Wisdom of Rich Dad

Call it journalism, or call it joblessness or just plain curiosity, but in the past two weeks, I went to two free “workshops” on Real Estate investing – one by the Rich Dad, Poor Dad author Robert Kiyosaki’s team, and one by Donald Trump’s team. Having time in the middle of the day means that I can attend programs that I wouldn’t be able to, if I was busy at work.

I claim it was journalistic purposes because I have no interest in being a real estate investor whatsoever. I don’t even own a primary residence. But I went because I was very curious about the people who attend these seminars (in the middle of weekdays) and I wanted to study the presenters and hey, it was free.

These were both 90 minute sessions, and as I learned the main intent of these workshops was to get people to sign up for 2 and 3 day advanced seminars, where they teach you lots of Real Estate techniques in great detail.

Here are some of my impressions and notes from the free pre-class:

• Behold the power of Branding. Thanks to the popularity of TV shows (The Apprentice) and books, people like Donald Trump and Robert Kiyosaki have become household names. They are able to capitalize on that by essentially franchising themselves. Trump’s is called Trump U., and Kiyosaki markets it as “Rich Dad Education.”

• Though it is not the intent, you can learn a lot about good presentation techniques by studying these presenters. Their task is to take disbelievers (who are most likely not economically well off and quite possibly unemployed) and try to sell them expensive course packages. The presenters were without exception great sales people.

• One clever technique I saw was to ask everyone to hold all the questions till the end. This is because they don’t want disbelievers disrupting the sales pitch, casting doubts.

• They will repeatedly make fun of anyone who has any doubts whatsoever.

• These folks must have all gone to the same NLP techniques class, because they all use it. Programming the audience first and then repeatedly making them shout out the same words and phrases over and over again. “Because I am going to help you make what?” and the real estate market has been really going where? and so on. (Correct responses: “Lots of money” and “Down”)

• They will pretend to get very angry when the audience doesn’t respond to moronic questions. “So does working for only 4 hours a week sound good to you?” “Would you like to make $20,000 on your very first deal?” (Hint: You are supposed to scream your Yes very loudly.)

• They make fun of books and CD’s that you see on late-night TV infomericals, and yet they try to tempt you with books that you absolutely must own and will get only if you attend the 3 day seminar.

I am really not knocking these multi-day seminars. They might be just the thing for people who have the willingness, but not the know-how. I approve of a lot of what they say – yes Knowledge is very important, and yes everyone has to take action if they are serious about improving their lot in life. I know that these Real Estate techniques (pre-foreclosure, short sales etc.) do work for some, and that the fees for these 2 and 3 day classes will pay for themselves for some people.

I just don’t approve of how easy they make it sound.

Flexo takes issue with Robert Kiyosaki’s definitions of asset and liability:

An asset is something that puts money in my pocket.

A liability is something that takes money out of my pocket.

I can see Flexo’s point in that Kiyosaki is recasting the definition of the words.  The proper financial terminology would say that:

An asset is something that is owned, while

a liability is something that is owed.

I live in a house which has a mortgage against it.  I don’t really own the house yet, because I still owe tens of thousands of dollars on my mortgage.  (Even after that, I can readily find out who the real owner is if I fail to pay my property taxes.)  The home itself has some value.  I can sell it to someone for money.  It’s an asset in the financial sense of the word.  The mortgage loan is owed to the bank.  It’s a liability in the financial sense.

At the same time, though, I can see the merit in Kiyosaki’s definitions, as they’re more practical.  The financial definitions deal with cash value, while Kiyosaki’s deal with cash flow.

In terms of cash flow, my mortgage is of course still a liability for me.  But, my house itself is also a liability.  Maintaining it, removing mold, keeping it warm, keeping it clean, keeping it looking pretty, keeping it dry, etc., take a lot of money.  A house deteriorates just like anything else if it’s left alone.

Going back to the financial definition for a second, I can rephrase this statement by saying that the value of my asset, my house, will go down if I don’t take care of it.  It costs me each month so that the value of the asset isn’t affected by my carelessness.

In the cash flow sense, the house would be an asset only if I were renting it out for more than it cost me to maintain it.  That is, only if it put money in my pocket.

I’m not sure that clears things up at all.  If anything, it makes things more confusing.  If so, then I’ve accomplished something.   Seriously, though, I do like Kiyosaki’s definitions because they bring the focus to the cash flow.  If you buy a boat, you have an asset, but while you own it it’s a huge liability — unless you get the credentials to boat people around for hire, in which case it becomes an asset.  Thinking about purchases this way brings the spotlight to the lifetime cost (or lifetime earning potential) of an item.  Maybe fewer people would buy boats if they knew that BOAT stands for “bring on another thousand.”

Anyway, what are your thoughts?

Life is like a game of chances. You can win or you can lose. Everyday, we are faced with challenges, which can either lead us to become a winner or a loser. Learning financial literacy is essential to increase your chances of winning the game of life. Consequently, it is best to play the cash flow game to gauge how well did you grasp the concepts in winning the game of money.

