Wisdom of Rich Dad

Your journey towards financial freedom isn’t complete without these obstacles which you must learn to face and conquer. The sooner you take action against them, the sooner you achieve wealth.

Impulse Buying

Through the years, I have changed from an impulsive buyer to a frugal shopper. It took some time and a lot of personal motivation but I was finally able conquer this bad habit. If I was able to do it, I don’t see any reason why you can’t. Whenever I’m faced with an urge to buy something unplanned, I usually pause and ask myself several questions first. These simple dialogue with myself has become a powerful tool for me and I hope it will be for you too.

Inflation

Inflation hurts people particularly those in fixed incomes like the elderly and those whose income isn’t indexed to inflation. They lose a part of their purchasing powers because their cashflow remains constant while their cost of living increases. Employed individuals, despite receiving constant salary increments, are hurt because there is a time lag in compensation adjustments. By the time they receive higher nominal income, it has already been months since the prices of commodities went up.

Procrastination

Procrastination simply refers to the habit of putting off doing something for a later time. Filipinos are more familiar to the term mañana habit, which is often translated to Tagalog as “mamaya na” (much later). Aside from the definition, it is also necessary to learn why we often choose to procrastinate. Is it simply because we are too lazy to act or is it something much deeper? More importantly, how do we get rid of this bad habit? What is the best way to really overcome procrastination?

Fear of Taking Risks

A simple video which tells the story of my first burn (a term that refers to the first time a person will spin a fire poi). I can still vividly remember that night when I learned how to face my fears and got the courage to take the risk. I hope that this will inspire you to likewise do the same in your life.

Wrong Beliefs About Money

If you think about it, money is simply defined as a tool that we use to acquire the things that we need or want. It is a non-living thing that is void of emotion or bias. Take a bill out of your wallet right now and look at it. Would you agree with me if I say that you’re simply holding a piece of paper?

~ fitzvillafuerte.com

We all want to get ahead. You hear people say it all the time. But what exactly does that mean?

It’s kind of a vague statement, but it sounds good.

Basically, it means that you want to have more money?maybe get your earnings ahead of your cash depletion. Maybe it means you want to be able to save enough to send your kids to good universities, or be able to take your family on annual vacations. It could mean that you want to squirrel away a retirement fund.

Whatever your particular idea of getting ahead, it does imply some sort of motion movement from where you are now to where you want to be.

That means you must figure out exactly where you are now and where you should be going. Once you start to think about it, though, you may find those places are a little more difficult to determine than you had originally thought.

You may find yourself beginning to struggle with just what your particular concept of getting ahead is.

Robert Kiyosaki, who authored the popular Rich Dad series of books, has mapped out a way for you to tell where you are and where you should be, if building wealth is your goal. He also gives you a plan on how to get there.

In his book “Cash Flow Quadrant”, he introduces readers to a concept that the man he called his “rich dad” introduced to him years ago.  This quadrant is an illustration of where your money is coming from and subsequently how you think about money.  Believe it or not, the two things go together.

For instant, if you are in the E quadrant, you are an employee in search of security.  Someone in the S quadrant is self-employed and likes to be in control, to do things their way. A B quadrant person is a business person. (This is very different from an S-quadrant person because the B has a system that can work without their direct input, thereby freeing them for other, wealth-building, pursuits.) The I quadrant person is an investor.

According to Kiyosaki, that quadrant not only tells you where you are, but where you should be. If you are on the left side, in either the E or S quadrant, you should be making plans that will move you to the right side?first to the B quadrant then into I.

In order to do that, you need to increase your wealth by taking a job that affords you the money to invest or the time to build a business system. The system will take care of your personal needs, afford you the time to learn about investing, and provide you with the cash to purchase real estate equity.

That is how you get ahead. It is a process, and you have to be systematic about it. You can’t just jump into investing without knowing what you’re doing. That is foolhardy and dangerous. You also can’t jump in if you haven’t gotten your basic needs covered. First, make sure that is taken care of. Then expand.

 ~ Robert Kiyosaki

As a Marine Corps pilot in Vietnam, I was acutely aware of the balance between supply and demand. Stationed on an aircraft carrier, we had to order supplies from warehouses on land. It was frustrating to regularly receive aircraft parts for the wrong model of aircraft. My commanding officer wasn’t interested in my problems with the supply chain; all he wanted was for my gunships to be ready when he needed them. Because the Army had a large supply of parts in its aircraft graveyard, we often kept our fleet flying by borrowing parts from the Army. Although this didn’t follow Marine Corps directives, we kept our aircraft in the air with or without parts from our own supply chain.

One very important job of an entrepreneur is to coordinate the forces of supply and demand in his or her business. If there’s too much supply, or inventory, the business suffers. If there’s too much demand and not enough supply, the business also suffers because the customers aren’t being supplied with what they want and may go to a competitor. If there’s no demand or supply, the business will soon be out of business.

Think of demand as sales and marketing. It’s your sales and marketing department’s job to create demand by making sure your customers know and buy what your business has to offer. Meanwhile, supply is represented by manufacturing, warehousing and distribution, aka the supply chain. It’s your supply chain’s job to be prepared to fulfill the demand created by the sales side.

