Wisdom of Rich Dad

Making plans to free yourself from debt is easy but it’s rather difficult to put those plans into action.

Your views on saving money do matter

Saving money may be difficult but it’s definitely not impossible. Convincing yourself that saving is achievable is a positive step in the right direction and these positive thoughts will lead you to a debt free life.

Prepare a Realistic budget

While formulating a budget make sure that it a reasonable and realistic budget and that it does not put undue and excessive pressure on you to save. Your budget should work from the very first try itself because that will motivate you to further your commitments and continue limiting your expenses in the forthcoming months. This will make saving a regular habit rather than a stressful and cumbersome act.

You Budget should be a Practical one

While making the budget you could set aside a reasonable and affordable sum for personal expenses. But ensure that you don’t overdo it since it can put your budget off track and may worsen your debt burden even further thus destroying the purpose of the budget.

Tackle the Highest Interest Rate Credit Card first

While framing the plan to pay off your debts, give priority to the card which has the highest interest rate. Such a card will obviously have a higher outstanding balance and a more demanding creditor. Clearing the high interest rate credit card first and then gradually moving to the lower interest rate card is a sensible step in your debt pay off plan.

Avoid the Card, Use Cash

To resist all temptations to spend, simply leave the credit cards at home. But if carrying too much cash makes you feel unsafe then it’s fair to have one credit card in your wallet. However remember that spending with your credit card is more expensive than purchasing in cash and this will be evident if you pay closer attention to the interests you pay each month.

Credit Limit Reduction

Instruct your credit card company to reduce your credit limit so that you will not cross over your budget by overspending on your card.

Shop at the Right Places

Avoid visiting the fancy and expensive shops you always purchased at. Instead look for shops offering bargains, discounts and money saving offers.

If all the above ways cannot help you save then your ultimate plan to free yourself from debt should be to find ways of generating more money!

“The rich invent money,” says Kiyosaki. “Great opportunities are not seen with your eyes. They are seen with your mind.”

In his book “Rich Dad Poor Dad,” Kiyosaki recounts the story of growing up with two fathers – his own, and his best friend’s. While his own father was a college graduate with numerous degrees, he never became a wealthy man. On the other hand, his friend’s father never finished the eighth grade, but would become one of the richest men in Hawaii. According to Kiyosaki, both of these men played a critical role in shaping his own attitude about money.

When there was something that Kiyosaki’s father, or any of his kids wanted, he would always first look at the price tag. If it was too expensive, that was the end of the story. The father of Kiyosaki’s friend would look at it from a different point of view. “My poor dad would say, ‘I can’t afford it,’ while my rich dad would say, ‘How can I afford it?’” Kiyosaki chose to follow his rich dad’s strategy.

For Kiyosaki and his rich dad, their mind is their greatest asset. “Most people never get wealthy simply because they are not trained financially to recognize opportunities right in front of them,” he says. “The rich have learned to recognize opportunities as well as how to create them.”

Kiyosaki has trained his brain to see the business opportunities investments around him – and there are always some great ones around him, he says. “There have never been more opportunities to become rich in the last 10 years. And there’ll be even more opportunities in the next 10.” Kiyosaki admits to missing out on some of the great ones – eBay, Google, MySpace, and the Macintosh – but he has managed to be persistent enough to strike his own goldmines.

Kiyosaki took his first real estate investment course in Honolulu in 1974. It was a three day course that taught him what to look for in making a good investment. His professor told all the students, however, that everyone would say those great deals do not exist. As Kiyosaki soon discovered, his professor was right. After going door to door of real estate offices in search of good real estate investments, he kept being told that he “was either dreaming or smoking funny cigarettes.” But, Kiyosaki knew the opportunities were out there and he kept on in search of them.

Finally, an obscure real estate broker in Waikiki offered Kiyosaki the deal he was waiting for: a condominium that was in foreclosure. He put $2,000 down for the $18,000 property and says, “My investment career had begun. More important, I was training my brain to see what most people don’t see.”

When it comes to real estate investing, Kiyosaki’s brain is his biggest asset. But, he also knows his limits, admitting it would quickly turn into a costly liability if he were to begin looking at investment opportunities in technology, or another area he knows little about. “People who refuse to open their minds to new strategies seldom become rich,” he says, “which I guess is why there are more critics in the world than rich people.”

Most small business owners never get past the equivalent of a self-employed practice with help. Businesses with up to 10 employees are usually oriented around the skills of their owners. The other people assist and the business owner provides the core talent to deliver client or customer results.

Where there are two or three owners, sometimes this may grow to 20 or 30 people, but the same point holds true. You usually find that you have one owner for up to 10 employees, or “helpers”. This still falls into the “S” category, identified by Kiyosaki in his book The Cash Flow Quadrant.

Why do small business owners get stuck into “S” type businesses?

We have identified 7 core factors that account for this unfortunate truth.

1. Small business owners are good at serving their clients and customers, not at growing businesses. They have their success due to their diligence at plying their skill, whether it be in dentistry, landscape architecture, or hanging door frames. The skills at generating customer satisfaction are where these entrepreneurs thrive, not in growing a business that offers that service.

2. These people have never grown a “B” type business before. I rarely meet anyone who currently has a $1 million, a $2 million or even a $5 million business who has experienced owning and operating a $10 million business in the past. This lack of experience in running a larger business shows. People just aren’t sure how to grow. This keeps these owners stuck in their smaller businesses, unable to grow them to the size they want.

