Financially Trapped

In the highly successful book Rich Dad Poor Dad by Robert Kiyosaki, he discusses the traditional lifestyle choices of a family and the usual general advice given to their children of studying hard and getting good grades.  They are asked to finish high school and college so they can find a good job when they graduate. He goes into further examplel where the kids graduate from school, get good jobs, get married, have kids, and buy a house they can afford to start raising their family.  Creating a lifestyle in most cases based purely on the amount of income the parents are making on an annual basis. As the parents income levels raise, as they get older, so do their lifestyle costs as they move into a larger home, and they upgrade their cars, and maybe invest in a vacation home.  Again, most of their decisions are purely based on their annual income levels. Yes, they also have company 401k retirement programs for their retirement. In life, nothing is sedientary, including our desires to change and experience or do different things. The challenge with these life changing desires is that the parents are now trapped financially.  They have to maintain their current income levels or they won’t be able to meet their financial commitments of mortgages, car payments, and all the other expenses that come with raising a family. They experience the financial trap.

The challenge with wanting change in our lives is that it usually requires a reset or taking a step backwards financially in order to gain a foot hold in a new career or interest.  After ten years in a specific industry it is hard as we get older to make industry changes. If you’re a real estate agent it requires a new education and usually schooling to become a pharmacist, teacher, or engineer as an example of a change.  Even if someone takes on this type of change they have to start from ground zero in their new career which means a pay cut. Robert Kiyosaki’s point is that our traditional form of thinking and living really creates very little flexibility for us in the future.  

In the original book The Millionaire Next Door, by Thomas Stanley one of the common characteristics of the millionaire’s that were interviewed as generally living in the first house they purchased for their life times.  It makes sense, since eventually they pay down their mortgage faster when their incomes increase as they get older, and this allows them to start putting extra monies and dollars into investments where their money starts working for them rather than them working for their money.  This is Robert Kiyosaki point as well. In order to get ahead and have financial flexibility we have to be free from having to work for our money.

So what if we’re one of the ones that is trapped financially.  How do we get out? Really, there are two ways. The most obvious way is to have an increase in your money supply for some reason which will allow you to either pay down your debt, or invest it into assets that produce income or wealth building.  This is the most common form of relief I see of people creating a small buffer of financial freedom.

The second way to create the freedom is to chip away or decrease the expenses of your lifestyle to free up additional monies allowing for the excess cash to be used to generate income generating sources of financial growth where your money is working for you.  I often read about a younger person that has retired from working at a young age, because they choose to live extremely frugile once they entered the working world, so they could stash away as much capital as possible. Eventually, they stashed enough money away to enable their financial freedom to live in exotic places or travel the world, or to do what they want to.  The living frugally was also another trait of the millionaires surveyed in the book The Millionaire Next Door. This method of escaping from the trapped syndrom is the best method, and the most effective.

Living frugally doesn’t sound fun, but when you do it, and become smart about it, it creates a base of living that doesn’t require a lot of stress to keep maintained.  In my life I have experienced people who have had forced life changes having to unwind expensive lifestyles, and that is very hard to do. Selling a large expensive asset such as a house is difficult.  There’s a smaller pool of people that can afford an expensive house verses those that can afford an entry level house. When you try and sell off other expensive furnitures, clothing, and such you will be lucky to get half of what you paid for them much of the time.  The old saying of when you drive a car off the dealer lot it looses half it’s worth is true. Used is used, and people want a discount for a used item. 

The point I am making here is don’t get trapped.  It sucks. Live frugally from the start. Get yourself ahead of the game financially.  Be smart, build investments that grow and produce income for you, so you don’t have to work for your money, but rather your money ends up working for you, so you can do the fun things you’ve always wanted to.