Tuesday, December 27, 2016

Real Estate returns can beat Stock market investing

You'll often here people say that they don't like real estate because if you look at the long term returns of the stock market, it seems to have a better return over the long term.

Of course, when they say this, they are leaving a few key things out.

First, when people say the stock market, what they really mean is something like the S&P 500 or the Dow Jones Industrial Average. These are not the stock market. Rather, they are indexes filled with some of the leading companies in the US. You'll often hear that the stock marketing returns anywhere from 7%-10% annually. This is really based on index returns rather than the market itself.

Second, while 7%-10% is a good return annually for the average person, it is not a good return for a professional investor. And when people stack up the returns from real estate against the stock market, they often only factor in one profit center in real estate, appreciation.

The reality is that there are four ways you can make money with real estate that, when added up together, make for considerably higher returns than the stock market. These profit centers are the reason that real estate is one of my favorite investment vehicles.

A word of clarification: as you read about these profit centers, realize that I'm talking about investment real estate-that is property bough specifically to be run like a business-rather than your personal residence. As I've said before, your house is not an asset. It takes money out of your pocket. But your investment real estate is, if you invest properly, because it puts money in your pocket.

Now, here are the four profit centers of real estate.

Cash flow on operations

If you're holding real estate as an investment, you will have tenants. Each month they will pay you rent. Let's say that you own a rental house and get $1,000 per month in rent. Over a year, that is $12,000 in income.

Now, you subtract out your expenses, which include things like your taxes, insurance, your property management, vacancies, turnover expense, allowances for repairs, etc. (This doesn't include your debt-more on that later).

For purposes of this example, let's assume that your monthly average expenses are $100 a month. Your cash flow on operations then would be $900 per month. That is what is referred to as your Net Operating Income (NOI).

Out of your NOI you pay your debt service. Let's assume for this example that you have a $200,000 property with an $180,000 loan at today's rate of 3.7%. That's a debt payment of about $830 a month.

So, that would be rental income of $1,000 minus $100 in operating expenses minus $830 in debt service, equaling $70 in cash flow. That times 12 equals $840 in cash flow per year. That $840 divided by your $20,000 equity stake would equal a 4.2% cash-on-cash return.

But that's not the end of your return story. Let's move on to the next profit center, Amortization.


Amortization is the concept of paying down your debt service. Each month, when you make your debt payment (or rather your tenant makes your debt payment) out of your NOI, a portion of that goes towards paying down your principle on the loan. When you hear somebody talk about a 30-year fixed fully amortized loan, it means that when you make all 360 of those monthly payments at the end, the loan is 100% paid off.

Because your tenant is paying rent, and that rent is covering the debt payment, the principle pay down included in that debt payment is actually profit for you. Let's take a look at how this plays out with our $180,000 loan from above.

In the first year of the loan, you'd be paying $6,604 in interest and $3,338 in principle. As the loan matures, the interest amount goes down each month and the principle amount goes up. But we'll use these numbers for now.

That $3,338 is profit to you. It's true equity in your property.

If we add this $3,338 to the $840 in operating income, we now have $4,178 in income for the year, a 20% return on our $20,000 invested into the property. Plus, your interest payment is often tax deductible, so added bonus, but check with your tax advisor to be sure for your specific case.

Already, you're crushing average stock market returns and there are still two more profit centers to look at.


This is often referred to as a phantom return. The basic concept of depreciation is that your investment property is made up of tow parts, the land and the improvements on the land, i.e., your house.

Appraisers will assign percentage values to your property based on these two parts. For this example, 20% of the value is the land and 80% of the value is the improvement. Over time, the house will deteriorate, so the government in the US (check with your tax advisor to make sure you qualify), let's you write down that 80% value over a certain number of years depending on the type of real estate. For residential homes it's 27.5 years.

So, your $200,000 property has $160,000 that can be depreciated over 27.5 years, which equals $5,818 per year. This amount is listed as a loss of income, even though no money is coming out of your pocket. Now let's see why this is called phantom income.

Let's assume you are in a 30% tax bracket. That means that, applying 30% to your depreciation of $5,818, nets you $1,745 in annual tax savings.

Adding that $1,745 to our existing income of $4,178, we now have $5,923, a 29.6% return on your cash of $20,000.

Let's take a look at the last profit center, appreciation.


This is the frosting on your cake. I don't invest in real estate for appreciation. I'm a cash flow investor. But I do appreciate my appreciation.

Let's assume you have a conservative appreciation rate of 3% a year on average for you $200,000 property. That equals $6,000 per year in value added to your house.

Add that to your $5,923 and you have $11,923. That's a 59% return on your $20,000 capital investment in your $200,000 property. And that blows investing in the stock market for the long term out of the water.
Increase your real estate IQ

These types of returns are achievable by anyone, as long as they understand how to find the right deal and run the numbers correctly. And it takes a high financial IQ.

