I believe that it’s no longer news that the value of
our currency continues to depreciate. In fact most currencies have
experienced a downward plunge in their values when you analyze
developments in the last decade or so.
In simple terms this means that what One Naira could buy
ten years ago is not what it can purchase today. One useful analysis we
can make is to compare the exchange rate of the Naira to the dollar for
the last ten years. In 2005 the Naira exchanged for around N130 to the
Dollar; today it is currently valued at around N210, a loss in value of
around sixty-two percent.
While the Naira’s value has depleted significantly incomes
have not gone up substantially in the last ten years for most people.
This means that no matter the increases earned in the last decade it
cannot compare to the losses made. In actual fact you need to earn at
today’s value at least sixty-two percent more in order to afford what
that same amount could purchase ten years ago.
Thus the impact of inflation and eroding currency values
cannot be overlooked. How is one going to be able to create wealth while
the value of money is constantly declining? The only way is by playing
by a different set of rules – the new rules of money.
Now the credit goes to Robert Kiyosaki, author of the Rich
Dad, Poor Dad book series for the term, “The New Rules of Money.” In
his bestselling book, “Rich Dad’s Conspiracy of the Rich: The Eight New
Rules of Money,”Kiyosaki posits that economic systems of the world
equips and empowers the rich to continue getting richer, at the expense
of the poor. He advocates a series of eight new rules, to help the poor
or less advantaged build their way to wealth.
Reliance on existing “old” rules like getting a job,
saving, diversifying your investment portfolio, avoiding debt, owning
your own home can only take one so far in these days of plunging
currency values and government bailouts.The new rules are:
Money is Knowledge
These days one does not require money to make money,
rather you require knowledge. You can tap into several business
opportunities that are available without having to put down any capital
of your own and still make a reasonable return. We live in the knowledge
economy where knowing the next move or policy, and even consumer trends
could translate to wealth and fortune.We do not need money to make
money. As long as we have the right knowledge, we can make money with
it. In other words, we should improve our financial literacy.
Learn how to use debt
We need to differentiate between good debt and bad debt.
Good debt puts money in our pockets and bad debt takes moneyaway from
us. Hence, taking up good debts is a form of leverage, putting more
money into our pockets. At the same time, we must avoid bad debts. Our
bad debts make other people richer.Debt is not evil.
Learn to control Cash flow
In order to build wealth you need to know how to control
your personal cash flow. Wealth seekers must understand the flow of cash
in an economy with regards to where jobs are created, where workers are
moving to, and which asset are they exchanging money for – stocks,
bonds etc.?
Prepare for bad times and you will only know good times
Bad times will come from time to time. This is certain;
however it makes good sense to prepare for them by taking steps to come
up with several causes of action if they arise. There is power in
preparation. If we are able to deal with financial crisis, we will be very profitable in good times.
The Need for Speed
We need to accelerate the amount of money earned. The rate
of money earned should follow an exponential scale instead of a linear
relationship. In other words, we should avoid getting paid by time,
exchanging an hour for a fixed amount of money. We only have 24 hours
per day. We should have the type of income that is able to increase in
folds so that money can flow to us as quickly as possible. We should
make money even while asleep.
Learn the Language of Money
Kiyosaki says, “Money begins with words, and words are
free.” Our thinking shapes our behaviour, and our behaviour and
responses determine our results. To change the results, we need to
change the root, which is our thinking. The rich think differently from
the average and the poor. The rich thinks in abundance while the average
and the poor think in lack.
Life is a team sport. Choose your team carefully
People are good in different things. We need to tap into
resources of the experts to help us in our life and businesses. We need
lawyers, accountants, financial advisers and more. It is important to
assemble a team of trustworthy experts we can call upon when we need
them.
Since Money is becoming worth less and less learn to print your own
Money is worth less due to inflation. We must grow our
money faster than the rate of inflation. One way is to “print” money
like the banks. Banks collect interest by lending our money. We should
also use other people’s money to invest and profit from the capital.
The new rules of money point us to a new approach or
direction we need to carefully consider in order to build wealth. We
cannot continue to build wealth using the same old methods and
techniques, especially with the rapid changes occurring. I
wholeheartedly recommend and endorse the application of several, or all
of these rules for anyone who desires wealth in the new economy.
PROFILE
Kenneth is currently the Managing Director of GfK RT
Nigeria, the West African subsidiary of the fourth largest Market
Research Agency in the world. He promotes Moneytalk, a knowledge based
organization committed to dispensing financial intelligence that leads
to financial freedom.
You can reach him with your feedback on
money@moneytalkng.com or 070 6337 3391 if you would like him to
facilitate Money talks and lessons at your events, seminars or
conferences over the weekend in the Lagos area. You can also visit
www.moneytalkng.com for additional resources on financial intelligence.
You can also follow him on twitter @moneytalkng. Or visit Moneytalk Resources Youtube channel for Money Lessons videos.
Kenneth Doghudje
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