Saturday, August 27, 2005
Rich Dad, Poor Dad
Rich Dad, Poor Dad
© 2000 by Robert Kiyosaki
If I had only one dad I would have had to accept or reject his advice. Having two dads advising me offered me the choice of contrasting points of view; one of a rich man and one of a poor man. One dad had a habit of saying, “I can’t afford it”. The other dad forbade those words to be used. He insisted I say, “How can I afford it?” One is a statement, and the other is a question. By automatically saying the words “I can’t afford it,” your brain stops working. By asking the question “How can I afford it?” your brain is put to work.
Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth. I noticed that people really do shape their life through their thoughts. He would say things like, “I am a rich man and rich people don’t do this”. I don’t work for money, money works for me. You boys are the first people that have ever asked me to teach them how to make money. I have more than 150 employees, and not one of them has asked me what I know about money. They ask me for a job and a paycheck, but never to teach them about money. Stop blaming me, thinking I am the problem. If you think I am the problem, then you have to change me. If you realize that you are the problem, then you can change yourself, learn something and grow wiser. Most people want everyone else in the world to change but them. Let me tell you, “It’s easier to change yourself than everyone else”. Don’t blame me for your problems. Keep the attitude that I am the problem and what choices do you have. The rich have money work for them. True learning takes energy, passion and burning desire. Most people given more money only get into more debt.
You are taxed when you earn, you are taxed when you spend, you are taxed when you save, you are taxed when you die. If you don’t learn this now you will grow up to be like the two women and older man sitting in my living room, working for money and hoping I don’t fired them. Or like your dad, earning lots of money only to be in debt up to his eyeballs, hoping more money will solve the problem. Most people never see the trap they are in. Instead of telling the truth about how they feel, they react to their feeling, fail to think. Money is running their lives, and they refuse to tell the truth about that. Money is in control of their emotions and hence their souls. The word emotion stands for energy and motion. Just be an observer, not a reactor, to your emotion. Never forget, because your two emotions fear and desire, can lead you into life’s biggest trap if you are not aware of them controlling your thinking. To spend your life living in fear, never exploring your dreams, is cruel. To wake up in the middle of the night terrified about paying bills is a horrible way to live. Learn to use your emotions to think, not think with your emotions. The rich know that money is an illusion, truly like the carrot for the donkey.
Rule one, you must know the difference between an asset and a liability and buy assets. Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets. If you want to be rich you have got to read and understand numbers. Assets put money in your pocket. If you want to be rich simply spend your life buying assets. The cash flow pattern of the poor person is job, income, taxes, food, rest. The cash flow of someone in the middle class is job, income, expenses, liability. The cash flow of a wealthy person is an asset generates income. Income is dividends, interest, rental, income and royalties and assets are stocks, bonds, real estate, intellectual property. The number one expense for most people is taxes. Many people think its income tax, but for most Americans their highest tax is social security. Once in their house, they have a new tax called property tax. They are full of mortgage debt and credit card debt. They are now trapped in the rat race. A loan company calls in and shows their greatest asset has depreciating value of their home. If you find you have dug yourself into a hole, stop digging.
The Japanese were aware of three powers, the power of the sword, the jewel and the mirror. The sword symbolizes the power of weapon, the jewel symbolizes the power of money, and the mirror symbolizes the power of self-knowledge. The self-knowledge according to Japanese legend was the most treasured of the three. According to psychiatrist the fear of public speaking is caused by the ostracism -- the fear of standing out, the fear of criticism, fear of ridicule, the fear of being an outcast. An intelligent person hires people who are more intelligent than they are. Most people work all their lives paying for home they never own. They pay for all their other expenses with after-tax dollar. The greatest losses of all are those from missed opportunities. If all your money is tied up in your house, you may be forced to work harder because your money continues blowing out of the expense column, instead of adding to the asset column, the classic middle class cash flow pattern. The asset column generates more than enough incomes to cover expenses with the balance reinvested into the asset column. The asset column continues to grow and, therefore, the income it produces growth with it. Concentrate your efforts on only buying income‑generating assets. Focus on keeping liabilities and expenses down. Wealth is the measure of the cash flow from the asset column compared with the expense column. The rich buy assets, a poor only have expenses, the middle class buys liability, they think are assets. Mind your own business. Your assets fall into several category.
Businesses do not require my presence. I own them, but they are managed or run by other people. Stocks, bonds, mutual funds, income-generating real estates, notes, royalty and anything else that has values. Once a dollar goes into your asset column, it becomes your employee. Rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. The old-money people, the long-term rich, built their asset column first. Then, the income generates in the asset column bought their luxuries. Real estate is one investment vehicle that allows such a great tax advantage. As long as you keep trading up in value, you will not be taxed on the gains, until you liquidate. Employees earn and get taxed and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It is one of the biggest legal loopholes that the rich use. They are easy to set up and are not expensive if you own investments that are producing good cash flow. By owning your own corporation, vacations are boards meeting in Hawaii. Car payments, insurance, repairs are company expenses.