Thursday, December 22, 2016

How spending money can make you a winner

A mantra of my rich dad was, "Savers are losers." By that he didn't mean it as a personal insult to people who save their money. Rather, he meant it very literally. If you bet on saving money as a path to financial security, you will lose.

As I wrote back in July, "In an economy where almost everything is built to take your money, saving it is of little value. From inflation to taxes to hidden fees in your 401(k), the system is stacked against you."

Why, "Money is not backed by anything. It is a currency, which like a current of electricity, is always moving. Today, money flows from one sector to another. If it stops moving, like a current it dies. If your money isn't moving, it is dying, slowly, losing value day by day."

In the new economy, it is spenders who are winners. Not those who spend on liabilities that take money out of their pocket each month, but rather those who spend money on assets that put money in their pockets each month.

Again, as I mentioned earlier in this post, you should be stuffing extra money into an account meant specifically for investing in assets. This could be construed as savings, but it is a very different way to save. It is saving to spend. The aim should be to move that money as quickly as possible into assets that generate money rather than to let it sit and die.

Tuesday, December 20, 2016

Make this money move instead of adding to your 401K

At Rich Dad,we've made no secret about why we despise 401(k)s. Take for instance one reason from the horse's mouth, John Bogle, the head of Vanguard: 
"…The financial system put up zero percent of the capital and took zero percent of the risk and got almost 80 percent of the return, and you, the investor in this long time period, an investment lifetime, put up 100 percent of the capital, took 100 percent of the risk, and got only a little bit over 20 percent of the return."

Rich Dad's advice: invest in cash-flowing assets

If you want to be rich, the last thing you should be doing is increasing your contribution to your 401(k). Instead, you should use any raise you get or extra money you can squeeze out to increase an account you can use to invest in cash-flowing assets of which you have control over and of which you can keep all or the majority of profits. And if you want the tax benefits of a 401(k) to do this, you can use a vehicle like a self-directed IRA.

The best part of this strategy is that the more cash-flowing assets you acquire, the more money you make each month from those assets that you could redirect into even more cash-flowing assets. This compounding of assets, not just money, creates true wealth.

Thursday, December 15, 2016

Your house is not an asset

Last week we kicked off the first in a monthly series called, "Ask Robert". It was fun to see all the questions asked, and hard to choose which one to answer. We'll be doing "Ask Robert" once a month, so start thinking now about your questions for the next installment. In the end, I answered Martin's question on whether to put his savings into paying off his personal residence or to invest in a rental property.

My response to Martin was that it's always preferable to invest your money into a cash flowing investment instead of paying down a mortgage on your home—especially in a market that is declining. 

Interestingly, I came across an article in The New York Times this week on real estate entitled, "Real Estate's Gold Rush Seems Gone For Good". The article highlights what I've been saying for over a decade since the publishing of my book Rich Dad Poor Dad: Your house is not an asset!

Here are some interesting statistics from the article:

-    It could take up to 20 years to recoup the $6 trillion loss in housing values since 2005
-    Housing values have dropped over 30 percent since the bubble popped
-    Sales figures for July are expected to show a drop of 20 percent over last year
-    The supply of housing might rise to 12 months—more than twice what's considered normal and healthy (Not only did it rise to 12 months but it surpassed it. Yesterday's report stated an inventory of 12.5 months)
-    When surveyed, people feel that housing will rise by as much as 10 percent a year over the next decade

That last statistic is frightening to me. Financial ignorance is so high in our country that we still believe that a house is an asset and a sure way to build wealth. It's not.

Monday, December 12, 2016

I'm buying properties that can cash flow

In the popular Back to the Future movies, Marty McFly goes back in time, accidentally gets his mother to fall in love with him, and has to work with his future friend, Dr. Emmett Brown, to make things aright. If he doesn't fix things-and learn from his mistakes-a different future will emerge where his parents don't marry, and he never exists.

The whole movie, Marty does everything he can to get back to the future.

For the last decade, many homeowners have been waiting to get back to the future as well…the future where their home prices are the same as they were ten years ago. It's been a long wait.

But it's finally come. As "The Wall Street Journal" reports, "The average home price for September was 0.1% above the July 2006 peak, according to the S&P CoreLogic Case-Shiller U.S. National Home Price index released Tuesday."

Of course, in the fine print is the fact that while prices are the same, value isn't, "Adjusted for inflation, the index still is about 16% below the 2006 high. Home prices jumped 5.5% over the past year."

Speaking of going into the past, in 2010, "The New York Times" wrote about how people-in the midst of the housing crisis-still believed that real estate would go up 10 percent a year. That of course hasn't happened. Back "The Wall Street Journal Article": "Home prices have grown at an inflation-adjusted annual rate of 5.9% since 2012, while incomes have grown by just 1.3%, according to Case-Shiller. By contrast, from 1975 until the present, prices grew at a rate of 1.1% a year, while per-capita incomes grew 1.9%."

