Tag: keytosuccess

Rich Dad Poor Dad | S5 – E13 | Understanding | Get Rich Quick? TERRIBLE Decision

Rich Dad Poor Dad | S5 – E13 | Understanding | Get Rich Quick? TERRIBLE Decision

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The reason I started with the story of the richest men in America
is to illustrate the flaw in believing that money will solve all problems. That is why I cringe whenever I hear people ask me how to get rich quicker, or where they should start. I often hear, “I’m in debt, so I need to make more money.”

Rich Dad Poor Dad

But more money will often not solve the problem. In fact, it may compound the problem. Money often makes obvious our tragic human

Cash flow tells the story of how a person handles money.

flaws, putting a spotlight on what we don’t know. That is why, all too often, a person who comes into a sudden windfall of cash—let’s say an inheritance, a pay raise, or lottery winnings—soon returns to the same financial mess, if not worse, than the mess they were in before. Money only accentuates the cash-flow pattern running in your head. If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending. Thus, the saying, “A fool and his money is one big party.”

Today, doctors face financial challenges I wouldn’t wish on my worst enemy: insurance companies taking control of the business, managed health care, government intervention, and malpractice suits. Today, kids want to be famous athletes, movie stars, rock stars, beauty queens, or CEOs because that is where the fame, money, and prestige are. That is the reason it is so hard to motivate kids in school today.

They know that professional success is no longer solely linked to academic success, as it once was.

Because students leave school without financial skills, millions
of educated people pursue their profession successfully, but later find themselves struggling financially. They work harder but don’t get ahead. What is missing from their education is not how to make money, but how to manage money. It’s called financial aptitude—what you do with the money once you make it, how to keep people from taking it from you, how to keep it longer, and how to make that money work hard for you. Most people don’t understand why they struggle financially because they don’t understand cash flow. A person can be highly educated, professionally successful, and financially illiterate. These people often work harder than they need to because they learned how to work hard, but not how to have their money work hard for them.

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Rich Dad Poor Dad | S5 – E12 | Assets vs. Liabilities | What’s Your Cash-flow Pattern?

Rich Dad Poor Dad | S5 – E12 | Assets vs. Liabilities | What’s Your Cash-flow Pattern?

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Are you a poor, middle, or rich cash-flow possessing individual?

Well, let me try to break this down in blog form. If you want the amazing podcast, make sure you scroll down to the bottom for it.

Cash-flow of a poor person

Your job gives you your salary, which then goes to your expenses: taxes, food, transportation, clothes, etc. That’s all you have. You have zero assets, and fortunately, you have zero liabilities.

Cash-flow of a middle-class person

Your job gives you your salary, but instead of going to expenses, it goes down to your balance sheet in the category titled “liabilities.” This has your mortgage, car loans, credit card loan debt, school loans, etc. After you pay for your liabilities, then the remaining money goes back to your expenses: taxes, etc.

Cash-flow of The Rich

You do not have a job or salary. Better yet, your money starts in your balance sheet in the assets category which has real estate, stocks, bonds, notes, intellectual property. Those assets never get paid with liabilities. In fact, it goes back up to your income statement, which is the rental income, dividends, interest, and royalties. The only monthly expenses you have are taxes and a possible mortgage payment.

Which one are you?

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Rich Dad Poor Dad | S5 – E11 | Assets vs. Liabilities | Cash-flow Pattern of an Asset

Rich Dad Poor Dad | S5 – E11 | Assets vs. Liabilities | Cash-flow Pattern of an Asset

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Rich dad believed in the KISS principle—Keep It Simple, Stupid (or Keep It Super Simple)—so he kept it simple for us, and that made our financial foundation strong.

So what causes the confusion? How could something so simple be so screwed up? Why would someone buy an asset that was really a liability? The answer is found in basic education.

We focus on the word “literacy” and not “financial literacy.” What defines something to be an asset or a liability are not words. In fact, if you really want to be confused, look up the words “asset”

Rich Dad Poor Dad

An asset puts money in my pocket. A liability takes money out of my pocket.

and “liability” in the dictionary. I know the definition may sound good to a trained accountant, but for the average person, it makes no sense. But we adults are often too proud to admit that something does not make sense.

