A dollar saved is a dollar earned

One of the key insights that struck me from reading Robert Kiyosaki's "Rich Dad, Poor Dad" book was changing our paradigm of seeing if that $1 we earn becomes an asset or an expense.

His book does give some interesting perspectives on personal finance though I too, like many critics, do feel that he made his millions from selling his book rather than from his real estate exploits.

The concept is simple: Ask yourself this question - Everytime we earn $1 of our hard-earned pay check, do we channel that $1 into an expense by buying stuff or do we save and invest it in financial assets that generates future cash flows?

I have learnt that one of the keys to early financial security is to curb one's expenses and build up one's financial assets (or reduce one's financial liabilities) with that $1. I mentioned in my earlier post that we need to decide what is the standard of living we desire for ourselves and then set the limit on how much we should spend. All savings should then be channeled into building assets (or clearing liabilities).

What assets can we invest in? Starting from the humble Maybank iSavvy, we are already getting 2.08% on balances exceeding $5,000. Other unexciting but safe instruments such as Treasury Bills or Singapore Government Securities beckon offering rates better than savings accounts in most of the local banks. For the more sophisticated investor, one may wish to punt in the local or even overseas stock markets or park one's funds in a unit trust. There are of course, risks from taking the different investment types but suffice to say we need to get better returns than the pathetic savings rate available now.

Time to change our paradigms... $1 you earn.... What's it going to be? An asset or an expense.

You decide.