Robert Kiyosaki of real estate fame and probably more importantly of the Rich Dad Poor Dad! series, made a fantastic point in his co-authored book Why We Want You to Be Rich, with Donald Trump, in which he pointed out that the best way to invest is to invest with other peoples money.
Think about how powerful that statement is for a moment. One of the greatest lessons he learned was how to avoid risking his money in the markets and instead found a way to invest other peoples money. He used his money to save for his education and living expenses.
Not Borrowing Money to Invest – Not Stealing Either
Now you are thinking, “yeah, that sounds awesome! But how in the world do I make that happen?” Keep in mind here, we are not talking about borrowing money here. It is generally considered a huge faux pas to borrow money in investing, especially for the youthful investor. Yet, those investing in the most important internet start ups have used credit cards to make their millions. Some things are never quite concrete. What we are talking about is making organic money from other people that is not money that we rely on for living.
How to Use Other People’s Money to Invest
An excellent example of that is something like blogging. A blogger pays for hosting, the domain name, and all of the bells and whistles involved in developing a wonderful website from WordPress themes to SEO buildup. Once all of those expenses are matched, monetization of the website offers an excellent opportunity to invest other peoples money.
If your monthly operating costs of your hypothetical website are $150 for example and you bring in on average $250 in revenue through ads and affiliates then you have netted $100 in the form of other peoples money. Let’s be clear here, this example is not stealing money. The visitors to the website buy something from an advertisement or pay for a service and the owner of the website gets a percentage for the referral. All three participants win in this situation.
If that $100 of other peoples money can be invested outside of the website and is not money that is needed to pay off high interest debt or living expenses then it can be aggressively applied to a number of investing projects such as penny stocks. This helps take away some of the fear in the risk involved.
It also has the power of dollar cost averaging and contributing a balanced amount set aside, whether weekly, monthly, quarterly, or annually to investing. The youthful investor must start early and the more consistent the better. Blogging is just one example of how to utilize other peoples money.
Other Examples of Investing Other Peoples Money
The author is referring to money you don’t rely on and that can be generated without you having to put your normal 9-5 in. If you are looking for something besides starting a website or a blog you may want to consider profits from a business. The business doesn’t have to be small but sometimes that makes the best example.
Consider something like a few vending machines. Whatever you make past your expenses and time is other people’s money. What about a rental property? After your costs for keeping the place up and the time it takes to keep it up, this is other people’s money. Sure, it is your profit but it was provided besides your initial hard work and you do not rely on it for living.