We all have tremendous potential. Yet, the one thing that holds all of us back is some degree of self-doubt. Often in the real world it’s not the smart that get ahead but the bold. After the class, her friend came by and told me she was upset. The people get out of the rat race in the game, the quicker are the people who understand numbers and have creative financial minds. They recognize different financial options. Money is not real. If you can grasp idea that money is not real you will grow rich faster. The single most powerful asset we all have is our mind. If it’s trained well, it can create enormous wealth in what seems to be an instant. Financial intelligence was made up of four technical skills
1. Financial literacy
2. Investment strategies
3. The market
4. The law
My overall philosophy is to plant seeds inside my assets column. I start small and plant seeds. Some grow, some don’t. In 1995 I was to share the platform with Zig Ziglar. He was speaking on motivation I was speaking on the secrets of the rich. It says best-selling author not best-writing author. Her eyes widened immediately. I am a terrible writer. You are a great writer. I went to sales school. You have a master’s degrees. Put them together and you get a best-selling author and a best‑writing author.
Once people are trapped in the lifelong process of bill paying, they become like those little hamsters running around in those little metal wheels. Education is more valuable than money, in the long run. Life is much like going to the gym; the most painful part is deciding to go. They focus on perfecting their skills of building a better hamburger rather than the skills of selling and delivering the hamburger. May be McDonalds is not making the best hamburger but they are best at selling and delivering a basic average burger.
People face road blocks to become financially independent. Five main reasons fear, cynicism, laziness, bad habits, arrogance. Fran Tarkenton said, “Winning means I will be not afraid to lose. In my own life I have noticed that winning usually follows losing. I never forgot a golfer who has never lost a golf ball. Texans don’t bury their failures. They get inspired by them. They take their failures and turn them into rallying cries. For winners losing inspires them. Jaunty Rocks Teller said I always tried to turn every disaster into an opportunity. If you have little money and you want to be rich, you must first be focused, not balanced. Balanced people go nowhere. To make progress, you must first go unbalanced. Just look at how you make progress walking. Thomas Edison was not balanced. He was focused. Bill Gates was not balanced. He was focused. Donald Trump is focused. George Soros is focused. George Patton did not take his tanks wide. He focused them, and blew through the weak spots in the German line. Every time they mention real estate as a vehicle I often hear I don’t want his toilet that’s what Peter Lynch calls noise.
That is a thought pattern that keeps most people poor. They criticize instead of analyze. A great property manager sees the success in real estate. Colonel Sanders at age 66 lost his business began to live on the social security check. It wasn’t enough. He went around the country selling his recipes for fried chicken he was turned down 1009 times before someone said yes. Instead Rich Dad required his children to say, “How can I afford it”. His reasoning the word, “I can afford it” shut down your brain. You didn’t have to think any more. “How can I afford it” open up the brain, forced into think and search for answers. How can I afford never to work again? Eleanor Roosevelt said do what you feel in your heart to be right for you will be criticized anyway. You will be damned if you do and damned if you don’t. I need a reason greater than reality the power of spirit. If you do not have enough strong reason there is no sense reading further. It will sound like too much work.
I choose daily, the power of choice. I choose to be rich and I make that choice everyday. Invest first in education. 90% of the population buys TV sets and 10% buy books on business or tapes on investment. Listening is more important than talking.
Choose friends carefully, the power of association. I have several friends who generate over a billion dollars in their short lifetime. The three of them reports the same phenomena. Their friends who have no money have never come to them and asked them how they did it but they do come asking for one or two things or both, one a loan, two a job. Why investors buy an investment when it’s not popular?
Master a formula and then learn a new one.
Pay yourself first, the power of self-discipline. If you cannot control yourself, do not try to get rich. In the rule number one and paying yourself first you don’t get into debt in the first place. When you come up short let the pressure build and don’t dip into your savings or investment. Use the pressure to inspire your financial genius to come up with new ways of making more money and pay your bills. Poor people have poor habits. The rich say that savings are only used to create more money not to pay bills.
Be an Indian giver, the power of getting something for nothing.
Assets buy luxuries, the power of focus. Too often today we focus to borrowing money to get things we want instead of focusing on creating money. Remember the easy road often becomes hard and the hard road often becomes easy. To be the master of money you need to be smarter than it. But heroes do more than simply inspire us. Heroes make thing look easy. Instead find heroes, who make it look easy. If you want something you first need to give. Whenever you feel short or in need of something give what you want first and it will come back in buckets.
Teach and you shall receive. All you need to be is generous with what you have and the powers will be generous with you. Here are some to do’s. Stop doing what you are doing. Stop doing what is not working and look for something new to do. Look for new ideas. Find someone who has done what you want to do. Take classes and buy tape. Make lots of offers.
Action always speaks in action. You must think action before you can receive the financial rewards. Act now. Money is only an idea. If you want more money simply change your thinking.
I often ask myself, am I building a pipeline or hauling buckets? Am I working hard or am I working smart? The four quadrants are E for Employee, S for Self Employed, B for Business Owner, I for Investor. You want to be on the right side of the quadrant for B and I. Which quadrant do you generate the majority of your income from?
