The 3 E’s of Successful Investing

When I was younger, my rich dad said to me, “The rich get richer partly because they invest differently than others. They invest in things that are not offered to the poor and the middle class. Most important, however, they have a different educational background. If you have the right financial education, you will always have plenty of money.”

Rich dad often spoke of the three E’s of successful investors have. They are:

1. Education

Most people understand reading, writing, and arithmetic. But those who are financially successful also have a different kind of education—financial education.

Financial education is the foundation for building wealth.

You know you are financially smarter when you can tell the difference between:

  • Good debt and bad debt
  • Good losses and bad losses
  • Good expenses and bad expenses
  • Tax payments versus tax incentives
  • Corporations you work for versus corporations you own
  • How to build a business, how to fix a business, and how to take a business public
  • The advantages and disadvantages of stocks, bonds, mutual funds, business, real estate, and insurance products, as well as the different legal structures

2. Experience

A successful investor has a plan, is focused, and plays to win. This doesn’t mean that you won’t fail. Failure is part of the game. What separates the winners from the losers when it comes to investing is the ability to take the experiences, both successes and failures, and to learn from them to get better and better. That is what I mean by experience.

Most people do not learn from their successes and failures. Instead, they jump from one thing to another hoping one will stick. Hot tips don’t make you rich, experience does.

3. Excess cash

When most people hear they need excess cash to be a successful investor, they check out. I often hear them say things like, “I’m living from paycheck to paycheck,” or, “I’ll never have enough money to really invest well.”

The problem is that people hear excessive cash instead of excess cash.

When Kim was first starting out investing, she bought a small house in Portland, Oregon. She did not have a lot of extra money on hand. But she did have a great financial education, a plan, and was building her experience. She was able to save up the money needed for the down payment, and purchase the property. It cash flowed about $25 per month.

There is nothing wrong with starting small. It is through small investments that are successful that you can grow to larger and larger investments. Today, Kim owns thousands of apartment units across the US.

How’d she get there?

It started with financial education, continued with experience, and was kick started by wisely investing a little bit of excess cash. You can do the same, starting today.