Recently, I watched another video again of Robert Kiyosaki as now he talks about the so-called Game of Money where he described the four quarters of financial life dividing it into 10-year horizons and asked, “at which age will you win the game of money?”

Let’s view the four quarters of life with some inputs so that we know how will we win the game of money and retire as young as we can be.

1st Quarter (25-35 years old) – By this age, you’re probably done with your college education. Most of us start our careers when we land on our first quarter of life. We want a high-paying job, buy a car, have our credit cards and enjoy life. While many of us just want to enjoy life after graduation, it is advisable for us to:

Savings should be our top priority. When you receive your paycheck, take out a certain amount and deposit it in a savings account. Once you accumulated enough savings, transfer the bulk of it into a higher yielding deposit account. Compound interest will help it to earn more interest.

Get Insurance. Get insurance especially if you now have family and kids to support with at this age. The higher and the healthier you are, the cheaper insurance costs will be.

Learn Investment Options. Think of investment options where you can invest your extra cash. You can invest it in stocks, mutual funds, real estate, bonds, etc. Start to educate yourself financially.

2nd Quarter (35-45 years old) – By this age, you are probably at the top of your career and definitely earning much more. But this quarter may also be the time when you’re starting to have your own family so that also means higher expenses. It is advisable to:

Plan for children’s future. You are now working not just for yourself but also for your children. Plan for your children’s future by getting an educational plan or open a time deposit that’s under your children’s name and deposit an amount into it regularly.

Make sure you have enough for your emergency fund. Emergency fund is amount totally dedicated to emergency expenses such as health problems, etc. A good amount would be equal to six months up to 1 year of your monthly income. Place it in an easy accessible type of investment so that when your need arises, you can easily withdraw it.

Have a business. By this age, you could have probably known a lot of networks from friends, colleagues, acquaintances, etc. And since you’re earning much higher, then you could start your own business. Gauge yourself on what business you should start. Examine your passions and skills in choosing the right business for you.

Half Time – Kiyosaki referred after the 2nd Quarter as half time because you are in the middle before retirement. It’s also called as “mid-life crisis”. It is now time to examine yourself. You are not getting any younger anymore. Have you had enough savings to cover for your future? What did you accomplished in your life?

3rd Quarter (45-55 years old) – By this age, you are probably on top of you career, possibly a manager or vice president of the company. You could be earning more and your children may be in their college years or are already working. Retirement is just around the corner waiting for you. In this quarter of life, it is advisable to:

Allocate much of your income to investment capital. Review your investment portfolio and ask yourself if you need to transfer your funds into a higher earning investment scheme. Just be sure to have a through due diligence before you transfer your funds.

4th Quarter (55-65 years old) – By this age, your children may well be on their own now with their respective families already. You are now at the age where you can retire. You may choose to still be employed but it should not be on stressful work as you are now prone to health problems brought about by old age, which means higher health care expenses. In this age, it is advisable to:

Protect your capital. Try to preserve your capital so that you can live with on its interest. And make sure to make your last will in order.

Over Time – Kiyosaki referred after the 4th quarter as over time. If you haven’t had any accomplished things when it comes to your financial future, then that would be a great problem because sooner or later you would be “out of time” and the game of money will be “game over”.

We don’t want to retire old. As much as we could, we want to retire young so that we can still enjoy the things that we want. How could we enjoy it if we are already old with a lot of health problems associated with old age?

Personally, just like what Kiyosaki did retiring at the age of 47, I also want to win the game of money and retire on the second quarter of life. I want to enjoy life as early as I could without having to worry on going or having to work. And that is the very essence of financial freedom.

As the saying goes, “the early bird catches the worm”, one of the things that I learned in the journey towards financial freedom is to start early to retire early. The earlier we started saving money, the earlier we started our financial education, the earlier we started to invest, we can be guaranteed that we can also retire earlier.

Why not? Retiring early is one of the best options of a lot of people. Who wants to work for the rest of their lives? Who wants to be bothered by lots of worries in their work? And who wants to encounter a lot of stress that their health will be put into danger?

Personally, I would like to retire in the age of 40s. Recently, I wrote an article about the four quarters of life and how to win the game of money. No one wants to retire at the age of 60s because they cannot really enjoy the fruits of their labor. At that age, a lot of health problems will begin to manifest. Definitely, their savings will just be used for medicines to treat these health problems brought about by old age. As they have said, “in our youth, we spend our health to gain our wealth” but “as we get older, we spend our wealth to gain our health”.

What are the things that we should start early to retire early?

Learn how to save properly. The earlier we started saving, the larger our savings can be over time. Just imagine if you regularly save your income, it will accumulate over time. With the power of compound interest, our savings can be enough to lead us to the next step.