One painful lesson I experienced as a young boy was simply how much time one dad had available to spend with me versus the other. It was obvious that one dad had less and less time to spend with his wife and four children. My real dad was always on the road at meetings or dashing off to the airport for more meetings. The more successful he got, the fewer dinners we had together as a family. My rich dad on the other hand had more and more free time as his success grew. One of the reasons I learned so much about money, finance, business and life was simply since rich dad had more and more free time for his children and me.
Henry Ford said thinking is the hardest work there is, that is why so few people engage in it.
Those who are true B’s can leave their business for a year or more and return to find their business more profitable and running better than when they left it. A B owns a system and then hires competent people to operate the system, and S owns a job. Can you personally make a better hamburger than McDonalds? Can you personally build a better business system than McDonalds? Bill Gates of Microsoft did not build a great product; he bought somebody else’s product and built a powerful global system around it.
The definition of wealth is the number of days you can survive without physically working and still maintain your standard of living. Most are saving money in their retirement account hoping there will be more money coming out then they put in. There is a difference between people who save money in their retirement account, and people who through investing actively use their money to make more money as income.
People who seek security use the word diversification a lot. Why? Because the strategy of diversification is an investment strategy for not losing. It is not an investment strategy for winning. Successful or rich investors do not diversify, they focus their efforts. People who take risks change the world. Few people ever get rich without taking risks.
I recently read that most Americans today will receive a credit card while still in school and will be in debt for the rest of their lives. They became trapped by the need for job security simply because on average, they are less than three months away from financial bankruptcy. If business got better, he did not have to work harder, he simply had his president expand the system and hire more people to do the work. The reason so many people struggle financially is because every time they make more money, they also increase their two biggest expenses: taxes and interest on debt.
It’s not so much how much you make, but how much you keep, how hard it works for you, and how many generations you keep it for. Ninety-nine of one hundred small businesses ultimately disappear in ten years. Doctors’ and lawyers’ life expectancy is fifty-eight, for everyone else it is in the seventies.
I will explain how people on the right hand side of the quadrant utilize taxes as an asset instead of a liability whereas people on the left side of the quadrant. The only difference between a rich person and a poor person is what they do in their spare time. If you are first successful as a B, you will have a better chance in developing into a powerful I. Is invest in Bs. My rich dad said to me, you may lose two or three companies before you build a successful one that lasts. For a business to survive and thrive, one hundred percent of all the systems must be functioning and accountable.
There are seven levels of investor. Level zero is those with nothing to invest. This is about fifty percent of the population.
Level one is the borrower; these are people who solve financial problems by borrowing money.
Level two are savers, they put a small amount of money in a low risk vehicle like a CD. People in this group often waste their most precious asset, which is time and trying to save pennies. They spend hours clipping coupons from the newspaper and then at the supermarket they hold up everything else in line fumbling to find those big savings. The bank lends ten to twenty dollars for every one dollar you have in savings, and charges up to nineteen percent interest, then turns around and pays you less than five percent. We should all be bankers.
Level three, smart investors. 3A people in this group make up the “I can’t be bothered” group. They have convinced themselves they don’t understand money and never will. Level 3B is the cynic, these people know all the reasons why an investment will not work. They are dangerous to have around. Level 3C is the gambler, this group is also called pigs by professional traders.
Level 4 is a long-term investor. These investors are clearly aware of the needs to invest. They are actively involved in their own investment decisions. They have a clearly laid out, long-term plan that will allow them to reach their financial objectives. They invest in their education before actually buying an investment. They could take it down to periodic investing and whenever possible, invest in a tax-advantaged way.
Most importantly, they seek out advice from competent financial planners. If you are not yet a long-term investor, get yourself there as fast as you can, sit down and map out a plan, get control of your spending habits, minimize your debts and liability, live within your means and then increase your means. Find out how much invested per month, for how many months will take you to reach your goal. Goals such as, what age do you stop working? How much money will you need per month?
Level 5, sophisticated investors. These investors can afford to seek more aggressive or risky investment strategies. They risk less than twenty percent of all their capital in speculative ventures. They often start small, putting a little money down so they can learn the business of investing. If they lose this twenty percent, it would not damage them or take food off their table. The people are sophisticated; they can create their own deals with returns of twenty five percent to infinity. They have the extra money and a team of hand picked, professional advisors with a track record to prove it. Level 5 investors can assemble their investments by bringing different components together. They re-invest their gains to build a lot bigger asset base. They know that building a strong asset base throws off high capital yields or high returns with minimal tax exposure is the path to great long-term wealth. They have a personal board of directors to help them manage their assets. They take advice and learn.
Level 6, capitalist. Few people in the world reach this level of investment skill. When I took my new offer back to the Real estate agent, all he said to me was, you can’t do that. It’s not how much money you make, but how much money you keep, how hard it works for you, and how may generations you keep it. An asset puts money into my pocket; a liability takes money out of my pocket. Tax lien certificates are an excellent way to receive at least sixteen percent interest on your money. Property taxes take priority in paying them even before the bank’s mortgage. I have had the opportunity to buy houses I paid the taxes on for less than $3,500.00.