The WSJ article goes on to point out that the "recovery" in housing isn't all roses. "The country is building far fewer homes than normal, the homeownership rate is near a five-decade low, and mortgages remain difficult to come by, especially for less-affluent buyers. Rising mortgage rates could also begin to pose headwinds to further price growth."

But, more than likely, people will read a headline that says, "Home Prices Recover Ground Lost During Bust," and start thinking things will be as they were before. Unfortunately, this future of housing will most likely much different than the decade that led up to the bust. But what remains the same is that people will continue to think that buying a house is an investment-that it is an asset-when it is not.

So since we are back to the future of housing, it's a good time to remind folks of the reality that your house is not an asset, and if you heed the word, maybe we can avoid another housing bubble…maybe.

Your house is a liability

Since the lesson still hasn't sunk in for many Americans, I'll repeat here: Your house is not an asset. It's a liability.

Very simply, an asset is something that puts money in your pocket. A liability is something that takes money out of your pocket. The reason people are confused and think that a home is an asset is because from the 1970's through the early 2000's they were able to pull money out of their house in the form of loans, like a real estate ATM. Now that prices are back, they might start thinking the same thing again.

As that 2010, "New York Times" article states: "The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming."

The problem is that wealth wasn't generated. Only debt. People didn't sell their homes to pay for things like college educations and vacations; they borrowed against them. In the process they bought into the illusion that they were tapping an asset when in reality they were growing a liability by taking on more and more bad debt.

How a house can be an asset

Despite the fact that housing prices have not recovered in real terms, I'm buying. This may sound contradictory, but it's not. As you may have guessed, I'm buying investment properties that cash flow.

To me it matters little property appreciates in price. I care only whether it provides cash flow every month. And while investing for cash flow won't provide the home-run returns that speculators saw in the early 2000's, it's the only sure way to build wealth and assure a secure retirement in terms of real estate investing.

The key is to make your money on the buy, not the sell. What I mean by that is that by doing proper due diligence you can find deals that will provide substantial cash flow for years to come. By doing so you don't have to worry about the price of your asset. If it goes up, that's a bonus. If it doesn't, you still have a great property that puts money in your pocket every month.

So, your house is not an asset. But a house can be an asset-if it cash flows.

My hope his that you-and the world-will learn from the past and begin to build for a secure financial future. In that future, you do not rely on your home to be your primary nest egg. Ask people ten years ago, on the cusp of retirement, how that worked for them.

In that future, you rely on financial intelligence to find cash-flowing assets that provide income month in and month out.

Your house is a liability

Since the lesson still hasn't sunk in for many Americans, I'll repeat here: Your house is not an asset. It's a liability. Very simply, an asset is something that puts money in your pocket. A liability is something that takes money out of your pocket. The reason people are confused and think that a home is an asset is because from the 1970's through the early 2000's they were able to pull money out of their house in the form of loans, like a real estate ATM.

As The New York Times article states: "The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming."

The problem is that wealth wasn't generated. Only debt. People didn't sell their homes to pay for things like college educations and vacations; they borrowed against them. In the process they bought into the illusion that they were tapping an asset when in reality they were growing a liability by taking on more and more bad debt.

It's amazing to me that people still think their house will gain value given the true statistics about the housing market. The reality is that the housing market will take decades to regain value—and may fall in value in the short term—and most gains will only be keeping up with inflation. Buying a home and counting on it to be your retirement is financial ignorance and recklessness at its worst.

How a house can be an asset

Despite the fact that housing prices may never actually recover in real terms, I'm buying. This may sound contradictory, but it's not. As you may have guessed, I'm buying investment properties that cash flow.

To me it only matters if a little property appreciates in price. I care only whether it provides cash flow every month. And while investing for cash flow won't provide the home-run returns that speculators saw in the early 2000's, it's the only sure way to build wealth and assure a secure retirement in terms of real estate investing.

For many, the fact that housing prices might drop again is a bad thing. For me it is exciting. It means that more deals will be out there for great properties that bring in money every month in the form of rent. As I've said before, we're experiencing the greatest wealth transfer in history. If you're smart with your money, wise in your looking for deals, and ready to make a move, you can find great investments at bargain prices.

The key is to make your money on the buy, not the sell. What I mean by that is that by doing proper due diligence you can find deals that will provide substantial cash flow for years to come. By doing so you don't have to worry about the price of your asset. If it goes up, that's a bonus. If it doesn't, you still have a great property that puts money in your pocket every month.

Your house is not an asset. But a house can be an asset—if it cash flows.

Monday, December 5, 2016

Failure is a part of success

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, November 30, 2016

Some millionaires live paycheck to paycheck

If you had $1 million in the bank, would you feel wealth? How about if you had $2 million? What about $5 million?