3. Many small business owners are under the misguided notion that hard work and plenty of it will get them their goals. This is simply not true. Productivity is a function of design and structure, not your good intent, and not your hard work. Hard work just won’t get it done. Like it or not, that is a fact. Without the appropriate structure, you can work all you want, but you won’t achieve the results you desire. Most small business owners fail to recognize that fact.

4. Most small business owners get caught in a “success-trap” within an “S” type business. I have seen it often, where people are so good at what they do that they attract many loyal repeat and referral customers to them, all with individual needs that must be addressed. This increased demand eats up the owner’s time, leaving little if any time to design and grow the new, larger business. Yes, success can be a trap that thwarts you from your goals.

5. Most business owners don’t know how to train others or transfer what they do to other staff. You may have gained a loyal following from your intuitive skills, but that is very different from a distinct set of skills called training and transferring your knowledge to teach others your profession. Without this additional competency, it is very difficult to scale at the level needed to become a “B” type business.

6. Owners of “S” type businesses don’t know the perspective that is required to develop and operate a “B” type business. People who own and run “B” type businesses think of things from a much different perspective. While an “S” person, when faced with a challenge, will think, “How can I get that done for my client”, a “B” type person will look at the same issue and say, “How can my business be structured (without me) to tap this opportunity for all future clients?” Subtle, but very different thought processes leading to vastly different results.

7. There hasn’t been a place to go to learn how to take a business from “S” to “B”. Most available training either require small business owners to adopt large business methodologies (which do not usually work in smaller businesses). They are expected to stop their own companies and try to build their own business like a franchise of hundreds of locations, while still trying to make ends meet. None of these strategies has proven to consistently work to move the owner of an “S” type business into the “B” realm.

~ Andy Ford~

Savvy investors can make a profit in almost any market. An investor must know where his profits are coming from before entering a real estate transaction. Knowledge of exit strategies is key to making a profit as an investor. To be knowledgeable in real estate investor transactions, here are some tools an investor needs to flip houses in any market. These are the basics to profiting as an investor.

1) Wholesaling is the process of locating distressed properties and selling to wholesale buyers. Many times the investor has no money in the transaction. Quick profits can be made by assigning properties to wholesale buyers that you already have in place. Experienced wholesalers will already have their buyers’ list, which are just a phone call away. The skill needed here is finding houses to put under contract. Placing properties under a purchase and sales agreement is a fairly simple process.

2) Owner financing is purchasing houses from owners that will allow you to take over payments. This is a simple process that allows the investor to think out of the box and place a new buyer who normally cannot get financing or is interested in taking over payments. There are 3 ways to make a profit. First, profits are made in the down payment. The second profit to be made is in the difference between the monthly payment that the investor negotiates between the seller and the final monthly cost to the buyer. And the third way to make a profit is in the final payment when the buyer closes out the sale if he gets financing. This is a good way to have a constant income once you get several in the pipeline. A good attorney or courses can be taken to understand simple contracts to place buyers into an “owner financing agreement.” Consult with a local attorney to check for any laws and regulations related to owner financing agreements.

3) Lease option, also known as rent to own, is a method of selling houses that investors use in flat or rising markets to make a profit. Although done a few different ways, investors purchase a home below market by having the seller “owner finance” to the investor. Profits are made by investors basically selling at market value to a buyer “renting to own.” Buyers usually will contract with the investor to complete the sale in 1 year to several years. Profits come from the down payment, sometimes in the monthly payments, and the biggest profit is at the end. Many investors do this and feed the pipeline, with the goal of cashing out 1 or more a month as they set up their systems. Profits are very reasonable and the buyer can make $5,000 to $50,000 or more once the buyer decides to take the option to purchase.

4) Retailing is the business of selling houses at market value. It goes hand in hand with purchasing properties at wholesale and rehabbing for resale for profits.

There are more methods for investors but these are the basic principles of buying and selling houses as an investor. Investors develop specialties and focus mainly on one or maybe two different principles. The more knowledgeable an investor becomes, the more successful he can be in different markets. Make sure to abide by rules and regulations of your state.

I came across this piece of writing from well-known author Robert Kiyosaki said:

A few weeks ago, I was at a financial conference giving an investing talk. A hand from the audience shot up as I talked about returns on investments of 50 percent, 1,000 percent, and infinite returns. “That’s a load of rubbish,” shouted the person attached to the hand waving in the air. I asked the participant to clarify what he thought was a load of rubbish.

“You can’t get such high returns,” he replied angrily. “I’m a financial planner, and I’ve never seen anyone achieve such returns.”
“What kind of investments do you recommend for your clients?” I asked.
“I recommend a well-diversified portfolio of cash, stocks, bonds, and mutual funds,” he replied indignantly.

“That’s why I ask you: How can you get such high returns from these investments?”
“Because I don’t invest in those investments,” was my reply.

Kiyosaki went on to explain some real estate projects where he is making really good returns. The issue isn’t what Kiyosaki is making his money in; the issue is the defeatist attitude of that financial advisor waving his hand.

The man had no creativity. His only experience or understanding was to accept what the “averages” were giving him in terms of stocks and bonds. Great traders, great entrepreneurs make things happen. They don’t just sit around and accept the “average”.

Mike Maloney – Rich Dad Adviser on Gold and Silver