The name of the game of capitalism is who is indebted to whom. The more people you are indebted to, the poorer you are, and the more people you have indebted to you, the wealthier you are. That is the game. Your profit is made when you buy, not when you sell. If you take on risk and debt, make sure you get paid for it. The point is that most people’s lives are determined by their opinions rather than the facts.
Most people will be in debt from the day they leave school until the day they die. Money is an idea, money is a drug. He never wanted us to become addicted to working for money. A B creates, owns, or controls the system. The best way to keep going is to keep the flame in your heart going. Stop worrying about yourself and your fear begins to eat away at your soul. Passion builds businesses, not fear. You’ve gone this far, you are close so don’t turn back now. Remember what you set out to do, keep that memory in your heart to keep the flame going so why quit now. Flash dance, take your passion and make it happen. You can always quit, so why quit now? Build a system around your heart, build a system around your passions. The faster you want to get rich, the more accurate with numbers you must be. Playing the game of monopoly was the formula for getting rich. Lead, think and grow rich.
Years ago I was in on this class on goal setting. It was the mid 1970s. I was spending $150.00 on a beautiful Saturday and Sunday to learn how to set goals. What I learned from that class has helped me achieve what I want in life. Once most people figure out what they want, their goal, they begin listing what they have to do. That is why most people have to-do lists; they set their goal, and begin doing. They focus on what they have to do rather than who they have to be. A diet will not help if your thoughts do not change.
In marriage, many people try to change the other person so they can have a better marriage. Instead of trying to change the other person, which often leads to fights, it is better to change yourself first. Don’t work on the other person; work on yourself about that other person. You must be first. This book is primarily about strengthening your thoughts, being so that you can take the action, doing that will enable you to become financially free, having.
The greatest cause of human financial struggle is fear of losing money, and because of this fear, people often operate too safely or with too much personal control where they just give their money to someone they think is an expert and hope and pray that money will be there when they need it. Instead of finding out about the investment, they jump up, scream and run out of room. My rich dad forbade me from saying, I can’t afford it, I can’t do that, play it safe, don’t lose money, what if you fail and never recover. When a person says some things it becomes real. My rich dad firmly believed that what we said to ourselves at our core became our reality.
What people do on the right side of the equation is not that hard, it is as easy as buying four green houses for low prices, waiting until the market improves, selling them and then buying a big red hotel.
Great transfers of wealth often occur when laws and markets change. So it’s important to pay attention if you want to have those changes work in your favor and not against you. Build businesses and buy real estate. Pick out the best professional advice you can. The wealthy people maintained a long-term vision and plan, believed in delayed gratification, used the power of compounding in their favor. Most of us have heard that people who write down their goals are more successful than those who do not. Raymond Aaron recommends having great big long-term dreams and wishes. Set obtainable, daily goals that when achieved provide positive reinforcement to help you stay on the path to the big goal.
In the expense column, the two biggest monthly expenses are taxes and debt service for long-term liability. Taxes are approximately 50%; debt is approximately 35%, and then living expenses.
Fill out your personal financial statement, set a long-term goal for five years and a smaller-term goal for one year. I want to decrease my debt by X dollars. I want to increase my cash flow from assets or passive income to X dollars for a month. Commit five hours of your time to do a financial plan. Investors who are good at solving problems expect to make returns at 25% to infinity on their money. The lesson is to start small and learn to solve problems and you will eventually gain immense wealth as you become better at solving problems.
Practice solving problems. Mind your own business, take control of your cash flow and know the difference between risk and risky. Become an expert of solving a certain type of problem, do not diversify. Become an expert solving one type of problem and people will come to you with money to invest.
Attend financial seminars and classes. Meet with several business brokers to see what existing businesses are for sale in your area. Attend a network marketing seminar to learn about business systems. Teach mentors. Professionals have coaches, amateurs do not. I have coaches because I get paid to play those games. Seek mentors, seek out role models and reverse role models.
Who you spend your time with is your future. Write down the six people you spend the most time with. Have your children count as one person. You are looking at your future. The six people you spend the most time with are your future. The more I discuss my list with other people and the more I listen to them, I realize that I need to make some changes. This exercise has little to do with the people I was spending my time with; it has everything to do with where I was going and what I was doing with my life. I wanted to change my future.
To successfully change my future I have to change my thoughts, and as a result, the people I spend time with. When people are lame, they love to blame. Just as inside every problem lies an opportunity, inside every disappointment lies a priceless gem of wisdom. Few people can tolerate disappointment. Instead of learning to face disappointment, they spend their lives avoiding it. Expect to be disappointed, have a mentor standing by. Make mistakes, put a little money down. You must also start doing to make offers on small real estate deals that will generate positive cash flow.
Personal truths are spoken at moments with peak emotion. My most important advice I know to give you is to be very aware of your words, especially be aware of the words that come from your heart, your stomach, and your soul. Take control of your spending habits, minimize your debt and liabilities, live within your means and increase your means, find out how much you invest each month. Are you ready to stop hauling water buckets and begin building pipelines with cash flow to support you, your family, and your lifestyle?