If you're not a millionaire, more than likely you said, "YES!"-probably at the $1 million mark, and most definitely at the $5 million mark. Most everyone thinks that having enough money will make them rich and solve their financial problems. But what those who are really rich know is that money doesn't make you rich at all.

Revisiting our $1 million to $5 million question, consider this finding from a survey by UBS: Only 28% of those worth $1 million to $5 million considered themselves as wealthy.

How could this be?

"Half of those worth $1 million to $5 million believed that one bad break, such as a market crash or a job loss, would have a major impact on their lifestyle."

In other words, these millionaires have a lot of money but not a lot of financial intelligence. How do I know? Because a financially intelligent person isn't ruined by a job loss or market problems. The rich do not worry about these things nearly as much as the poor do. Why? Because the rich know how to prepare for them.

The survey by UBS brings to light a reality of many millionaires. They are not really financially free. Rather they are high-paid employees that have a large amount of liabilities, bad debt, and bad spending habits. Some even live paycheck to paycheck.

This confirms a simple truth: no amount of money can change bad financial habits. In fact, it often magnifies them. The rise and fall of lottery winners and pro athletes are good examples of this.

In 2015 consumers spent $67,560,000,000 in store and another $2,932,000,000 online on Black Friday deals-an average of $403.35 per person. This year, even more shoppers are expected and even more money will be spent.

This will be just the beginning of a glut of holiday spending. With the average shopper going into debt by $986 on average. Couple that with the fact that the average household has a total personal debt of more than $90,000, and you can start to see that the average person has a real problem when it comes to money.

For most people, the problem is not that they don't have enough money. It's that they spend it far too quickly and on liabilities. As I've mentioned before, a liability is something that takes money out of your pocket. An asset is something that puts money in your pocket.

The fundamental difference between the truly rich and wealth, and the poor-even those with millions of dollars-is that the rich invest in cash-flowing assets that cover their liabilities, and the poor rely on a paycheck, spending it all often before they even have it in hand. These "poor" millionaires just happen to spend a lot more each month than the average person.

So, as you ponder the questions I asked at the beginning of this article, perhaps a better question would be, "Do you have the financial habits and intelligence to be wealthy when you have $1 million to $5 million? Or would your financial habits still keep you poor, even if you had more money?"

This holiday season, as we come into a new year, is a great time to reevaluate how you manage your money. If you need to make some adjustments, now is the time. That will be the best gift you get all season.

Wednesday, November 23, 2016

How Donald Trump can help everyone including the poor

During this election, I've been clear on my support for Trump, who is both a friend and a co-author. I've also been adamant about my belief that when it comes to your financial well-being it doesn't matter who was president.

How can I hold these two seemingly opposing positions? A little context is helpful.

The poor getting poorer

Unless you've been under a rock this week, and quite possibly you have just to get away from all the news coverage, it's clear that a surge of working-class, white, rural voters propelled Trump into the presidency. These are the people Trump referred to in his acceptance speech as "forgotten." And he's right. They have been forgotten.

I've detailed throughout this election how the middle class is being decimated. Just read, "The Reason You Feel Poorer" and "Why the Middle Class is Screwed".

If you want to dig really deep, read The Wall Street Journal's series, "The Great Unraveling".

The long and short of it is there are millions upon millions of Americans who really, truly don't feel that America is great…not for them or their families. Millions upon millions of Americans who are struggling mightily financially and who are losing ground each day.

The poor do not need more government

Now here's the problem. They think that a president and the government can solve their problems. Unfortunately, this is simply not true. Can the economic policies of Trump help some people marginally? We shall see. There is a lot he will have to contend with both at home and abroad. But it is very doubtful that he can fundamentally change the lives of these forgotten people through government alone. This will be the fundamental challenge of his presidency-to appease the very people who put so much hope in him…just as many people put their faith in Obama and have been let down.

So where will Trump make the greatest impact?

The greatest thing a Trump presidency can do for the American working class is to help them reorient their mindset from one that looks for others to solve their problems to one that looks within both individually and as communities to solve their problems.

In the process, some of Trump's policies can help make this easier.

- Giving more power to states empowers local politicians who can make real change on the ground.
- Cutting loopholes for large corporations to ship jobs overseas provides stability and an even playing ground for up-and-coming entrepreneurs
- Lowering tax rates for individuals and businesses will stimulate growth and lower risk
- And restructuring the healthcare system and stemming the alarmingly-high rising costs of health insurance will allow people to strike out on their own more easily

But none of these things will in and of themselves solve the problems plaguing the working class. Only they can do that for themselves. They'll have a helping hand, but it is ultimately in their hands-and yours.

What a Trump presidency will do is provide a model for all Americans of what a successful businessperson and entrepreneur looks like, how they lead, and how they inspire others to succeed around them. I stand by my words, that is what America needs.

