Wisdom of Rich Dad

A familiar acronym for job is just over broke. Oftentimes, it’s easy to get caught up in a job as a means of security or money. However, the rich use jobs as learning opportunities to develop necessary skills to be successful.

As Kiyosaki recommends in the book, take a long view of life. Instead of simply working for the money and security, which are important, take a second job or take classes that will teach you a skill.  He goes even further to describe the three main management skills necessary for success:

1.    The management of cash flow (assets and liabilities)
2.    The management of systems (basic economic theory, political landscape, etc.)
3.    The management of people

If one is able to focus getting jobs that develop these three major skills sets, he is well on their way on the path to success. After sharing these main lessons of the rich, Kiyosaki goes a step further by addressing the 5 main obstacles keeping people from actually following through.

1.    Fear- Overcoming the fear of losing money.  The fear of losing money is real. Everyone has it. The difference becomes how a rich and poor person handles the fear. Wealthy individuals use failure as a teaching moment and aren’t afraid to fail.

2.    Cynicism- This deals mostly with those around you. Follow your own path, because at the end of the day, wealthy individuals are a small percentage who go against the grain and don’t follow the crowd

3.    Laziness- One must be willing to put in the time and effort to build up their financial knowledge. This means being selfish and taking time out to build one’s personal wealth.

4.    Bad Habits- Reducing expenses is easier said than done, but one must be willing to break those bad spending/investing habits in order to be successful

5.    Arrogance- Always be willing to reach out to those who are successful and those you want to emulate. To become wealthy, it’s often a collaborative effort, bouncing ideas from prospective mentors.

It just takes personal initiative to further develop the financial knowledge and management skills necessary for success. As Rich Dad, Poor Dad shows, higher education or a great job doesn’t guarantee success but rather the skills and knowledge you are able to apply with your income separates the lower and middle class from the wealthy.

Years ago, I heard a lecture by author Robert Kiyosaki, who co-wrote the best-selling book Rich Dad, Poor Dad.

The lecture, and the book, was all about the various ways you could invest to make money, but in amongst all of that, Kiyosaki broached the subject of leadership.

While I never followed any of his investment advice, I’ll always remember what he said about leaders.

From his perspective, most of those who masquerade as leaders are, in fact, nothing more than managers. Leader and manager, he explained, are two completely different mindsets.

Leaders by nature look to expand boundaries and explore new ideas while managers look to confine and contain. Leaders are not threatened by change, but managers are; managers say “why” and leaders say “why not!”

A leader is someone who can create an environment that helps you overcome your fears; a manager plays on them to maintain some sense of control.

These are just some of the fundamental differences, but you get the drift.

Politics post-9/11 was made for managers. Our fears came to the surface and the advantages of being corralled into a place where we’d trade freedom for security was the only solution being offered.

The machines behind both major parties then set about creating and presenting politicians in the manager mould because they were obviously going to be vote winners.

Parliaments around the country are now full of them, which is bad news, really, because that research from David Chalke would suggest they are not what we want any more!

Could our apparent dissatisfaction with the manager mentality that permeates our politics be one reason why the Greens and independents are attracting such support?

Like the Queen Mary, the political machine doesn’t turn quickly, and I don’t know if we’ll ever see another Don Dunstan or Sir Thomas Playford in South Australian politics, but it’s going to be fascinating to see if any one is game enough to try.

1. Start small. Business schools like to tell you that you need to “go all in” when you start. Not true. You have a much better chance of succeeding if you start small. Plus, always have a fallback in case your new venture takes a while to get going, or simply doesn’t work. When I started out, I kept my full time job and started my business on the side.

2. The best business partner is no partner. When you have a partner or even an investor, you spend more time discussing and negotiating and less time in action. Business is serious and operates best with one clear leader. Your energy should be spent building the business, not worrying about the needs and feelings of a partner.

