Wisdom of Rich Dad

By Oonagh Montague

The days when a woman’s place was in the home are long gone. Nowadays, she’s more likely to own the home, and perhaps a few more besides. Ria Lawlor, a qualified medical doctor, mother of two and full-time investor, is one of the founder members of the ICES Group, (Irish Complementary Education Systems), an extraordinary team of individuals determined to take the fear out of investing for the ordinary man, or woman.

“It all started in 2002 with a game called Cashflow,” says Ria. Cashflow 101, a board game designed by Robert Kiyosaki, author of motivational book Rich Dad Poor Dad aims to teach players how to invest, focusing in particular on property investment.

“When my husband Ian and I began playing the game with Tony Reid and Darrell O’Dea, we knew nothing about investment. We started as a small group playing in a kitchen. As more people joined, we moved to a hotel in Tallaght and, finally, on to Temple Bar.”

The group grew to such an extent that the original four decided it was time to structure the evenings. “We started inviting guest speakers and holding question and answers sessions,” explains Ria.

In 2003 the ICES Group was officially formed and, today, network meetings and events take place nationwide. Guest speakers at ICES meetings explore a range of subjects, such as gold investment, how to make money through property, stocks and shares, or the ever-crucial subject of tax. However, there is even more to learn when the speakers are finished. According to Ria, the questions and answers slot is often the most interesting aspect of an ICES Group event.

“People will ask questions such as ‘I’m looking at a property in Dublin 6, is it a good investment?’ or ‘How do I go about renting my house?’ It’s about shared knowledge and shared information. You might meet someone who tells you about an investment that may not be right for them, but it might be right for you.”

For Ria, this boils down to one simple lesson: “We’ve found that if you increase your network of people, you increase your net worth.”

For Tina Suvanto, a former librarian, the contacts she made through the ICES Group have led to fruitful investments.

“You can’t underestimate the power of meeting with like-minded people. I’ve made long-term friends from ICES Group,” she says.

Education forms the cornerstone of the ICES Group approach. To this end, they run several programmes and master classes. One of these is the Property Discovery Programme (PDP).

Clare Connolly was on a career break from her high-powered job with a pharmaceuticals company when she enrolled in the PDP.

And the outcome? Clare released equity on her home and went on to invest in a property in the UK, two in Eastern Europe, one in New York and she has just closed on a apartment in Massachusetts.

Through contacts made in ICES Group, Clare also now runs a letting agency. “It’s been life-transforming. As a single parent with a 15-year-old daughter, it initially felt like a big risk to take, but I thought, if I don’t do it now, I never will. I’m so glad I did. It’s just where I want to be.”

As Ria emphasises, anyone can become an investor: “It’s important to remember that everyone starts off at ICES on the same footing. None of us learned about money in school.”

In fact, one of the main lessons learned at the ICES Group is about returning to basics. Ria explains: “It’s about those very simple habits that many people have forgotten nowadays; like keeping an eye on your money, like saving. These are basic steps that have nothing to do with how much money you have. What’s important is what you do with it”

Besides money, a wealthy woman has some qualities that serve as guideposts to make sure she’s always walking toward wealth rather than away from it. This month’s readers each had one or more of these traits out of alignment.

Here are the eight qualities and how they can translate into financial success:

Harmony and balance. Harmony is the agreement between what you think, say, and do. Balance is the state of stability in which you’re able to make sound judgments that will enhance your financial security. When you use a loan for in vitro fertilization that will leave you so deeply in debt that it would be difficult to care for your new child, you forsake harmony. Aligning your thoughts, words, and actions will put you on a path to balance—and emotional and financial well-being.

Wisdom and courage. The ability to make (not just think about) sensible decisions that respect your needs takes wisdom, the voice of experience that’s inside each woman. Courage, the catalyst that creates harmony by uniting our thoughts with our actions, is what lets us assert our opinions confidently. To tell your mother that you love her but can’t ruin your financial life to save hers requires wisdom and courage.

Generosity and happiness. True generosity must benefit both parties. No woman can control her destiny if she doesn’t give to herself as much as she gives of herself. That’s why I so often caution you not to cosign loans or deplete your emergency cash savings to bail out someone. While those acts seem helpful, they leave you financially at risk. Happiness manifests itself through generosity—when, for example, a woman makes donations that help others yet don’t deplete her.