Monday, November 21, 2016

I respect Hillary Clinton more after the elections

Congratulations to my friend, President-elect Donald Trump. He is a cat with nine lives. Many times I thought he was finished, yet he tapped into the core sentiment of the American people and won.

Also, my respect for Hillary Clinton has gone up. She is a tough competitor. My poor dad lost his election for Lt. Governor of the State of Hawaii and that defeat crushed him and our family.

I felt for Hillary as the returns came in and the map of the US went red for Republicans rather than Blue for her. I doubt if I could have taken such a massive personal vote of no confidence. She has my respect.

You may know that Donald Trump and I wrote two books together. I still cannot believe I am on the cover of two books with the President of the United States. That is beyond being lucky and my wildest dreams.

While I am happy he won, I am concerned for him. He is President at one of the most turbulent times in world history. I know he will bring changes, but I wonder what the changes will bring.

I know the future is bright, yet I am afraid in the short term…our nightmare has just begun. May God watch over all of us during this time of global change.

Monday, November 14, 2016

You can control your own financial destiny

Recession is looming

Most people intuitively feel what economists are predicting: a new recession is likely within the next four years. And we're already seeing serious ripples in the banking industry with Deutsche bank facing serious challenges . Could it be a canary in the coalmine? And all those new jobs you keep hearing about? Many of them are temporary or part-time jobs.

We don't trust our leaders or our institutions

The current approval rating of congress is 18 percent. For the most part, it's widely acknowledged that our politicians are in the pocket of the rich and powerful on Wall Street. After all, as MSN reports, "Big Banks, hedge funds, private equity shops and other securities and investment firms have made more than $273 million in donations to federal candidates during the 2015-16 election cycle, according to Americans for Financial Reform."

Politicians won't save you

Four years ago, on the eve of our last election, I wrote these words:
    This week's election is an opportunity for instant feedback. As you watch the results come in, take note of how you react. What does that reaction say about you and where you place your hope? If the news isn't good about how you react, what are you going to do about it?
    I've said it before, politicians cannot save you. Only you can.
    Rather than blame others for where you are in life, today I encourage you to look within yourself and see where you can make changes personally, which will lead to changes financially. In fact, I'd say that would be a much better way to spend election night than watching-and fretting-as the results come in.

Those are words I still stand by today. Each cycle, people think the politicians will finally solve their problems. They never are. Meanwhile, things continue to get worse for many in our country and the world when it comes to money. Fundamentally this is a personal finance problem in the truest sense of the words. You have to personally take care of your finances. This starts with financial education and putting your new knowledge to work.

I have seen and truly believe that when people take control of their own financial future and education, they can thrive no matter if the times are good and bad. In fact the hallmark of true financial intelligence is to succeed in the hard times. No matter what the next four years bring, you can control one thing: your mindset and your money. Start today.

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, November 9, 2016

How to budget your way to success

It's no secret that the average American isn't good with money. As "The Motley Fool" reports, almost 70 percent of Americans don't have even $1,000 in the bank. And "almost half of Americans claim that to cover a $400 emergency, they'd need to borrow the money or sell something quickly to round up the cash."

"The Motley Fool" goes on to share a U.S. Bank study that states only 41 percent of Americans budget their money. This, writer Maurie Backman thinks, is a big reason why money problems are so big in the US.

I agree that having a budget is an important first step to gaining ground in your personal finances. But having a budget alone won't fix the underlying problems that most Americans have when it comes to money.

First and foremost, there is a great need for financial intelligence. The problem with most budgets is that they cater to the old rules of money that simply don't work anymore, like save money, get out of debt, and live below your means.

Ultimately, budgeting, as it's usually taught, is a vehicle for cutting expenses, not making money. I wrote a while back on how budgeting like a business can turn a budget into a vehicle for growing your assets, not saving your expenses.

Ultimately, your budget is a plan. As such, it can be a good plan or a bad plan. A bad plan is one that requires you to cut expenses and save money. You don't enjoy the things you're used to enjoying and you make little to no money on the money you save. Ultimately, it won't get you where you need to be financially.

A good plan, however, is one that spurs action for the better. And a good budget is one that will inspire you to make more money so you can do what you love and grow your money exponentially.

With that in mind, here are three tips on how your budget is a helpful a tool to grow your cash flow the right way, through investments.

1. A budget shows you your monthly outflow
A common exercise we do when working with people who want to be financially free is to have them write down all their monthly expenses in one column on a piece of paper and then write down their salary on the other. Then, we have them cover the salary column with their hand.

"What," we ask, "would you do if you didn't have your salary?" The result is often a momentary flutter of panic.

This is helpful because it is a quick splash of reality-that is, most people have a lot of expenses and are reliant on a salary to pay for them.

But how great would it be if you had passive income coming in every month that covered your living expenses? What would you do then? Would you retire? That's what Kim and I did when we reached that point in the 1990's.

