Wisdom of Rich Dad

While most Amercian are struggling with credit card debts, a frugal family of 7 lives debt-free on $35,000 a year!!!

Meet Amercia’s Cheapest Family –> http://cosmos.bcst.yahoo.com/ver/237/popup/index.php?cl=3892900

Robert Kiyosaki stressed in his Rich Dad books on the importance of being financially literate.  And among other things, learning and keeping a financial statement is a important element of being financially literate.

I always have the impression that learning to read a financial statement and keeping one is a tedious effort that will require me to spend perhaps a full day trying to make head and tails of it.

Well, I am surprised to know that creating and keeping a personal financial statement can be as simple as ABC after reading this post. 

 

Robert Kiyosaki

I was speaking on financial intelligence a few months ago to a group of university professors in Singapore. At the end of the talk, one of the professors asked me,

“Where did you learn about business and why do some people make more money than others?”

Responding to the first half of his question I referred to my book ‘Rich Dad, Poor Dad’ and explained to him that I had a father who was just like him, a respected and highly intelligent career educator. My other dad, my best friend’s father, who also spent many years raising me, was a school drop-out, but he was a natural financial genius. My business education came from him.

To the second half of this question, I replied: ‘The best business school I attended was Vietnam. In Vietnam, I learned what I believe to be my most important life skill”.

“And what is that?”, the professor asked.

‘To know if I am thinking rationally or emotionally’ I replied. ‘While in combat, l learned to be a master of my emotions and to think clearly, even under extreme pressure. I went on to tell him of a day in 1972 when the engine of my helicopter gun ship suddenly quit. There was a loud bang and then deathly silence followed by the most horrible of sinking feelings. We were falling out of the sky like a huge rock Every part of me was screaming ‘Pull back on the stick and add power.’ But my three years of pilot training had taught me to think rationally and override my emotions.

Instead of pulling the nose of the aircraft up, I pushed the nose of the aircraft down and dove the aircraft straight for the ocean below me. To this day, my mind is burned with the vision of the deep green ocean coming up at me at blinding speed. As we faced what appeared to be our certain death if I had done what I felt like doing which was pull the nose up I would have died that day, taking four other people with me.

“And how has being the master of your emotions been important to your success?”, the professor inquired with even greater curiosity.

Wanting to stay in his world, I replied using his frame of reality. Have you ever had very smart students with great grades go out into the world and not do well financially or professionally?

The professor nodded.

When it comes to money, I replied, “it is the emotion of fear that keeps most people poor. Most people live in fear of losing money or risking money so they say things like ‘Play it safe’ or ‘Don’t take risks’.

The professor immediately interjected, “Are you saying be careless? Live dangerously?”

“No”, I replied. “All I am saying is that you need to know when you are thinking emotionally and when you are thinking rationally and when you are emotional, thinking rationally is often the hardest thing to do. Money, sex, religion, and politics are emotional subjects. So when it comes to those subjects most people are not thinking rationally. When it comes to money, most people are so afraid of losing that they wind up losing. That is not too intelligent.”

The professor was beginning to nod his head.

I continued on. “Another example of emotional thinking versus rational thinking is when someone says, ‘I don’t feel like doing it.’ Many people are not successful because they let their feelings do the thinking for them. For example, every morning I get up and say, ‘I don’t feel like going to the gym.’ But hopefully my rational mind overrides my emotional mind and says, ‘Come on, one hour and it’s over.’ If my rational mind wins I ride my bicycle to the gym and if my emotional mind wins, I snuggle up in bed for another hour.”

“And to you, that is the primary difference between successful people and unsuccessful people’?”, asked the professor.

I nodded my head. “When it comes to money, I am often going in when most people are getting out. Or I take risks, while the masses are playing it safe. I feel the same fears they do, I just use my mind differently. That ability to do what is necessary, in spite of my feelings screaming at me to do otherwise, is the single most important life skill I have learned.”

