When I was younger, my rich dad said to me, "The rich get richer partly because they invest differently than others; they invest in investments that are not offered to the poor and the middle class. Most importantly, however, they have a different educational background. If you have the education, you will always have plenty of money."
Davidson points out that the dollar has lost 90% of its value in the last century. Being a cheap millionaire is therefore not enough. To qualify to invest in the investments of the rich, the price is at least $1 million of net worth. Even then, you may not be competent enough to safely invest in what the rich invest in.
Rich dad said, "If you want to invest in the same investments the rich invest in, you need:
2. Experience, and
3. Excessive cash."
At each level of what rich dad called the three Es, you find a different type of investor with a different level of education, experience, and excessive cash.
The price of being financially free requires time and dedication to gain the education, experience, and excessive cash to invest at those levels. You know you are financially smarter or increasing in sophistication when you can tell the differences between:
1. Good debt and bad debt
2. Good losses and bad losses
3. Good expenses and bad expenses
4. Tax payments versus tax incentives
5. Corporations you work for versus corporations you own
6. How to build a business, how to fix a business, and how to take a business public
7. The advantages and disadvantages of stocks, bonds, mutual funds, businesses, real estate, and insurance products as well as the different legal structures and when to use which product
Most average investors know only of:
1. Bad debt, which is why they try and pay it off
2. Bad losses, which is why they think losing money is bad
3. Bad expenses, which is why they hate paying bills
4. Taxes they pay, which is why they say that taxes are unfair
5. Job security and climbing the corporate ladder instead of owning the ladder
6. Investing from the outside, and buying shares of a company rather than selling shares of a company they own
7. Investing only in mutual funds, or picking only blue chip stocks
9. You can become rich by being generous. This was the way rich dad became rich. He often said, "The more people I serve, the richer I become." He also said, "The problem with being on the E and S side of the Quadrant is that you can serve only so many people. If you build large operating systems in the B and I Quadrants, you can serve as many people as you want. And if you do that, you will become richer beyond your dreams."
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