But to get to that point, we had to know how much we were spending each month. Why? So we knew how much we'd need to make in cash flow to be financially free.

2. A budget helps you understand what kind of cash flow you need
Once we understood our monthly expenses, we then were able to make a plan to acquire the assets we needed in order to cover those expenses. And here's where things got really interesting. Instead of cutting expenses, we created a new one-an investing expense. We called this paying ourselves first, the financial golden rule.

3. A budget inspires action to get your cash flow
By making it an expense to invest each month, we made it a priority to grow our assets. We worked our butts off to make the extra cash we needed. We started teaching classes on the weekends. We got creative in how we paid our creditors. We dreamed up and launched new products. We found amazing real estate deals. All of this was made possible by shifting our mindset when it came to budgeting away from saving money to making money. Our budget gave us the road-map to financial freedom, and we were inspired to make it happen.

So, if you're ready to begin your journey towards a better financial future, then yes it's time to start with budgeting. But don't do it the old school way; do it the rich dad way. Only then will you be really successful.

Monday, November 7, 2016

How you can use free money to own real estate

There is such a thing as free money. We've talked a lot about Other People's Money (OPM) in Rich Dad circles. The concept of OPM is simple, but the execution of the concept takes a high level of financial intelligence. With OPM, you use other people's money to invest in cash-flowing assets that cover both the expenses required to maintain the asset and the expense of the investor capital (OPM). In the process, you significantly increase your return on investment.

A common example is using a bank to fund a real estate investment. You put up 20 percent of the capital and the bank puts up the other 80 percent. In return you get 100 percent ownership for 20 percent of your own money and 80 percent of OPM. If you find the right investment, the income covers the OPM and provides you cash flow each month. As such, your return is much higher on only 20 percent of your money than if you had to put up all the money.

Friday, November 4, 2016

Network marketing and team work

Network marketing represents amazing time leverage. Successful network marketers understand that a key to success is using other people’s time as a way to leverage yours.

Small and Medium-sized enterprises benefit by investing in their teams and by helping everyone to achieve success. Who’s on your team and how strong are they? [An entrepreneur] needs a team with specialised talents, skills and experience to build a thriving organisation.

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Thursday, November 3, 2016

Monopoly game and business success

Business success is a multifaceted scenario. Learn to use debt. Smart entrepreneurs know how to use debt to get rich.

Many factors come into play: market conditions, timing, supply and demand, economic environment, access to money, risk tolerance… the list goes on and on. All these lessons play out in Monopoly. The key to great wealth is three green houses, one red hotel.

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Thursday, October 27, 2016

Millennials to face more challenges than the Baby Boomers

At the end of the day, fundamentals are fundamentals, even when they are wrapped in a prettier package. And for all their disdain for their parent's generation when it comes to materialism, the reality is that millennials suffer from the same financial disease: the need to spend, and spend richly, on liabilities.

Simply put, as great as experiences are, they are still liabilities that take money out of your pocket. And if you don't get smart about your money and your financial future, you'll find yourself unable to enjoy those experiences later in life.

So what's a millennial to do?
Securing your financial future isn't about greed

The lessons of "Rich Dad Poor Dad" still apply to this day: increase your financial intelligence, invest in assets that provide cash flow, and enjoy the things you love with that cash flow.

The beautiful opportunity the millennial generation has is to turn their love for experiences into opportunities to grow their financial intelligence and assets. This is not about owning more stuff. It's about securing your financial future to do things you love and be the generous people that you are for the entirety of your life.

Some quick ideas:

-Turn your trips into opportunities to get to know the local real estate market and identify potential cash-flowing properties

-Take advantage of sharing economy services like Airbnb and Uber to create income opportunities
-Form an investing club with your friends and make the idea more appealing by giving it a social-good component such as using part of the funds to support a charity together
-Find ways to sell the goods you create from your hobbies to fund them and build a business

Each of these ideas could be a post in themselves, but the purpose is simply to get the gears of your mind turning. More than ever, the lessons of "Rich Dad Poor Dad" apply today. You must change the way you view money and investing in order to survive your financial future. Simply buying into the old rules of money like saving, buying a house, investing in a 401(k), and getting a good job won't do the trick. It didn't work for your parents and it won't work for you.

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, October 26, 2016

To depend on Social Security is the ultimate gamble of hope

Social Security has been around for a long time now and they only have $2.8 trillion on hand. How they would ever catch up, especially given that, including other obligations, the US has $100 trillion in unfunded liabilities, is not explained. Why? Because it is the big elephant in the financial room.

To put it simply, US unfunded liabilities are larger than the "future" payroll collection income for Social Security-money that has not been collected yet can't even cover the money we owe today.

In the end, relying on things that are called "assets" but that don't put money in your pocket is the biggest gamble you can take with your financial future-and relying on a government program like Social Security as your "biggest asset" is the ultimate gamble…one that you will lose big on.

