We have been trained to believe that success equals a college education, stable employment (with benefits), a family, nice cars, and the ability to buy your dream home with a real estate company like Jeeves Realty. What we’re not taught is how to acquire assets that help us to build wealth and create true financial freedom.

The truth is, what we really need to know about how to become financially free won’t be found in textbooks. This knowledge is often found through good mentors and information shared from those that have found success. Don’t worry, if you don’t know any of these people personally. If you’re willing to do a little research, there are resources out there to help us learn to create wealth. The book “Rich Dad Poor Dad”, is one of them.

In the book. the author, Robert Kiyosaki talks about the ways people earn income. He defines four specific categories: 1) employees, 2) self-employed/small business owners, 3) big business owners, 4) investors. In this article, we’ll look at which of these categories you currently fit into and how important it is to stop swapping hours for dollars.

the employee

If you’re an employee, the challenge is that someone else decides how much you get paid and what bonus you receive (if any). Your schedule is set for you and time-off requests have to be approved. You essentially swap hours for pay.  There are exceptions, like commission based careers, but most employees are paid a set salary or hourly wage. 

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the self-employed

If you’re self-employed or own a small business, your income directly correlates with the sales you’re able to generate. However, working for yourself doesn’t come with the financial security associated with the regular paycheck you received when employed. In addition, entrepreneurs are also often the most time-starved. They work countless hours and even when they take time off, they’re still thinking about their business.

Robert Kiyosaki explains that these two ways of making money, being employed and self-employed won’t necessarily lead to a life of wealth in the sense of time and financial freedom. He explains that to be rich, you must stop swapping your time for money, and to do this, you must build and leverage assets.

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big business owners

The big business owner, in this context, doesn’t have to be a Richard Branson or Marcus Lemonis. It’s the hairstylist that owns several salons and spends her time managing the business rather than working in it. She has leverage because she has built systems, infrastructure, and assets. She no longer trades her time for money – instead, she leverages the efforts of other people.  

Think of a high-paid attorney working in a large firm.  Let’s say she nets $100 an hour for their time – yet bills at an hourly rate of $500. The employee benefits from a sense of financial security. But the owner of the firm profits on the hours that each lawyer bills. For example, if the owner nets $50 in profit per billable hour (per attorney); the following scenario applies – 40 hours x $50 = $2,000 per week.  Now, if that business owner has five attorneys within the firm they profit $10,000/week!

That is the power of leverage.

the investor

Similarly, an investor that invests their money in high growth companies, commodities, or even a savings account with a decent rate of interest has leverage – because their money is working for them (e.g. $500,000 at 10% interest each year is a $50,000 return). However, if you’re not in the position to invest half a million dollars or establish a successful business, you can still gain financial freedom.

The secret is acquiring assets that you can leverage. Whether that means learning how to trade stocks or purchasing investment properties at auction… there’s a way to get the assets needed to help you achieve financial freedom and take advantage of all of the tax deductible business expenses associated with owning property. 

The important thing is that you start where you are. You want to empower yourself to either leverage the efforts of others or have the ability to acquire assets that generate income for you. Both elevate you from trading your own time/labor for a set wage and into a position of financial abundance.