Amazon: http://www.amazon.com/exec/obidos/ASIN/0446677450
© 2000 by Robert Kiyosaki
If I had only one dad I would have had to accept or reject his advice. Having two dads advising me offered me the choice of contrasting points of view; one of a rich man and one of a poor man. One dad had a habit of saying, “I can’t afford it”. The other dad forbade those words to be used. He insisted I say, “How can I afford it?” One is a statement, and the other is a question. By automatically saying the words “I can’t afford it,” your brain stops working. By asking the question “How can I afford it?” your brain is put to work.
Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth. I noticed that people really do shape their life through their thoughts. He would say things like, “I am a rich man and rich people don’t do this”. I don’t work for money, money works for me. You boys are the first people that have ever asked me to teach them how to make money. I have more than 150 employees, and not one of them has asked me what I know about money. They ask me for a job and a paycheck, but never to teach them about money. Stop blaming me, thinking I am the problem. If you think I am the problem, then you have to change me. If you realize that you are the problem, then you can change yourself, learn something and grow wiser. Most people want everyone else in the world to change but them. Let me tell you, “It’s easier to change yourself than everyone else”. Don’t blame me for your problems. Keep the attitude that I am the problem and what choices do you have. The rich have money work for them. True learning takes energy, passion and burning desire. Most people given more money only get into more debt.
You are taxed when you earn, you are taxed when you spend, you are taxed when you save, you are taxed when you die. If you don’t learn this now you will grow up to be like the two women and older man sitting in my living room, working for money and hoping I don’t fired them. Or like your dad, earning lots of money only to be in debt up to his eyeballs, hoping more money will solve the problem. Most people never see the trap they are in. Instead of telling the truth about how they feel, they react to their feeling, fail to think. Money is running their lives, and they refuse to tell the truth about that. Money is in control of their emotions and hence their souls. The word emotion stands for energy and motion. Just be an observer, not a reactor, to your emotion. Never forget, because your two emotions fear and desire, can lead you into life’s biggest trap if you are not aware of them controlling your thinking. To spend your life living in fear, never exploring your dreams, is cruel. To wake up in the middle of the night terrified about paying bills is a horrible way to live. Learn to use your emotions to think, not think with your emotions. The rich know that money is an illusion, truly like the carrot for the donkey.
Rule one, you must know the difference between an asset and a liability and buy assets. Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets. If you want to be rich you have got to read and understand numbers. Assets put money in your pocket. If you want to be rich simply spend your life buying assets. The cash flow pattern of the poor person is job, income, taxes, food, rest. The cash flow of someone in the middle class is job, income, expenses, liability. The cash flow of a wealthy person is an asset generates income. Income is dividends, interest, rental, income and royalties and assets are stocks, bonds, real estate, intellectual property. The number one expense for most people is taxes. Many people think its income tax, but for most Americans their highest tax is social security. Once in their house, they have a new tax called property tax. They are full of mortgage debt and credit card debt. They are now trapped in the rat race. A loan company calls in and shows their greatest asset has depreciating value of their home. If you find you have dug yourself into a hole, stop digging.
The Japanese were aware of three powers, the power of the sword, the jewel and the mirror. The sword symbolizes the power of weapon, the jewel symbolizes the power of money, and the mirror symbolizes the power of self-knowledge. The self-knowledge according to Japanese legend was the most treasured of the three. According to psychiatrist the fear of public speaking is caused by the ostracism -- the fear of standing out, the fear of criticism, fear of ridicule, the fear of being an outcast. An intelligent person hires people who are more intelligent than they are. Most people work all their lives paying for home they never own. They pay for all their other expenses with after-tax dollar. The greatest losses of all are those from missed opportunities. If all your money is tied up in your house, you may be forced to work harder because your money continues blowing out of the expense column, instead of adding to the asset column, the classic middle class cash flow pattern. The asset column generates more than enough incomes to cover expenses with the balance reinvested into the asset column. The asset column continues to grow and, therefore, the income it produces growth with it. Concentrate your efforts on only buying income‑generating assets. Focus on keeping liabilities and expenses down. Wealth is the measure of the cash flow from the asset column compared with the expense column. The rich buy assets, a poor only have expenses, the middle class buys liability, they think are assets. Mind your own business. Your assets fall into several category.
Businesses do not require my presence. I own them, but they are managed or run by other people. Stocks, bonds, mutual funds, income-generating real estates, notes, royalty and anything else that has values. Once a dollar goes into your asset column, it becomes your employee. Rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. The old-money people, the long-term rich, built their asset column first. Then, the income generates in the asset column bought their luxuries. Real estate is one investment vehicle that allows such a great tax advantage. As long as you keep trading up in value, you will not be taxed on the gains, until you liquidate. Employees earn and get taxed and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It is one of the biggest legal loopholes that the rich use. They are easy to set up and are not expensive if you own investments that are producing good cash flow. By owning your own corporation, vacations are boards meeting in Hawaii. Car payments, insurance, repairs are company expenses.