To us young boys, rich dad said, “What defines an asset are not words, but numbers. And if you can’t read the numbers, you can’t tell an asset from a hole in the ground.” “In accounting,” rich dad would say, “it’s not the numbers, but what the numbers are telling you. It’s just like words. It’s not the words, but the story the words are telling you.”

“If you want to be rich, you’ve got to read and understand numbers.” If I heard that once, I heard it a thousand times from my rich dad. And I also heard, “The rich acquire assets, and the poor and middle class acquire liabilities.”

Here is how to tell the difference between an asset and a liability. Most accountants and financial professionals do not agree with
the definitions, but these simple drawings were the start of strong financial foundations for two young boys.

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Rich Dad Poor Dad | S5 – E9 | A Job is a Short-term Solution to a Long-term Problem

Rich Dad Poor Dad | S5 – E9 | A Job is a Short-term Solution to a Long-term Problem

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“Remember what I said before: A job is only a short-term solution to a long-term problem. Most people have only one problem in mind, and it’s short-term. It’s the bills at the end of the month, the Tar Baby. Money controls their lives, or should I say the fear and ignorance about money controls it. So they do as their parents did. They get up every day and go work for money, not taking the time to ask the question, ‘Is there another way?’ Their emotions now control their thinking, not their heads.”

“Can you tell the difference between emotions thinking and the head thinking?” Mike asked.

Rich Dad Poor Dad

The absolute TRUTH! I’ve never heard it put so eloquently. A job is a short-term solution to a long-term problem. Genetics maybe? Mother did the same thing — work hard for a dead end check and pay all the bills.

Why Teach Financial Literacy

Whenever I speak to groups of people, they often ask what I would recommend that they do. “How do I get started?” “Is there a book
you would recommend?” “What should I do to prepare my children?” “What is your secret to success?” “How do I make millions?”

Whenever I hear one of these questions, I’m reminded of the following story:

The Richest Businessmen

In 1923 a group of our greatest leaders and richest businessmen held a meeting at the Edgewater Beach hotel in Chicago. Among them were Charles Schwab, head of the largest independent steel company; Samuel Insull, president of the world’s largest utility; Howard Hopson, head of the largest gas company; Ivar Kreuger, president of International Match Co., one of the world’s largest companies at that time; Leon Frazier, president of the Bank of International Settlements; Richard Whitney, president of the New York Stock Exchange; Arthur Cotton and Jesse Livermore, two of the biggest stock speculators; and Albert Fall, a member of President Harding’s cabinet. Twenty-five years later, nine of these titans ended their lives as follows: Schwab died penniless after living for five years on borrowed money. Insull died broke in a foreign land, and Kreuger and Cotton also died broke. Hopson went insane. Whitney and Albert Fall were released from prison, and Fraser and Livermore committed suicide.

I doubt if anyone can say what really happened to these men. If you look at the date, 1923, it was just before the 1929 market crash and the Great Depression, which I suspect had a great impact on these men and their lives. The point is this: Today we live in times of greater and faster change than these men did. I suspect there will be many booms and busts in the coming years that will parallel the ups and downs these men faced. I am concerned that too many people are too focused on money and not on their greatest wealth, their education. If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer despite tough changes. If they think money will solve problems, they will have a rough ride. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.

So when people ask, “Where do I get started?” or “Tell me how to get rich quick,” they often are greatly disappointed with my answer.
I simply say to them what my rich dad said to me when I was a little kid. “If you want to be rich, you need to be financially literate.”

That idea was drummed into my head every time we were together. As I said, my educated dad stressed the importance of reading books, while my rich dad stressed the need to master financial literacy.

Rich Dad Poor Dad | S5 – E8 | Should Prices Go Up?

Rich Dad Poor Dad | S5 – E8 | Should Prices Go Up?

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“Because it is ignorance about money that causes so much greed and fear,” said rich dad. “Let me give you some examples. A doctor, wanting more money to better provide for his family, raises his fees. By raising his fees, it makes health care more expensive for everyone.

It hurts the poor people the most, so they have worse health than those with money. Because the doctors raise their fees, the attorneys raise their fees. Because the attorneys’ fees have gone up, schoolteachers want a raise, which raises our taxes, and on and on and on. Soon there will be such a horrifying gap between the rich and the poor that chaos will break out and another great civilization will collapse. History proves that great civilizations collapse when the gap between the haves and have-nots is too great. Sadly, America is on that same course because we haven’t learned from history. We only memorize historical dates and names, not the lesson.”