Cleanliness and beauty. Removing clutter and chaos from our lives brings clarity, which makes it easier to achieve what we want. From emptying closets of unused stuff to streamlining your wallet, cleanliness is a sign that you’re in control. And by bringing the first seven qualities into your life, you feel beautiful.

When you commit to finding harmony and balance, you have the courage to make wise decisions that are as generous to you as they are to others. This leads to deep, unwavering happiness and brings beauty into your life. I wish this for the women who wrote to me this month, and I wish it for you.

Adapted from Suze Orman’s latest book, Women & Money: Owning the Power to Control Your Destiny (Spiegel & Grau)

Most of us think about our finances in terms of our top line — in other words, how much money we earn.  We pursue big incomes and then we spend those incomes on the right clothes, the right cars, the right home. Isn’t that what wealth is all about?

Not at all. What really matters in building net worth isn’t how much we make, but how much we keep. That’s the bottom line on a financial statement. It’s also the key to accumulating wealth.

Self-made millionaires know the importance of the bottom line.

Thomas Stanley and William Danko, a pair of business professors, spent years studying households that had net worths of more than $1 million. Their research, outlined in their landmark work, “The Millionaire Next Door”, contradicts nearly all the stereotypes surrounding wealth.

Most millionaires, it turns out, accumulate wealth by living below their means.  They avoid status objects such as big cars, huge homes and designer clothes.  They do their own yard work, drink beer instead of champagne, and stock up whenever laundry detergent goes on sale.  They put the emphasis on building up their bottom lines: the amount of money they have left over after taxes and living expenses.

You don’t have to be a genius to adopt the same lifestyle. 

Jay Zagorsky, an economist at Ohio State University, tracked down 7,000 American baby boomers who wrote a standard IQ test in 1980. He caught up to them in 2004 and asked them about their financial status.  Much as you might expect, the people who had higher IQs tended to earn more.

But — and this is a shocker — there was no correlation between higher IQs and higher net worth. Smart people may earn more, but they appear to be just as vulnerable as anyone else to spending as much as they make and neglecting their bottom lines.

One reason we get dazzled by a high income is that we forget the bite that taxes take.  If you’re a middle-class Canadian, you’re probably losing close to half of each additional dollar you make to income taxes, GST and PST.

Think about what that means: the latte that costs you $4 in after-tax dollars costs you $8 in pre-tax dollars. (Makes you think twice about that morning treat, doesn’t it?)  The dinner at a fancy restaurant that costs you $250 in after-tax dollars costs you $500 in pre-tax dollars. (Gee, and the chateaubriand wasn’t even that good)

Of course, the positive way to look at this is that if you pass up the latte and the dinner, you’re giving yourself the equivalent of a $508 raise in your pre-tax salary. That’s a good thought to keep in mind. After all, it’s how millionaires think.

Barbara Hawkins

In his third or fourth “Rich Dad Poor Dad” book, Robert Kiyosaki expresses the advantages of investing in real estate by describing another type of cash flow quadrant.

This cash flow quadrant describes the four ways to generate money through investing in real estate.

They are: depreciation, tax benefits, rental-income, and appreciation.

I like this model as it is simple to understand and remember.

Let’s define each one a little bit more clearly:

• Depreciation – This is, thanks to Alan Greenspan, the amount structure loses in value over time, assuming no improvements have been done to it. Residential real estate, for example, is considered to fully depreciate its value in 27 1/2 years. So, for the purpose of taxes, an investor may choose to take that depreciation as a deduction. If the structure is worth $200,000, it’s depreciation for the year is $7273.
• Tax benefits – Anyone who holds a mortgage for property knows that all that mortgage interest is tax deductible. Similarly, when acquiring additional properties, the mortgage interest from those properties are also deductible, as well as improvements made to that real estate.
• Rental income – When we put a tenant into a property, be it residential, commercial or industrial, we usually receive an amount of rent associated with that occupancy. Hopefully that rent will cover the mortgage payment with some money left over.
• Appreciation – We all know that although we take depreciation at tax time, the property itself is actually appreciating in value as cities and populations grow. Typically, unless a major economic or whether related disaster occurs, real estate only increases in value. That is why banks and other lending institutions are willing to lend most, if not all the money to purchase properties.