We all have tremendous potential. Yet, the one thing that holds all of us back is some degree of self-doubt. Often in the real world it’s not the smart that get ahead but the bold. After the class, her friend came by and told me she was upset. The people get out of the rat race in the game, the quicker are the people who understand numbers and have creative financial minds. They recognize different financial options. Money is not real. If you can grasp idea that money is not real you will grow rich faster. The single most powerful asset we all have is our mind. If it’s trained well, it can create enormous wealth in what seems to be an instant. Financial intelligence was made up of four technical skills
1. Financial literacy
2. Investment strategies
3. The market
4. The law
My overall philosophy is to plant seeds inside my assets column. I start small and plant seeds. Some grow, some don’t. In 1995 I was to share the platform with Zig Ziglar. He was speaking on motivation I was speaking on the secrets of the rich. It says best-selling author not best-writing author. Her eyes widened immediately. I am a terrible writer. You are a great writer. I went to sales school. You have a master’s degrees. Put them together and you get a best-selling author and a best‑writing author.
Once people are trapped in the lifelong process of bill paying, they become like those little hamsters running around in those little metal wheels. Education is more valuable than money, in the long run. Life is much like going to the gym; the most painful part is deciding to go. They focus on perfecting their skills of building a better hamburger rather than the skills of selling and delivering the hamburger. May be McDonalds is not making the best hamburger but they are best at selling and delivering a basic average burger.
People face road blocks to become financially independent. Five main reasons fear, cynicism, laziness, bad habits, arrogance. Fran Tarkenton said, “Winning means I will be not afraid to lose. In my own life I have noticed that winning usually follows losing. I never forgot a golfer who has never lost a golf ball. Texans don’t bury their failures. They get inspired by them. They take their failures and turn them into rallying cries. For winners losing inspires them. Jaunty Rocks Teller said I always tried to turn every disaster into an opportunity. If you have little money and you want to be rich, you must first be focused, not balanced. Balanced people go nowhere. To make progress, you must first go unbalanced. Just look at how you make progress walking. Thomas Edison was not balanced. He was focused. Bill Gates was not balanced. He was focused. Donald Trump is focused. George Soros is focused. George Patton did not take his tanks wide. He focused them, and blew through the weak spots in the German line. Every time they mention real estate as a vehicle I often hear I don’t want his toilet that’s what Peter Lynch calls noise.
That is a thought pattern that keeps most people poor. They criticize instead of analyze. A great property manager sees the success in real estate. Colonel Sanders at age 66 lost his business began to live on the social security check. It wasn’t enough. He went around the country selling his recipes for fried chicken he was turned down 1009 times before someone said yes. Instead Rich Dad required his children to say, “How can I afford it”. His reasoning the word, “I can afford it” shut down your brain. You didn’t have to think any more. “How can I afford it” open up the brain, forced into think and search for answers. How can I afford never to work again? Eleanor Roosevelt said do what you feel in your heart to be right for you will be criticized anyway. You will be damned if you do and damned if you don’t. I need a reason greater than reality the power of spirit. If you do not have enough strong reason there is no sense reading further. It will sound like too much work.
I choose daily, the power of choice. I choose to be rich and I make that choice everyday. Invest first in education. 90% of the population buys TV sets and 10% buy books on business or tapes on investment. Listening is more important than talking.
Choose friends carefully, the power of association. I have several friends who generate over a billion dollars in their short lifetime. The three of them reports the same phenomena. Their friends who have no money have never come to them and asked them how they did it but they do come asking for one or two things or both, one a loan, two a job. Why investors buy an investment when it’s not popular?
Master a formula and then learn a new one.
Pay yourself first, the power of self-discipline. If you cannot control yourself, do not try to get rich. In the rule number one and paying yourself first you don’t get into debt in the first place. When you come up short let the pressure build and don’t dip into your savings or investment. Use the pressure to inspire your financial genius to come up with new ways of making more money and pay your bills. Poor people have poor habits. The rich say that savings are only used to create more money not to pay bills.
Be an Indian giver, the power of getting something for nothing.
Assets buy luxuries, the power of focus. Too often today we focus to borrowing money to get things we want instead of focusing on creating money. Remember the easy road often becomes hard and the hard road often becomes easy. To be the master of money you need to be smarter than it. But heroes do more than simply inspire us. Heroes make thing look easy. Instead find heroes, who make it look easy. If you want something you first need to give. Whenever you feel short or in need of something give what you want first and it will come back in buckets.
Teach and you shall receive. All you need to be is generous with what you have and the powers will be generous with you. Here are some to do’s. Stop doing what you are doing. Stop doing what is not working and look for something new to do. Look for new ideas. Find someone who has done what you want to do. Take classes and buy tape. Make lots of offers.
Action always speaks in action. You must think action before you can receive the financial rewards. Act now. Money is only an idea. If you want more money simply change your thinking.
I often ask myself, am I building a pipeline or hauling buckets? Am I working hard or am I working smart? The four quadrants are E for Employee, S for Self Employed, B for Business Owner, I for Investor. You want to be on the right side of the quadrant for B and I. Which quadrant do you generate the majority of your income from?
