I stumbled across a concept a while back from Robert Kiyosaki. It was in an article he had written and having read most of his books, I wondered to myself, why has he never said this before? Why is this such a new concept?

Then I realized - He had been saying it all along, I just didn’t get it.
This brings up two important points:

1. The true concepts of wealth really are a departure from conventional thinking

2. You never know when you will come across a nugget of information that changes your world

..I will discuss these points later in the article as you are probably chomping at the bit to know what concept Mr. Kiyosaki was talking about..

The Concept

Here is the gist of what he was speaking about.

He mentioned that he wanted to buy a new car. His wife said to him, 

“OK, what asset is going to buy you that car?”

He laughed and said,

”Right, I forgot”

He went on to say that the rich use assts to pay for their lives. The poor use money earned from labour to pay for their lives. This is a very important distinction.

I have explained this concept to others and my favourite method is to use a metaphor.

If you were to create a blueprint of a “rich person” what would they look like? What would be a typical example of a rich person. I want you to exclude athletes, musicians, actors, and lottery winners. These are not typical wealthy people. These are exceptions to the rule and are not to be emulated. I am talking about the REAL rich people in the world, of whom there are many and most go quietly about their business without being on TV or Instagram. 

If you were to describe the average millionaire, they are an entrepreneur. They have worked at their business for a decade or two, and have made smart choices with their money as they built up their fortune. They exercised self discipline, delayed-gratification, and long-term thinking in their everyday behaviours and decisions. 

So.. 

If you model this typical millionaire into your own world, you have many choices. As I am an evangelist for investing in dividend stocks, I like to use the metaphor of “your dividend stocks are your business”. 

If you built up a business from scratch, you would feel pretty proud of your accomplishment and would consider this business your pride and joy. It is your baby, and you would try to preserve it to the best of your ability. 

I say use the same philosophy with your investment strategy. 

When you build up a portfolio of dividend bearing stocks, you are building a “business”. This business is there to take care of you and your loved ones. It is your source of income and it is in your best interest to keep the business running and profitable. 

So with this in mind there are a few key decisions or behaviours that you now do:

1. If you want to make more money, you grow your business.

2. If you want to retire you can sell your business or you can just keep it going

3. If the word is changing, you pivot your business model

Grow your business

This is my favourite part of my metaphor, because it is so easy to do, simple to understand, and directly beneficial to the bottom line. If you have money, invest it. Simple. If you have found a good, blue-chip dividend stock, you just keep buying it. Every share you buy increases your income, because every share will produce a dividend. It is simple math with a direct correlation.  They more you buy, the more you earn. The stock price is certainly a factor when you buy, as that determines your yield, but through dollar cost averaging and simple growth over time, your take home pay will go up. Yes, occasionally companies decrease or eliminate their dividend, but picking the right companies will drastically reduce this possibility. 

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Sell Your Business

When you want to retire you have the option of selling your stocks or just continuing to enjoy dividends. If we go back to our initial metaphor, that would be like selling off pieces of your business bit by bit over time in order to have an income. The problem with that is you may run out of money eventually, especially if you live a long time! Also, as you sell of pieces of your company your income declines in lockstep with your shrinking asset value. It seems crazy when I put it like that, but this is exactly what they are encouraging you to do with your retirement savings. You build it up until you are 65 and then you chip away at it until you die. This seems crazy to me. Why would you put yourself in that kind of predicament?

Why not just keep living off of your dividends forever? Then your heirs can enjoy it too. 

The other cool thing is if you have done a good enough job of investing, you can live off of less than you earn (always good advice) and invest the difference. Why would a good habit like that have to stop when you “retire” - just keep doing it for your whole life and your “business” will continue to grow just as your income will! 

Pivot your Business Model

We all know that the world changes. It changes fast and the prevailing wisdom in the world of business is that the most adaptable survive. Business that can change quickly will persevere while others can become dinosaurs quickly as time change. As a “business Owner” you need to be able to pivot as well. As the winds of change start to blow, you have the advantage of pivoting your “business” with a few clicks of a button, rather than re-imagining an entire business. If the companies that you are invested in start to decline, and the writing is on the wall that their services are not relevant anymore you simply sell those shares and buy new ones in companies that are positioned to succeed in the new world. This is not always as simple as I make it sound, but the principle is very straightforward. You should always spend quality time researching your stock picks and not make rash decisions based on hype or speculation. But pivoting is really not that difficult, when you just have to change your mind. 

The Important Points

As I eluded to earlier this whole discussion brings light to two important facts:

The true concepts of wealth really are a departure from conventional thinking

Rich Dad Poor Dad was a work of genius because it was not a “how to” book an investing. It was a complete paradigm shift to the average person. Of course the concepts in its pages were not news to the rich, but to us commoners it was undiscovered country. The ideas were so different from how we were raised or “conditioned” to think that it is no wonder that it took me a while to wrap my head around it. It is not hard to understand per se, but very hard to “believe”. To truly integrate the idea of “assets” and “passive income” took some time. I am glad I finally figured it out. 

You never know when you will come across a nugget of information that changes your world

I have been repeating this in almost everything I’ve written because it has been my experience that it is fundamentally true. You really never know when you will read or hear a snippet of wisdom that suddenly turns the light on and you see the world differently. When you truly grasp a great idea or finally see a new way to look at your world it is life changing. I have read hundreds of books in my life and there have been many that said the same thing as a previous book that I had read last year. But every once in a while, I read something that is new and my mind is blown. But even more common is I read something that I have read before, but the author said it in a different way that suddenly makes way more sense to me and my quirky brain. Now I get what the concept is and I understand what the last guy was trying to say. It is a wonderful moment and I continue to read voraciously in order to experience as often as I can. 

So when I write books I am aware that many of the things I write about have been said before in one way another, but my hope is that the way I say them will resonate with someone out there and it will be a life changing moment for them.  I hope to make a difference. 

Treat your investment portfolio like a business and enjoy the fruits of other people’s labour. Diversify, grow and adjust. Increase your own salary at your whim. You are now the master of your destiny. If you want to make more money, it is entirely your decision. That is freedom.