Rather than passively rely on capital gains and the government to make you financial secure, you need to take control of your own financial future. That starts with increasing your greatest asset: financial intelligence.

And the key to financial intelligence is how to use both cash flow and capital gains to grow wealthy. So many people are not successful, because they're generally focusing on only one of the two. The majority is focusing on capital gains.

In my opinion, one of the primary reasons people invest in tomorrow, rather than today, is simply because they think they cannot find or afford an investment that pays them today. As a result, they often become believers in tomorrow. These are the people who often fall prey to financial predators selling dreams of the future.

As my rich dad said, "An investment needs to make money today and tomorrow." 
Today, start putting the power of true assets and cash flow to work for you.

Monday, October 24, 2016

Your Business depends on your Selling ability

If you’re making six figures today, imagine what your life would look like if you could make 10x more. You’d be a multi-millionaire in no time. Think about how much you could grow your business, how much more time you could spend with your loved ones, and how much better your life would be.

Everything in business—success or failure—hinges on your ability to sell. You have to sell your ideas, your message, your products, and most importantly yourself. If sales equals income, why wouldn’t you want to master selling?

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, October 19, 2016

We retired early because of our cash flow

One of the reasons I was able to retire at age 47, and my wife, Kim, at 37, was simply because we had enough cash flow coming in (primarily from our real estate investments). It wasn't much-about $10,000 a month-but we only had about $3,000 in monthly expenses. That left us with $7,000 a month to do with as we pleased.

On the other hand, capital gains are when you buy a stock for a dollar, and it goes up to $10 so you make $9 a share. Or, you buy a house for $100,000, and it appreciates to $150,000. You sell it and make $50,000.

One of the reasons people do not become financially free is because most of them are focusing on capital gains rather than cash flow. Chasing capital gains alone is gambling-not investing. Want proof? You don't have to go back very far to find it: During the great recession starting around 2008, millions of investors lost trillions of dollars in the stock and housing markets.

"When you invest for cash flow," my rich dad said, "you're investing in a money-back guarantee. If you invest for capital gains, you invest in hope. The biggest thief of all is hope."

Monday, October 17, 2016

House as an asset | Rich vs Poor Dad

"Our house is an asset," my poor dad would say.
But, my rich dad saw things differently. "Your house is not an asset, but a liability," he said.

You see, even though my poor dad thought of his house as an asset, the fact is that every month it took money from his pocket via mortgage payments, utilities, and upkeep.

Now my rich dad owned several houses. But instead of depleting his wallet, those homes were rented out. They generated enough income to cover his expenses-with money left over. That's a true asset.

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, October 12, 2016

Robert Kiyosaki on TED talks

In 2002, I wrote Rich Dad’s Prophecy, I wrote about the coming stock market crash and retirement crisis as baby boomers began pulling money out of their paper-asset-stocked retirement plans in order to live. One reason why the gap between the poor and the rich is growing as such a fast pace is because so many people as still playing by the old rules of money.

To know, understand, and play be the new rules of money you first have to have a financial education. The rich are getting richer because they understand the rules of money and how to use them to their advantage. One of the reasons I wrote, in 1997, Rich Dad Poor Dad was because I knew that money was not being taught in schools and I had a calling to teach people all the things my rich dad taught me.

Going forward, the middle class will continue to shrink and the divide between the rich and the poor will only grow. I want you to grow richer. I want you to continue your financial education; I want you to learn how to profit from taxes, debt, and inflation rather than allow them to make you poorer. I believe that there is a way for everyone to become rich. It’s up to you to take action.

Robert Kiyosaki talks about why money is being devalued and why real income is going down in America.

Monday, October 10, 2016

Introverts are better at selling than Extroverts

Three valuable things learnt in decades of experience in sales

1. Find out what the other person wants, and help them get it

Too many salespeople—even experienced salespeople—focus entirely on selling a specific product or set of services. Not many people try to figure out what a lead actually wants before going into the sale full bore.

Put another way, there’s always a reason why someone says “No” when you try to sell them. They may be the most qualified lead in the world, but once you hear that first “No”, your job is to figure out what’s holding them back. And that means developing your listening skills.

Instead of asking yourself, “Why is my lead rejecting me?” ask yourself, “Why is my lead rejecting my approach?” It’s likely that you do have the perfect solution, but they need a bit more convincing.

Sometimes, it’s because the lead has a “hidden agenda” that you might not know about. Other times, it could be because the package you’re offering is only a 90% fit, and the remaining 10% needs a little tweaking. Whatever the case: listen well, and ask the right questions.

2. Meet objections with questions

The most important question you can ask a hesitant lead is “Why?” Because when you say that one, simple word, you’re reframing the conversation. Instead of putting the pressure on you, you keep your prospect talking.

