7 levels of investing and 99% chance your not at level 7. Concepts from Rich Dad Poor Dad
First off I'd like to say it doesn't matter how much money you make but what you do with your money that creates your wealth. If you make $1,000
Level 1: these people have no investments and no investing. They are living pay check to pay check and the borrow more than they make. They live in complete financial denial and think there is no way out.
Level 2: The saver. They save money and put it into a low interest very secure savings account. Where they save to consume, they safe to buy something or to go on vacation. They are afraid to take any financial risk.
Level 3. The passive investors. They use RRSP/ 401k and their work contribution investments. But they are still financially illiterate. They like to think "I'm to busy to follow the investments so I will leave it to the professionals." They follow the hype and are scared to hold when the markets fall.
Level 4: Automatic investor. These people are aware of the need to invest and put money aside to invest automatically from every time they get paid. I like to refer to this as paying yourself first, that way you've put aside money for investing and can spend your left over money on whatever you want. This is where most people should be at minimum. These people are actively involved with their investments and they have plans for their investments.
Level 5: The Active investor. Understands that in order to get to this height their investing principles and rules of investing must be clear. They actively participate in their investments by managing them, this would be researching, monitoring, and finding how to add value. These investors find ways to optimize performance and how to minimize risk. Their goal is to build there assets before anything else. Which means they put as much money into the assets to increase cash flow then spend whats left over for their daily lives. This way once the asset is build up enough it will provide consistent cash flow to spend money on anything they want.
Level 6: The Capitalist. 2 principles of their investing, which is to leave a legacy and to be a good manager of their money while they are living.
Level 7: what do you think the 7th level looks like?
