What you don't know about money can have a devastating impact on your finances. In fact, a recent study by the National Council of Financial Educators found that lack of knowledge about personal finance cost respondents an average of $1,506 each last year. Although this number is down from $1,819 in 2022, it still represents a financial literacy crisis.
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Robert Kiyosaki, personal finance expert and author of Rich Dad Poor Dad, addresses just that topic in a post on his Rich Dad blog, explaining that people's biggest money mistakes are due to financial education. He pointed out that this is often due to a lack of One of those mistakes he makes is spending money based on affordability rather than value.
In her post, Kiyosaki told the story of a friend who tried to buy a home from $780,000, which was beyond her and her husband's budget, to $215,000, which was more than she could afford. However, in Kiyosaki's opinion, the house had low value because it was located in an area that was deteriorating and had a high-crime school.
“Only cheap people buy things that are worth the price…Just because something is cheap doesn't mean it's worth it.”
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Kiyosaki: Always buy value
Mr. Kiyosaki explained to her that he buys things of value even if it means paying more money. “Value, not price, has made me rich,” he said.
In the end, the deal fell through. But that friend of hers was still trying to buy her cheap, which may have hindered her financial success, Kiyosaki said.
One reason for this is that “cheap” tends to be an emotional trigger. As Kiyosaki writes, people tend to make big financial decisions at the most emotional times in their lives, such as when they get married, buy a home, or have a child. When it comes to big purchases and investments, following your head is a better strategy than following your heart.
Another problem is getting advice from people who tell you what you want to hear, not what you need to know. Kiyosaki believes that most people will listen to and benefit from a salesperson's advice, whether it brings them success or not. He recommended listening to the rich people instead.
So how can you avoid making the same mistakes on your way to building wealth? It all comes down to educating yourself and being able to identify opportunities and risks. “To become rich, you need to assess the good and bad, short-term and long-term consequences of your decisions,” Kiyosaki writes.
Materials from experts such as Kiyosaki, Dave Ramsey, and Suze Orman are a good starting point. They sell books, courses, and coaching services, but they also offer a lot of great advice for free based on their own experiences and successes.
Other resources include:
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This article originally appeared on GOBankingRates.com: Robert Kiyosaki: Why cheap people can't get rich