3. Solve your own problems. Don’t automatically look to outside resources. Try to solve the issue within. By training yourself to solve your own problems, your solutions will be uniquely suited to your situation, business and industry, and will quite often provide you with breakthrough advantages. You will not succeed by simply following others.

4. Don’t fight fate. Once you’ve immersed yourself in your business, you’ll start to see opportunities you never knew existed. Be ready to act on new and different opportunities when they arise. Do things differently than the other guy.

5. Do you feel lucky? Business schools teach strategy and business planning, but most entrepreneurs will tell you that at least half of what they’ve accomplished is due to luck, not strategy. Skill comes by having the talent to spot lucky breaks when they arise and being willing and nimble enough to take full advantage of them.

Like learning how to swim or riding a bike, it reaches a point where theoretical “why” and “what” should be followed by practical ‘how’. What you have learnt will be made permanent when you put it in practice.

 In the process of practising what you have learnt, you will develop yet more knowledge and skills that might have been missed during theoretical lessons.

Investing in shares is one of such skills requiring putting words into action, walking the talk. It is an exercise forming part of our broader financial planning. There are two ways which can be used to start the process: Invest the lumpsum  in one or few companies, or invest on a regular basis for a prolonged period.

The former method of investing is possible where you have significant cash from either of the following sources; past savings, retirement funds, inheritance, liquidation of other assets, or any other legitimate windfall gains (lottery).

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Right now, you are playing in the biggest, most important game of your life. How are you doing?

That game is “The Money Game” and you’re in it because you are making financial choices each and every day. You can’t opt out of this game. You can’t sit on the bench or go back into the locker room. You’re out there on the Money Game field, pitted against millions of other players (someone had to tell you).

Since you’re in this game and you can’t opt out, it would seem like a good idea to know how to play the Money Game… and win.

Three Elements

The Money Game (like all games) has three basic elements. The first one is offense. In the Money Game, the offense includes income, savings and investment choices. When you do well on offense, you score points and improve your position. That’s how it works in the Money Game, too.

Then there’s the defense – protecting what you already have. In the Money Game, that can involve insurance, cash reserves or legal protections like an estate plan.

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So you want to start investing in real estate do you? Well good on you for making that decision! Now where are you going to start? My suggestion is to find some education first and then begin your journey to financial freedom or to an extra income. Whatever it is you are looking at real estate to do for you is your choice.

Just let me ask you one question. What is going to be your area of focus? This could be one of the most important questions you need to ask yourself before you get started investing. Why you ask? A focused investor is a successful investor. Take Donald Trump for example, his focus is development, you don’t hear of him doing lease options, wholesaling, fix and flips, buy and hold, land development, commercial real estate and development, do you? More than likely not, his focus is development. Don Campbell, his primary focus is long-term buy and hold properties.

My mentor Ross Lightle’s primary focus is lease options. Robert Kiyosaki’s primary focus is buy and hold properties. Ron LeGrand is focused on wholesaling. Do you see the trend developing here? All of these investors above are highly successful, and they all have their areas of focus. There is a reason they are successful. They chose an area of focus, became an expert in it and took off to the skies. Now I am not saying these areas of focus are the only areas of real estate these investors work in, I am saying it is their main focus.

So take some time and decide what your main focus is going to be. Once the decision is made, stick with your focus and become an expert in that area of focus. And when people ask you what kind of real estate investing you do, be specific, “I buy single family homes and hold for long term growth.” Now you can get a lot more specific than that (how many bedrooms, what size, what city, what area in that city etc…), that is a whole other blog. For now, determine where you want to focus on real estate investing, become and expert in it, and go for it!

A little tip, make sure the area of focus is something you are passionate about and enjoy, this will also make a world of a difference. If you are not passionate about your area of focus or do not enjoy it, when the going gets tough for you, you will probably get going. If you are passionate about your focus area and enjoy it, the speed bumps you encounter won’t be a big issue.

So before you start investing in real estate, take the time to determine your area of focus and then put some rocket fuel behind it and take off! It will be an important decision you make in your real estate investing career.