Wisdom of Rich Dad

By Marcia Griffin

The whole financial world seems to be in turmoil, but any superficial analysis of the problem seems to come up with one reason for this chaos – bad debt.

Bad debt is not only the sum total of debt but also the type of debt – risky debt, debt that can’t be collected on – and if we dig further it seems that banks and lending institutions have been allowing customers to borrow more than they should have. In turn consumers have become addicted to debt and now the crunch has come.

So the lessons are there – really tough ones, and as consumers and business leaders know there are all sort of ratios that guide debt management. But it has not prevented some major meltdowns.

As consumers there is very little advice available about debt. Is that because it is in the interests of financial institutions and businesses to encourage spending and not to warn about over-exposure to debt?

You could say “buyer beware” – but looking at the level of consumer debt it is apparent that the consumer has not been sufficiently aware and those buy now, pay no interest advertisements continue not only to go to air but also to work.

It seems as a society we are addicted to so many must-have items that we simply continue to live above our means, borrow beyond our means and are beholden to institutions who are doing the same thing!

The adage from Robert Kiyosaki to borrow only for assets and cash flow seems very sound in these times – we just need to be clear about the true value of the assets.

There are some truly sad stories that emerge in such difficult times, and it is so easy to be caught in the debt trap. But I feel as consumers we need to seek better value and, without wanting to sound like a total puritan, put the brakes on unnecessary expenditure.

For business the same principles should apply, but be careful not to cut down in areas that add value to your business. I hear CEOs say “we will need to cut marketing, cut people, cut training”, but I think we need to cut waste and get very clear about what we need to stop spending on and what we should be investing in.

It can be a great mistake for a business to slash its marketing budget; a bit like a consumer cutting down on healthy food.

Many well run businesses can use this time to gain market share as poorly run businesses do not survive tough times!

As consumers and business leaders, we simply need to become more discriminating in our spending, making sure we get value for our dollar and that we only cut back on the high risk areas in business and unnecessary items as consumers.

The world is not about to stop, but these are times for great lessons and clear thinking.

~ Robert Kiyosaki

What do higher gas prices mean? From a macro view, it means the end of the Industrial Age and the beginning of the Information Age. So businesses that operate in an Industrial Age context, such as airlines and auto manufacturers, are hurting.Higher gas prices also mean the rich are getting richer and the poor are getting poorer. A dollar means a lot more to a person making $50,000 a year than a person making $500,000. So when a gallon of gas goes from $3 to $4, the dollar increase hits lower income people harder. A dollar increase means people who once drove their car to work now ride the bus or train. For these people, a $1 increase in the price of gas can mean a decrease in their standard of living.

For entrepreneurs, higher gas prices mean you have to become a better entrepreneur. For example, if your company produced one pizza per hour in 2007, you’d better be producing 10 pizzas per hour by 2009. And not only do you have to produce 10 pizzas per hour, but you also have to sell 10 pizzas per hour. Simply buying a faster pizza-making machine or hiring more pizza makers won’t cut it. 

This means you need to become a better leader of people. If you have workers who rate a five on a scale of one to 10, you must inspire them to become sevens or eights. This may require further training, demotion or termination. 

In the Industrial Age, workers came to expect higher pay for seniority, loyalty and longevity–regardless of productivity. And older workers were valued. In the Information Age, if older workers’ speed and skills don’t keep up with the accelerating pace of our times, seniority, loyalty and longevity may become liabilities. Steady performance may be a liability if increased performance is required. There is a difference between employees working for a one-pizza-an-hour organization and an organization operating at a 10-pizzas-per-hour pace.

If you, as the small-business owner, have Industrial Age values, then you’re the liability. If you have Industrial Age ideas, you put your workers at risk. Higher gas prices mean you and your organization must do much more for much less. You must become a bolder leader, not a better follower.

In my organization, higher gas prices have caused us to use videoconferencing more and airline travel less. Higher gas prices have pushed us to expand through franchise owners instead of more employees. Higher gas prices have moved us to collaborate more and compete less. In other words, higher gas prices have helped make my company richer, because higher gas prices forced me to become a better entrepreneur. What do higher gas prices do for you?

I have to admit, I do it too. I complain. Seek better. Complain again. Ridiculous cycle. It’s more of a condition really. A humanity disease, I think we are born with it. It is almost as physical and useful as a regular appendage. Don’t get me wrong, being dissatisfied with here, has got us all to a lot of great theres. Otherwise America would still be in dreary old England and we wouldn’t have the 4th of July.

