How Fast is Your Money Moving?
|For years, I choked when I heard such a question. I choked because I was at a loss for words. I was at a loss for words because such a simple question does not have a simple answer.|
So the answer I came up with was, "It depends."
I tried this answer for awhile and soon noticed that this answer was unsatisfactory not only to the person asking the question - but also to me...
Looking for a new answer, I came up with, "If you do not know what to do with your money, put it in a bank far away from you, with instructions not to let you touch it." I would add, "If you do not know what to do with your money, and you announce publicly that you are an idiot with money, many people will call and tell you what to do with your money…which is to give your money to them." This new answer was not a satisfactory answer, yet it was better than "It depends."
Today, I am happy to announce that I have a new answer to the same question and that answer is, "Read my latest book, Who Took My Money?" After years of frustration and unsatisfactory short answers, the answer to that simple question is now in a book and I am very proud of this book. I am proud of this book because it takes the time to answer the question, "What should I do with $10,000?"
The reason the answer to such a simple question is complex is because what a person should do with the money depends upon who the person is. For example, if the person has a limited financial IQ, then the person should definitely put it in a bank and keep the money secret and far away so no one; including that person, can touch it. If the person has a higher financial IQ, then he or she can invest, leverage, and speed up their money to achieve far higher returns than most people think possible.
In my new book, Who Took My Money, there are three different examples of investing $20,000. Using exactly the same parameters of 5% interest, and a 7-year period:
The difference between real estate in choice #2 and choice #3 is that financial velocity is added to choice 3. If you would like further clarification on the causes of the differences, you can find this example on page 118 of the book.
- Choice #1: a mutual fund $28,142 5.8%
- Choice #2: real estate $101,420 58.2%
- Choice #3: real estate $273,198 180.9%
The point of this article is that a higher financial IQ does definitely pay off and that variable is why I have had a difficult time answering such a simple question. If a person has a very low financial IQ then, obviously, they should put the $20,000 in the bank. At 1% interest, the $20,000 would have grown to approximately $22,000. While not great, it is better than losing the nest egg.
One of the purposes of The Rich Dad Company is to continually improve a person's financial IQ and this is an example of the pay off of a higher IQ. So keep learning and soon you will find your wealth increasing - not because you are working harder but because your money is moving faster.
|Robert Kiyosaki is an investor, businessman and best-selling author. His book, Rich Dad Poor Dad, reveals what the rich teach their kids about money that the poor and middle class do not.|
Retiring at the age of 47, Robert continued with his love of investing. It was during his "retirement", he wrote Rich Dad Poor Dad, the #1 New York Times bestseller. Robert followed with Rich Dad's CASHFLOW Quadrant and Rich Dad's Guide to Investing - all 3 books have been on the top 10 best-seller lists simultaneously on The Wall Street Journal, USA Today and The New York Times. In January 2001 Robert Kiyosaki launched Rich Kid Smart Kid.
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