“But aren’t you afraid?”, asked the professor.

“Yes.” I replied strongly. “I have the same fear as everyone else. It’s how we respond to that fear that makes the difference. As I said, most people would have pulled back on the stick when the engine died and l was trained to push the nose forward. The same thing happens financially. People pull back, play it safe, terrified of making a mistake, while life’s opportunities pass them by.”

The professor seemed to be understanding so I kept going. “There is another aspect of fear that also causes people to lose money and that is the fear of ostracism, reportedly the number one fear of most humans.

“Why the fear of ostracism?”, asked the professor.

“Ostracism is the fear of being different, or standing alone, or being ridiculed by their peers. That fear causes people to conform rather than risk being different. In Australia it’s called the “Tall Poppy Syndrome.” In investor language, the fear of ostracism leads to the “thundering herd” mentality. The fear of being different causes people to band together so they wait for social proof that what they are doing is right. It is also called the “madness of the crowd.” So they enter markets late, buying what their friends are buying, and get slaughtered. After an experience like that, they spend the rest of their lives living in perpetual fear, continuing to go along with the rest of the crowd that is not going anywhere financially.”

“So how does that affect financial intelligence?”, asked the professor.

“Financial Intelligence is a 50/50 proposition.” I replied, beginning to summarise slowly. “50% of financial intelligence is what you learn in business school, or in my case what I learned from my rich dad. It is the so-called technical knowledge about money, accounting, finance, investing and business. The other 50% of financial intelligence is knowing when you are thinking rationally and when you are thinking emotionally. To simply say, ‘Play it safe.’ is not a rational thought because it is a thought that is generated out of emotion. To say, ‘Play it smart.’ is a thought coming from the rational brain. It is that 50/50 relationship that is the basis of financial intelligence, and in my opinion, to answer your original question, why some people make more money than others.”

First printed in Pow Wow News, Summer 1998

What do you need to be an entrepreneur?  What is the critical success factor for an entrepreneur?  Is it the hard work, the mindset, the ingenious and creative mind, the street smart knowledge?

Well, the author in this post believes that having a good financial education and being financial literate is a critical component for an entrepreneur to succeed.  Do you agree to that?  Is it possible to be a successful entrepreneur without having good financial knowledge?

by Claire Low

IN THE game of Monopoly anyone can be a real estate tycoon buying up whole streets, building houses only to tear them down to erect hotels, being thrown into jail more times than the hardest of criminals and extracting money from the hands of one’s opponents.

It’s fun and possibly educational as it requires strategy and mathematics. But does it actually teach the principles of the property market to its players? Award-winning auctioneer and real estate agent Mario Sanfrancesco of L.J. Hooker Tuggeranong confesses his six-year-old daughter often beats him at Junior Monopoly. “It gets [children] to understand the concept of purchasing and owning a house. It has been a start for her,” Sanfrancesco says. “When she gets pocket money, we talk about what she is saving up for. There’s the occasional lighthearted remark about saving up for a house, and she’s only six.”

He says that on the whole the game is unrealistic but on the other hand, “You do understand you own that land or square on the Monopoly board and it can generate income for you. It does give a bit of understanding.”

Two other real estate games, The Cashflow Quadrant Game and Cashflow 101, were invented by tycoon Robert Kiyosaki. The games are based on getting across the importance of getting out of the “rat race” through income-producing assets.

“It’s a fun little thing,” Sanfrancesco says.

He adds that just like the real market, Monopoly can be emotional and personality driven. However, “The true investor researches the market and makes decisions based on facts. It’s a business frame of mind different from ‘I’d better do this today because I want to win the game.”‘

Sanfrancesco plans to upgrade his daughter to standard Monopoly soon.

“I’m really concerned about how good she’s getting. I’d like to win occasionally.”