Learn how to invest properly. When you already have enough savings that already covers your emergency fund, then assess yourself to the next level on where can you invest your extra savings to earn more income for you. Learn how to invest in the stock market, in the real estate, in mutual funds and trust funds, and in other investment options where you can park your extra cash.

Build Passive Income. The secret of retiring early lies on building a stream of passive incomes. The earlier you started building passive income, the higher your chances to retire early. Look for opportunities along the way that will let your money work hard for you. This what makes rich gets richer.

Focus on that goal. Read some articles on self motivation. Surround yourself with people with the right midset and with the same goals as yours and together you will walk the way towards a common goal helping each other in every step and in every challenge that you will encounter along the way. I believe in the saying, “tell me who you’re friends are and I’ll tell you who you are”. Determination and focus is the key to become successful.

Play the cashflow game. Play the cashflow game by Robert Kiyosaki. It’s one way of increasing your financial intelligence. Test your skills against other competitors to get out of the rat race earlier. It’s definitely a fun and learning game.

Finally, you can read on Singapore’s Youngest Millionaire Adam Khoo in his Million Dollar Interview. Let’s learn from a very successful person who became a millionaire at a very young age of 26 and now a multi-millionaire.

So let’s start early to retire early! It’s now or never. We must choose the right choice.

In his Rich Dad book series, Robert Kiyosaki trumpets the benefits of investing, especially those of real estate investing. Those include tax benefits, and the ability to have your money go to work for you without your lifting a finger. It sounds wonderful, doesn’t it? The idea that you can turn a dollar into two just by placing it in what can seem like a magical realm can seem very enticing.

In order to actually turn a good idea into money in your bank account, however, you have to know a little something about how the magic works. It is a good idea, for instance, to take apart this term “real estate.” Just what is real estate, and what are the types of real estate investing that are open to you?

“Real estate” is a term that refers to a piece of land and everything that sits on it, usually meaning structures. In terms of investment, its value is affected by local market conditions more than global conditions. There are several different ways to invest in real estate.

Real Estate Investment Trusts (REITs) allow you to make money by investing in real estate, either by owning the properties themselves or by owning the mortgages on them, or to do a combination of both. The benefits of this type of investing are high yields and tax considerations. This is also a highly liquid type of investing, which means that it is easily converted to cash.

In a real estate partnership, you are pairing with (who or what?) in order to make money from existing structures or to build new ones. You can even make money off the sheer appreciation of undeveloped land itself. This is a good bet because of high growth potential and tax benefits (shelter).

The rental of vacation property is pretty self-explanatory. Your vacation property is one that is used for recreational purposes and is not your primary residence. (Define primary residence.)

Rental property is another almost self-explanatory concept, as we have all done business with landlords at some point in our lives. However, there may be a difference between residential and business rental property.

You may also invest in raw, or undeveloped, land.

It is a good idea to learn about each type of real estate investment to determine which yields the greatest benefits, determined by your particular needs. Kiyosaki named tax benefits as a good reason to become a real estate investor. After all, money you keep in your pocket is just as good as money earned.

If you are particularly interested in pursuing real estate investment because of tax benefits, you may even wish to become a real estate professional, as the IRS allows people who spend at least 750 hours a year to have nearly unlimited tax deductions. If you are not considered a professional, and your salary is high, that can actually cost you deductions on your real estate. You must have the time to participate in your real estate activities yourself, even if you have hired another real estate professional, to qualify for all tax benefits.

Alex Anderson

http://www.articlesbase.com/real-estate-articles/real-estate-investing-which-approach-is-right-for-you-124853.html

Your wife clips coupons to make ends meet, while you think now is the time for you to buy that big screen TV.

He said couples argue a lot about money. “When it comes to money, nobody ever agrees. And in my family, my wife calls me Imelda Marcos because I like shop and buy clothes,” says financial expert and “Rich Dad, Poor Dad” author Robert Kiyosaki.

But his wife Kim likes to make money. “But we have this agreement: I can spend whatever I want as long as I make the money first. So that means, invest my money.”

His example was a recent car purchase. “Like when I wanted a new Porsche, I had to go buy a piece of real estate and the piece real estate bought my Porsche for me. So my liabilities buy my assets. That’s a rule in our family.

Now you may not be able to do that, but Kiyosaki said you and your mate should learn about money together by reading books and attending seminars. He said that allows you to have calm, rational discussions about your finances.

“I would rather spend my time learning how to, not only make my money, but leverage my money to make more money so I don’t have to clip coupons or never do I ever have to say I can’t afford something.”

Kiyosaki said most couples don’t take the time to learn all they can about money. “Most people invest money. But they don’t invest any time in education and unfortunately then couples fight. You know the number one cause of divorce is money. It damages families and all this. Yet they won’t invest anytime in going to the library and getting a book and studying it together.”

Here’s how the money discussions go in Kiyosaki’s family: “My wife and I often read articles together. We go to seminars together and we talk about money like mature individuals. We don’t fight about money, but unfortunately, that’s what most people do.”