“Aren’t prices supposed to go up?” I asked.

“In an educated society with a well-run government, prices should actually come down. Of course, that is often only true in theory. Prices go up because of greed and fear caused by ignorance. If schools taught people about money, there would be more money and lower prices. But schools focus only on teaching people to work for money, not how to harness money’s power.”

“But don’t we have business schools?” Mike asked. “And haven’t you encouraged me to go for my MBA?”

“Yes,” said rich dad. “But all too often business schools train employees to become sophisticated bean-counters. Heaven forbid a bean- counter takes over a business. All they do is look at the numbers, fire people, and kill the business. I know this because I hire bean-counters. All they think about is cutting costs and raising prices, which cause more problems. Bean-counting is important. I wish more people knew it, but it, too, is not the whole picture,” added rich dad angrily.

“So is there an answer?” asked Mike.

“Yes,” said rich dad. “Learn to use your emotions to think, not think with your emotions. When you boys mastered your emotions by agreeing to work for free, I knew there was hope. When you again resisted your emotions when I tempted you with more money, you were again learning to think in spite of being emotionally charged. That’s the first step.”

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Rich Dad Poor Dad: S5 – E2 – Take Risks or Play it Safe?

Rich Dad Poor Dad: S5 – E2 – Take Risks or Play it Safe?

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Although both dads worked hard, I noticed that one dad had a habit of putting his brain to sleep when it came to finances, and the other had a habit of exercising his brain. The long-term result was that one dad grew stronger financially, and the other grew weaker. It is not much different from a person who goes to the gym to exercise on a regular basis versus someone who sits on the couch watching television. Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth.

I had two influential fathers, I learned from both of them. I had to think about each dad’s advice, and in doing so, I gained valuable insight into the power and effect of one’s thoughts on one’s life. For example, one dad had a habit of saying, “I can’t afford it.” The other dad forbade those words to be used. He insisted I ask, “How can I afford it?” One is a statement, and the other is a question. One lets you off the hook, and the other forces you to think. My soon-to-be-rich dad would explain that by automatically saying the words “I can’t afford it,” your brain stops working. By asking the question “How can I afford it?” your brain is put to work. He did
not mean that you should buy everything you want. He was fanatical about exercising your mind, the most powerful computer in the world. He’d say, “My brain gets stronger every day because I exercise it. The stronger it gets, the more money I can make.” He believed that automatically saying “I can’t afford it” was a sign of mental laziness.

My two dads had opposing attitudes and that affected the way they thought. One dad thought that the rich should pay more in taxes to take care of those less fortunate. The other said, “Taxes punish those who produce and reward those who don’t produce.”

One dad recommended, “Study hard so you can find a good company to work for.” The other recommended, “Study hard so you can find a good company to buy.”

One dad said, “The reason I’m not rich is because I have you kids.” The other said, “The reason I must be rich is because I have you kids.”

One encouraged talking about money and business at the dinner table, while the other forbade the subject of money to be discussed over a meal.

One said, “When it comes to money, play it safe. Don’t take risks.” The other said, “Learn to manage risk.”

One believed, “Our home is our largest investment and our greatest asset.” The other believed, “My house is a liability, and if your house is your largest investment, you’re in trouble.”

Both dads paid their bills on time, yet one paid his bills first while the other paid his bills last.

One dad believed in a company or the government taking care of you and your needs. He was always concerned about pay raises, retirement plans, medical benefits, sick leave, vacation days, and other perks. He was impressed with two of his uncles who joined the military and earned a retirement-and-entitlement package for life after twenty years of active service. He loved the idea of medical benefits and PX privileges the military provided its retirees. He also loved the tenure system available through the university. The idea
of job protection for life and job benefits seemed more important,
at times, than the job. He would often say, “I’ve worked hard for the government, and I’m entitled to these benefits.”

The other believed in total financial self-reliance. He spoke out against the entitlement mentality and how it created weak and financially needy people. He was emphatic about being financially competent.

One dad struggled to save a few dollars. The other created investments. One dad taught me how to write an impressive resumé so I could find a good job. The other taught me how to write strong business and financial plans so I could create jobs.

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