One painful lesson I experienced as a young boy was simply how much time one dad had available to spend with me versus the other. It was obvious that one dad had less and less time to spend with his wife and four children. My real dad was always on the road at meetings or dashing off to the airport for more meetings. The more successful he got, the fewer dinners we had together as a family. My rich dad on the other hand had more and more free time as his success grew. One of the reasons I learned so much about money, finance, business and life was simply since rich dad had more and more free time for his children and me.
Henry Ford said thinking is the hardest work there is, that is why so few people engage in it.
Those who are true B’s can leave their business for a year or more and return to find their business more profitable and running better than when they left it. A B owns a system and then hires competent people to operate the system, and S owns a job. Can you personally make a better hamburger than McDonalds? Can you personally build a better business system than McDonalds? Bill Gates of Microsoft did not build a great product; he bought somebody else’s product and built a powerful global system around it.
The definition of wealth is the number of days you can survive without physically working and still maintain your standard of living. Most are saving money in their retirement account hoping there will be more money coming out then they put in. There is a difference between people who save money in their retirement account, and people who through investing actively use their money to make more money as income.
People who seek security use the word diversification a lot. Why? Because the strategy of diversification is an investment strategy for not losing. It is not an investment strategy for winning. Successful or rich investors do not diversify, they focus their efforts. People who take risks change the world. Few people ever get rich without taking risks.
I recently read that most Americans today will receive a credit card while still in school and will be in debt for the rest of their lives. They became trapped by the need for job security simply because on average, they are less than three months away from financial bankruptcy. If business got better, he did not have to work harder, he simply had his president expand the system and hire more people to do the work. The reason so many people struggle financially is because every time they make more money, they also increase their two biggest expenses: taxes and interest on debt.
It’s not so much how much you make, but how much you keep, how hard it works for you, and how many generations you keep it for. Ninety-nine of one hundred small businesses ultimately disappear in ten years. Doctors’ and lawyers’ life expectancy is fifty-eight, for everyone else it is in the seventies.
I will explain how people on the right hand side of the quadrant utilize taxes as an asset instead of a liability whereas people on the left side of the quadrant. The only difference between a rich person and a poor person is what they do in their spare time. If you are first successful as a B, you will have a better chance in developing into a powerful I. Is invest in Bs. My rich dad said to me, you may lose two or three companies before you build a successful one that lasts. For a business to survive and thrive, one hundred percent of all the systems must be functioning and accountable.
There are seven levels of investor. Level zero is those with nothing to invest. This is about fifty percent of the population.
Level one is the borrower; these are people who solve financial problems by borrowing money.
Level two are savers, they put a small amount of money in a low risk vehicle like a CD. People in this group often waste their most precious asset, which is time and trying to save pennies. They spend hours clipping coupons from the newspaper and then at the supermarket they hold up everything else in line fumbling to find those big savings. The bank lends ten to twenty dollars for every one dollar you have in savings, and charges up to nineteen percent interest, then turns around and pays you less than five percent. We should all be bankers.
Level three, smart investors. 3A people in this group make up the “I can’t be bothered” group. They have convinced themselves they don’t understand money and never will. Level 3B is the cynic, these people know all the reasons why an investment will not work. They are dangerous to have around. Level 3C is the gambler, this group is also called pigs by professional traders.
Level 4 is a long-term investor. These investors are clearly aware of the needs to invest. They are actively involved in their own investment decisions. They have a clearly laid out, long-term plan that will allow them to reach their financial objectives. They invest in their education before actually buying an investment. They could take it down to periodic investing and whenever possible, invest in a tax-advantaged way.
Most importantly, they seek out advice from competent financial planners. If you are not yet a long-term investor, get yourself there as fast as you can, sit down and map out a plan, get control of your spending habits, minimize your debts and liability, live within your means and then increase your means. Find out how much invested per month, for how many months will take you to reach your goal. Goals such as, what age do you stop working? How much money will you need per month?
Level 5, sophisticated investors. These investors can afford to seek more aggressive or risky investment strategies. They risk less than twenty percent of all their capital in speculative ventures. They often start small, putting a little money down so they can learn the business of investing. If they lose this twenty percent, it would not damage them or take food off their table. The people are sophisticated; they can create their own deals with returns of twenty five percent to infinity. They have the extra money and a team of hand picked, professional advisors with a track record to prove it. Level 5 investors can assemble their investments by bringing different components together. They re-invest their gains to build a lot bigger asset base. They know that building a strong asset base throws off high capital yields or high returns with minimal tax exposure is the path to great long-term wealth. They have a personal board of directors to help them manage their assets. They take advice and learn.
Level 6, capitalist. Few people in the world reach this level of investment skill. When I took my new offer back to the Real estate agent, all he said to me was, you can’t do that. It’s not how much money you make, but how much money you keep, how hard it works for you, and how may generations you keep it. An asset puts money into my pocket; a liability takes money out of my pocket. Tax lien certificates are an excellent way to receive at least sixteen percent interest on your money. Property taxes take priority in paying them even before the bank’s mortgage. I have had the opportunity to buy houses I paid the taxes on for less than $3,500.00.