Laura Sibley, 12, of Fadden, comes from an enthusiastic Monopoly-playing household and says she would like to acquire real properties one day. Her real-life plan for buying real estate has a realistic slant she plans to rent initially. “It would be too much to buy a house straight off,” she says.

Her father David Sibley says, “I think it teaches the basic concepts of buying and selling property in a fun way. I don’t think it will give them any real-life sense of paying off a mortgage, however. It makes them aware there is a cost to buying property and it’s a big investment.

“Monopoly helps them make decisions, realise they need to strike a good deal and when they are offered deals to think it through and see what’s best for them. Hopefully another key thing they’ll learn is when the money’s gone, it’s gone.

“It teaches the long-term value of a property. They may not realise it at the time, but these games are helpful for getting them thinking about money and what they need to do to invest, buy and sell.”

Sibley says hotly contested competitions between siblings can echo a competitive market. “I guess competition between siblings should be managed just as competition is managed between people acquiring property,” he says. “Sometimes it means pulling out of a sale. Sometimes it means realising the other person is going to win the game.”

By Ayeromara Peter 

When most people think of investing, they feel it is all about just putting their money, either in their Savings or Retirement Account, and carry on with a life of hard work. They think that in those accounts, their money is working for them .

When inflation, which is one of our greatest economic challenges in this part of the globe, comes it renders their money worthless. A man in this country told me that he had three hundred thousand naira (N300, 000) in his Savings Account in 1980. He kept the money there till late 90’s, thinking his money was working for him. He later realised that his money had been rendered worthless by those saddled with the formulation of the nation’s economic policies. According to him, nobody came to tell him about equity investment then. I made him realise that he should not expect anybody to tell him about shares. Everybody should be his/her own driver when it comes to the vital issue of investment. This is the reason why we must seek information like a hungry lion. Information is powerful. If the man had gotten information about shares then, with three hundred thousand naira (N300, 000) invested in penny stocks like First Bank, Nigerian Brewery etc., he would have become super rich by now. First Bank and Nigerian Brewery were selling below N5 per shares then. Besides, his units of shares would have increased tremendously to the extent that he would be competing to be nominated into the board of these Blue Chip companies by now.

The question many people do ask me is: “How can they raise money to buy shares?” If you look carefully at these people or probing further at their profession, you will discover that majority of them are civil servants or in paid employments, artisans etc. What I am trying to drive home here is that quite a number of these people are working. Most of them collect car loans, loans to purchase Household equipments, loans to celebrate the demise of their aged relatives and the rest. Most of the artisans, too, belong to one co-operative society or the other where they have access to loans with very low interest rates. When they collect this money, they throw parties all over the place and engage in various money –draining projects. They purchase cars, household equipments which the financial experts refer to as downward investment. To this category of people, asking the question, my answer is: use the same way you raised money for those items for shares too. We should not joke with our future at all.

We should sit down and plan what becomes of our future. We should look at a time when money will keep on coming in forms off residual income when we are no longer working. We should work out how we would have financial freedom. Anybody can retire rich at a certain period, irrespective of your financial status now. It is simply a matter of adequate planning. If you want to retire rich, you will need to work harder and faster now and allow your money to do the same throughout your life time. The most important thing is to keep your money moving. Robert Kiyosaki described this as ‘Velocity of money’. According to him, “If you want to retire young and rich, it is very important that your money be like a bird dog, going out everyday and bringing home more and more assets”.

Due to the consolidations in the Banking Industry now, most of these Banks have what they call “Share Acquisition Scheme”. It is a product where you can borrow money from them to buy shares and the re-payment is spread for at least 12 months. It is a very good product and I advise our readers to embrace this product instead of borrowing money to acquire downward assets. There are many offers still coming and some are still in the market now. Don’t complain that the prices are high. Buy them and watch your investment move. Meet me and other financial experts at NUJ PRESS CENTRE, IWO/IBADAN ROAD , OSOGBO. On 18th AUGUST 2007 .