In my businesses, I divide my responsibilities between supply and demand. As a business grows, I appoint one person to be solely in charge of demand and another person solely supply. This reduces a lot of the finger-pointing, buck-passing and shoulder shrugging that happens when supply and demand aren’t in harmony. If there’s too much supply (inventory) and not enough demand (sales), both sides come to the table to discuss it. The beauty of including both sides is that everyone realizes it is one business. Problems have a better chance of being resolved when each side understands the other and realizes they share the same goals.

In Vietnam, I never had the opportunity to meet face to face with the clerk who shipped the wrong parts and explain how important his job was not only to the aircrew, but also to the troops on the ground. My experience with supply and demand in Vietnam has made me a better entrepreneur today. And every business can benefit from aligning these two critical components.

One of the best pieces of business advice I ever got was “You can’t do a good deal with a bad partner.”

Having had many partners over the years, I can say that this statement holds true. So I thought I’d offer some personal experiences I’ve had with partners both good and bad.

All Play and No Pay

The first partner is a former CPA who does spectacular pro forma projections. His numbers on the future viability of a real estate project are always well laid out and convincing.

In fact, after first meeting him and his business partner, a Wall Street whiz kid, and looking at some photos of a property they were interested in and an architect’s rendition of what it would look like upon completion, I was sold. I became their money partner.

So far I’ve done three deals with this pair, and to date, we haven’t made a dime. The numbers still look neat and tidy every quarter, just the way a CPA should present the financials. The problem is in execution: The projects never finish on time or on budget. Something always goes wrong, and there’s always some kind of drama — problems with environmentalists, city planners, or banks.

Finally, after years of squabbling, his partner (the whiz kid) left the relationship. The projects of theirs that I invested in are still operating, but to date I haven’t made any money on them.

A Complementary Relationship

The second partner is Ken McElroy, a writer and personal friend. My wife, Kim, and I have made the most money with Ken. There are several reasons why:

• We share the same investment philosophy.

We buy, improve, hold, and refinance. We generally don’t like selling our properties.

• His expertise makes up for gaps in mine.

Ken owns the largest property management company in the Southwest, and his partner, Ross, is a real estate developer. Both men have nearly 20 years of experience in their respective fields.

Because of Ken’s years as a property manager, he has the experience and skill to evaluate the value of an existing property. And Ross has the know-how to bring the reconstruction of properties in on time and often under budget.

Read the rest of this entry »

Sept. 3, 2008
The Arizona Republic

The Valley co-authors of the popular Rich Dad Poor Dad financial series officially are going their separate ways.

Robert Kiyosaki, the corporate face behind the books, on Wednesday paid an undisclosed sum to settle a lawsuit with Sharon Lechter, who had sued her former partner and his wife.

Financial terms were not disclosed and Lechter has sold all of her interests in the Rich Dad Co. to the Kiyosakis.

“This settlement allows us to focus on growing the company well beyond where it is today,” Robert Kiyosaki said in a statement. “The Rich Dad team is dedicated to bringing financial education to people throughout the world.”

Lechter, who was attending the Republican National Convention in St. Paul, Minn., said she was looking forward to writing about financial literacy for families and children on her own.

“I am very pleased with the settlement,” Lechter said. “The last 10 to 11 years were a great time of building a company, and I wish all of us great success in the future.”

Lechter had alleged the Kiyosakis had enriched themselves, diverted assets and wasted money in a business that she claimed to have helped build from scratch. Lechter also had claimed she “often rewrote large sections” of books she and Robert Kiyosaki co-authored.

The Kiyosakis denied the allegations and said if Lechter has been “damaged,” it was caused by her own actions.

Success from the original book catapulted their joint venture, commonly known as the Rich Dad Co., into a multimillion-dollar operation with offices in Scottsdale. The company, founded in 1997, now offers more than 25 financial books that have been translated into 51 different languages in more than 107 countries. The key objective is to achieve wealth.

Lechter, a certified public accountant who lives in Paradise Valley, had wanted a judge to dissolve the joint venture, appoint a receiver and have the Kiyosakis pay compensatory and punitive damages. She left the company last year and legal fighting followed in Clark County District Court in Nevada, where the company is headquartered. A trial was scheduled for Dec. 29.

“It’s good to have it behind us,” Kim Kiyosaki, Robert’s spouse and company co-founder, said in a phone interview. “It truly has gotten our company more focused in what we want to do. There has been some good to come out of it, given all the negativity and angst in a lawsuit.”

In the video, Robert Kiyosaki (of Rich Dad, Poor Dad fame and someone with more knowledge than me) explains exactly why (with a helpful accounting diagram) the house you own is not an asset and, instead, is a liability.

Kiyosaki makes some very helpful points, such as:

• People today call their liabilities “assets”;
• The concept that an item that takes money out of your pocket is a liability, and an item that puts money in your pocket is an asset; and
• The power of cash flow.

It’s a short and very insightful video.  Enjoy!