Most progress has something to do with wanting more, better, different. But it isn’t always good. People jump from relationship to relationship, place to place seeking what they didn’t find in the previous opportunity. It’s worth considering, for a moment, that maybe we don’t take full advantage of the opportunities that exist, right where we are.

Financially, we are always striving for more. No matter how big the raise, somehow we are still always just scraping by. A very particular group of dissatisfied individuals resides in the settlement recipient community. Those are the people who are receiving payments spread out over time. Impatient for the money, sometimes justifiably so, they cash in their future payments to get their money sooner. So instead of receiving the regular payments spread out over time, they choose to accelerate their payout. Of course, the reason is they think it would be better that way.

It isn’t always better to unstructure your payments. Just like it’s not always better to get a new car, move to a new place, and get a new love interest. There is a healthy time, motivation, and method for improving your situation, be it financial or otherwise. Consider carefully, take a moment and consider, if the way the things are, might not be good enough.

Jason Rigler
Settlement Advocate and consultant for Prosperity Partners Customer Service Department.

As the experts argue about the definitions of a recession, the reality is that things are definitely not booming. That hasn’t dampened America’s entrepreneurial spirit, but it’s made people more cautious. So should you consider starting a new venture in today’s economic climate? 

“Many people think that starting a new business in a slowing economy doesn’t make sense, but for many businesses, there are advantages,” says Peter Justen, is president and chief executive officer of MyBizHomepage. Justen says there are definite perks to starting a new business when the economy isn’t great; you can:

Negotiate for a great deal on the lease.  Real estate is slowing in most regions of the country which allows for small businesses to get retail, office and warehouse space at reduced costs.  “Do your homework,” Justen advises, “and study the past rental rates and current market conditions before you negotiate.”  In a tight economy, it’s also easier to negotiate for landlord build-outs, signage, and parking.

Find great used furniture/fixtures, office equipment. Take advantage of the many companies who ramp up too fast and find themselves with offices of new furniture and equipment to sell at a fraction of what they paid.  This is a great time to negotiate copiers, fax machines and computer equipment.

 Capitalize on less business competition. When the economy tightens, fewer people are likely to start businesses.  This means that you can do a competitive regional analysis and know that your niche is protected, for a while at least. Grand openings, ribbon cuttings and ground breakings are likely to get a lot more media and general attention.

Make the most of less advertising competition and reduced rates.  When you spend money to advertise your new company, you’ll have greater visibilitysince there are fewer companies advertising in a slow economy.  You should also be able to negotiate advertising rates.  

Benefit from reduced marketing costs.  In a down economy, writers, designers, and agencies are often looking for work and are able to offer reduced rates.

Pursue available media coverage.  Local press will be more likely to cover a start-up when it’s one of just a few.   When business slows down, it’s more difficult for reporters to find good stories.  Send story ideas and pitches to your local business reporters.

Take advantage of greater loan availability.  With fewer start-ups there are fewer companies vying for start-up loans from banks and Small Business Administration grants. While a tighter economy means tighter lending too, less competition should make it easier to get money from lending institutions, assuming you have stellar credit.

Scout out bank rates and services.  Shop your local banks for the best rates and services.  You can often negotiate lower interest credit cards and corporate accounts.

Profit from an enhanced employment pool. In tough times, businesses lay off good employees who are often willing to accept pay cuts for employment with a company that offers other benefits—improved commute, improved lifestyle, interesting work, etc.

Network harder than ever. All start-ups require hours of long, hard work. A down economy is no exception—quite the opposite.   The advantage though, as one of only a small number of start-ups, use this period of downturn to get out and network with all of the companies and executives who can be mutually beneficial to your business.  You have a window to take advantage of the down time and fully maximize your efforts.  For instance, in a slow economy, you may find that executives, bank officers, etc. you wouldn’t normally have access to are attending local chamber breakfasts and business receptions.  Use this to your full advantage.

Many are facing tough times with the stock market and economy being tumultuous and unpredictable.

To help you through these times we are speaking with Ethan Ewing, President of Bills.com and Kim Kiyosaki, author of Rich Woman and co-founder of The Rich Dad Company.

Ethan is going to show you how to get out of debt and stay out of debt while Kim is going to share some financial advice on how to stay cash flow positive.

Download mp3 – Tough Times Equal Tough People [55:17m, 12.6MB]