child future plans, Retirement plans…etc..) are the Capital Gains

products only.

Diagram: 44 - Difference Between Rich & Middle Class Investing




Remember that,

Middle class invest for the Capital Gains while the Rich Invest for

Cashflow and Capital gains both.

First of all let us understand what it means by investing for capital gains and

cashflow and then we will discuss why rich invest for cashflow rather than

only for capital gains?

What is Investing for Capital Gains?

Well, in very simple language, investing for capital gains means investing for

the price of asset going up. This means that you are investing in some asset

hoping that the price of that asset will go up in the future.

Say for Example, Investing in Stocks, Gold, Mutual Funds, Pension plans,

ULIPs, retirement plans…etc..

Almost all the paper assets are the investing for the capital gains. And all the

employees and self-employees of the world invest mainly in the paper assets

for the capital gains.

Say for Example, you invest in stocks at lower price or when the market is

down and stay invested in it for a long time horizon hoping that the price of

the stock will go up and when you will sell it in the future, you will have a

huge capital gains.

In fact, today most of the people in our world invest for the capital gains

only and this is really a risky thing. It’s basically a kind of gambling.

What is Investing for Cashflow?

Investing for the Cashflow means you are buying some assets not because

you think that the price of that asset will go up. But you are buying that

asset because of its cashflow. Here basically you are buying a passive

income stream. So once you will acquire that asset, your passive income and

cashflow will improve ultimately.




This is a smart form of investing and rich invest for cashflow and capital

gains both.

Say for Example – Rental Properties. You buy a rental property which will

not only give you the regular rental income but also appreciate in its price

(Capital gains).

Another Example is – Business. When you invest your money to start your

own business or acquire the already established business, you are investing

for the cashflow. This is because you don’t have to worry about the

valuations of your business. This is because as long as you will own your

business, it will give you steady cashflow which can afford your lifestyle as

well as other assets also.

Why Investing for Capital Gains is Risky?

So What is the problem with investing for the capital gains? Well, the only

problem with investing for the capital gains is that, you will have only once

control over your asset and that is, Selling.

You can not do nothing more than selling of your assets to realize the profit

when you are investing for the capital gains only. You don’t have any other

kind of control over that asset.

Say for Example, when you buy shares of Reliance Industries (RIL), you are

basically investing for the capital gains means you are hoping that the

fundamentals of the company are strong so the price of this stock should go

up in the future and that’s why you put a bet on this stock. You risk your

money on the stock.

But What is the price of the stock you buy will go down in the future? Well,

in that case you will end up losing your money no matter how valuable and

profitable Reliance Industries is. Rich avoid this form of investing. Basically

rich always invest for the cashflow and capital gains both.




Believe me, Investing for the capital gains is really risky and some day you

will lose all of your wealth in such kind of investing and become financially

poor in the single shot.

Gold is the Investing for Capital Gains – Risky Investment

Today many people around the world (Mainly in India) are diverted towards

investing in the gold. This is because since 2003, the price of the gold has

been appreciated very well.

And that’s why many people are liquidating their other investments to only

invest in gold. Now, this is really an extreme form of investing. This is

because when you invest in gold, you are basically invest for the capital

gains. All the people are investing in gold because they hope that the gold

price can go only in the one direction and that is up.

But well, this is not the truth. The truth is that, the price of any asset can go

in any direction – Up & Down. But unfortunately, middle class people think

that the price of the asset can go only up. And this is the reason why most

of the middle class people in India invest in gold hoping that all of them will

become very rich one day when the gold price will doubled, tripled or

quadrupled.

Unfortunately, Gold is not the investment for cashflow. It doesn’t provide

you any cashflow. And that’s why Gold is not the preferred asset class of the

rich people. Today, all the rich people invest mainly in 2 assets.

01) Business

02) Real Estate

Almost 99.99% of World’s rich people own some kind of Business on which

they have a management control. Business continues to be the preferred

asset class of the rich. This is because your business can provide you a

cashflow on which you can live. The Gold of course can provide you capital

gains but never give you a cashflow. And that’s why this form of investing is

really risky.




If you already have one or more cashflow assets like Businesses, Intellectual

properties and Real Estate (Rental properties) than it is alright if you buy

gold from the passive income of your cashflow assets.

But buying a gold (Non Cashflow producing, Capital Gain Asset) from your

hard earned money than it’s surely a fool’s plan.

Why Rich Invest for Cashflow? - Advantages of Investing for

Cashflow -

Rich always invest for the Cashflow. They always analyze that how much

cashflow particular asset will generate for them once they will acquire that

asset. This is really a smart financial move.

This is because when you invest for the cashflow, you don’t have to worry

about the daily ups and downs of the price/valuation of that asset. This is

because even if the price of that asset will go down, you will still have

cashflow income from that asset (Passive Income) which you can enjoy or

use to acquire more assets.

Say for Example, Rental Properties. Once you acquire the rental property,

you won’t have to worry about the price of that rental property. Even if the

price of the real estate crashes because of the real estate bubble burst, you

will still have a passive income from your real estate.

When you own some business, you have several controls over your business

such as,

01) Control over the management team

02) Control over the Cashflow

03) Control over the Income

04) Control over the Expenses

05) Control over the Assets




Thus, even if the price of your business goes down, you will still make

money from other controls. Say for example, Mukesh Ambani, the Chairman

of Reliance Industries (RIL) will still make money from RIL even if the stock

price of the RIL goes down by 50%. This is because he has a control over

management team, cashflow, income, expenses and the assets of the

company.

But suppose, if you buy the stocks of Reliance Industries and the price of the

stock will go down by 50% than you will simply lose 50% of your wealth and

nothing else. This is because you have invested for the capital gains which is

nothing but a form of gambling.

Flippers are Losers -

Flipping means buying low and selling high. And a flipper is a person who

flips assets for making profit. There are basically 3 common types of flippers

in the world.

01) Real Estate Flippers

02) Stock Flippers

03) Website & Domain Flippers

Real Estate flipper buy a real estate property at low price, modify and fix it

and later on sell it to a new buyer for huge profits after holding it for 6

months to a year.

Stock flippers buy stocks at low price and sell at higher price.

Website flippers develop a website out of scratch or acquire the already

established website, work hard on it to grow a web traffic and revenue of

that website and later on sell it to a new buyer for a huge profit.

Initially these kind of money making opportunities look cool. But these are

very risky things. This is because here you are investing your money for the

capital gains. And that’s why one day you will lose your entire wealth in

flipping.




Of course, rich never afraid of taking calculated risks. But taking such kind of

risk is literally an insanity. Playing with capital gains is a gambling. And the

thing is that, flippers call themselves a business owner but in reality flipping

is not a business but it’s your profession. This is because here you don’t

accumulate assets and grow your asset column. But here you just trade

assets to generate income. And that’s why the day you will stop doing

flipping, you will stop making money.

While rich are those who acquire cashflow assets. Rich accumulate assets.

Basically they don’t just sell their assets when the price of their assets goes

up. And this is the main difference between the rich and the flippers.

Moral:

Rich want more control over their investments. And that’s why they invest

for Cashflow. This is because if you have a control over the cashflow of any

asset, you will feel more secure and comfortable with your that investment.

The reason why middle class people don’t feel secure and comfortable with

their investments is because they only invest for the capital gains.

If you only invest for the capital gains, one day you will lose all of your

money. So Think like rich and always invest for the Cashflow and Capital

Gains both.

my journey to billionaire club[1]

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