The name of the game of capitalism is who is indebted to whom. The more people you are indebted to, the poorer you are, and the more people you have indebted to you, the wealthier you are. That is the game. Your profit is made when you buy, not when you sell. If you take on risk and debt, make sure you get paid for it. The point is that most people’s lives are determined by their opinions rather than the facts.
Most people will be in debt from the day they leave school until the day they die. Money is an idea, money is a drug. He never wanted us to become addicted to working for money. A B creates, owns, or controls the system. The best way to keep going is to keep the flame in your heart going. Stop worrying about yourself and your fear begins to eat away at your soul. Passion builds businesses, not fear. You’ve gone this far, you are close so don’t turn back now. Remember what you set out to do, keep that memory in your heart to keep the flame going so why quit now. Flash dance, take your passion and make it happen. You can always quit, so why quit now? Build a system around your heart, build a system around your passions. The faster you want to get rich, the more accurate with numbers you must be. Playing the game of monopoly was the formula for getting rich. Lead, think and grow rich.
Years ago I was in on this class on goal setting. It was the mid 1970s. I was spending $150.00 on a beautiful Saturday and Sunday to learn how to set goals. What I learned from that class has helped me achieve what I want in life. Once most people figure out what they want, their goal, they begin listing what they have to do. That is why most people have to-do lists; they set their goal, and begin doing. They focus on what they have to do rather than who they have to be. A diet will not help if your thoughts do not change.
In marriage, many people try to change the other person so they can have a better marriage. Instead of trying to change the other person, which often leads to fights, it is better to change yourself first. Don’t work on the other person; work on yourself about that other person. You must be first. This book is primarily about strengthening your thoughts, being so that you can take the action, doing that will enable you to become financially free, having.
The greatest cause of human financial struggle is fear of losing money, and because of this fear, people often operate too safely or with too much personal control where they just give their money to someone they think is an expert and hope and pray that money will be there when they need it. Instead of finding out about the investment, they jump up, scream and run out of room. My rich dad forbade me from saying, I can’t afford it, I can’t do that, play it safe, don’t lose money, what if you fail and never recover. When a person says some things it becomes real. My rich dad firmly believed that what we said to ourselves at our core became our reality.
What people do on the right side of the equation is not that hard, it is as easy as buying four green houses for low prices, waiting until the market improves, selling them and then buying a big red hotel.
Great transfers of wealth often occur when laws and markets change. So it’s important to pay attention if you want to have those changes work in your favor and not against you. Build businesses and buy real estate. Pick out the best professional advice you can. The wealthy people maintained a long-term vision and plan, believed in delayed gratification, used the power of compounding in their favor. Most of us have heard that people who write down their goals are more successful than those who do not. Raymond Aaron recommends having great big long-term dreams and wishes. Set obtainable, daily goals that when achieved provide positive reinforcement to help you stay on the path to the big goal.
In the expense column, the two biggest monthly expenses are taxes and debt service for long-term liability. Taxes are approximately 50%; debt is approximately 35%, and then living expenses.
Fill out your personal financial statement, set a long-term goal for five years and a smaller-term goal for one year. I want to decrease my debt by X dollars. I want to increase my cash flow from assets or passive income to X dollars for a month. Commit five hours of your time to do a financial plan. Investors who are good at solving problems expect to make returns at 25% to infinity on their money. The lesson is to start small and learn to solve problems and you will eventually gain immense wealth as you become better at solving problems.
Practice solving problems. Mind your own business, take control of your cash flow and know the difference between risk and risky. Become an expert of solving a certain type of problem, do not diversify. Become an expert solving one type of problem and people will come to you with money to invest.
Attend financial seminars and classes. Meet with several business brokers to see what existing businesses are for sale in your area. Attend a network marketing seminar to learn about business systems. Teach mentors. Professionals have coaches, amateurs do not. I have coaches because I get paid to play those games. Seek mentors, seek out role models and reverse role models.
Who you spend your time with is your future. Write down the six people you spend the most time with. Have your children count as one person. You are looking at your future. The six people you spend the most time with are your future. The more I discuss my list with other people and the more I listen to them, I realize that I need to make some changes. This exercise has little to do with the people I was spending my time with; it has everything to do with where I was going and what I was doing with my life. I wanted to change my future.
To successfully change my future I have to change my thoughts, and as a result, the people I spend time with. When people are lame, they love to blame. Just as inside every problem lies an opportunity, inside every disappointment lies a priceless gem of wisdom. Few people can tolerate disappointment. Instead of learning to face disappointment, they spend their lives avoiding it. Expect to be disappointed, have a mentor standing by. Make mistakes, put a little money down. You must also start doing to make offers on small real estate deals that will generate positive cash flow.
Personal truths are spoken at moments with peak emotion. My most important advice I know to give you is to be very aware of your words, especially be aware of the words that come from your heart, your stomach, and your soul. Take control of your spending habits, minimize your debt and liabilities, live within your means and increase your means, find out how much you invest each month. Are you ready to stop hauling water buckets and begin building pipelines with cash flow to support you, your family, and your lifestyle?
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