Try it out. The next time a lead says “No” to you, instead of offering a discount or another product, just say “Why isn’t this a good fit for you?” 9 times out of 10, the answer will be “I can’t afford this right now.” It’s a kind of token resistance that is all too common, even if the solution is perfect. So what do you do? Try asking “Why?” again, in different contexts. For example, “Why is it too expensive? Compared to what?”

By shining the spotlight back on your lead, sometimes they’ll end up answering their own objections. In the best-case scenario, asking “Why?” helps you get one step closer to a sale. In the worst-case scenario, at least you’ll have a solid answer for why your offer isn’t working (so that you can tweak it as needed).

3. Overcome your timidity and fear of talking to strangers

Over the years, I’ve realized two things about introverts and extroverts when it comes to selling:
- Introverts are often far better salespeople than they realize because they take the time to prepare.
- Extroverts are often just as shy and timid when it comes to selling because of the fear of rejection.

In other words, it isn’t necessarily true that extroverts are always better salespeople. There certainly seems to be a large number of extroverts in the selling business, but that’s not to say that they didn’t have to jump the same hurdles we all did.

The truth is that everyone is afraid of rejection. Everyone. You can be the most confident person in the world, but in the back of your head the fear of rejection will never go away. So stop making excuses like “I’m just not good at selling” or “I’m worried about being rejected.” We all are.

The best salespeople look that fear in the eye, deal with it, and overcome it every single day.

Robert Kiyosaki is a Japanese American investor and author of the popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, October 5, 2016

I hated sales but it was the best thing I did

When someone comes to me asking what they should do in order to be better prepared to start a business, I always tell them the same thing: “Get a job with a company that will train you in sales.”

My rich dad gave me that exact advice when I wanted to start my business. Like most people though, I hated sales. I had the same fears that everyone has about selling. Like most people I feared hearing “no.” I eventually got a job selling at Xerox. This was the best thing—as an aspiring entrepreneur—I could have done for myself.

Selling is an art. For many it takes years to master. And there are many people who will never be successful at selling. If you want to own a business, you have to master the art of selling.

Blair Singer, my Rich Dad Advisor, says, “Greatness doesn’t happen by chance, nor does it occur in a vacuum. Greatness comes from, first, a passion for what you do; and second, a clear understanding of what you can and want to be best at.”

Tuesday, October 4, 2016

Wells Fargo incident a reminder that banks are not our friends

When I was a kid, I remember my parents taking me to the local bank to open up a savings account. In those days, I got a little ledger book. Every time I made a deposit, we'd mark it down in my ledger with the date, as well as the total savings. I remember the bankers being very nice, and it felt like they were on your side.

Today, the banks still love to help parents open accounts. They'll even do "generous" things like waive the maintenance fee on accounts below a minimum threshold to get kids money in their coffers. Some banks even have whole programs built to attract kids to open up accounts.

Why? Because when you start 'em young, you can train 'em young.

Banks work very hard at creating a friendly, good-guy persona. But the reality is they're more like greedy leeches than they are good neighbors. And as if charging fees for pretty much everything related to them making money off your money, they also profit big time from selling you financial products.

And when the pressure to sell those products gets too strong, bad things happen to the little guy.

Enter the latest scandal from a big bank, this time Wells Fargo. As The Washington Post reported, "Subject to aggressive sales goals, some two million accounts opened by Wells Fargo workers may have been unauthorized, created without customers' knowledge and 'often racking up fees or other charges,' according to the Consumer Financial Protection Bureau."

Why would they do this? You want me to do what?

"An investigation by the Los Angeles Times into the sales practices back in 2013 reported that branch managers had to commit to 120 percent of daily numbers and tellers had to come up with at least 100 sales of financial services per quarter. Aggressive sales goals are frequently cited in anonymous employee reviews on Glassdoor, a career web site."

People do strange things when they are afraid of losing their jobs. And fear of not hitting sales goals cost some 5,300 employees their job at Wells Fargo, as well as the institution itself a $185 million fine.

Lets you think this is an isolated incident, Jim Pearce, a 30-year veteran in the banking industry writes in Investing Daily: "The scale of the malfeasance was impressive, but I wasn't surprised it happened, given how prevalent this form of compensation has become throughout the entire banking sector. I spent over half of my 30-year career working in the investment departments of several banks, every one of which pressured their branch personnel in similar ways as Wells to sell loans, credit cards and other high margin products."

Pearce continues, "In all these cases the senior management team either knew, or should have known, about the problem long before regulators levies severe fines and other sanctions."

In this case, Wells Fargo executive Carrie Tolstedt, who was in charge of the division that opened all these fraudulent cases, gets to "retire" with a giant bonus to the tune of $124.6 million, as well as the praise of Wells Fargo's CEO John Stumpf , who said she "a standard-bearer of our culture" and "a champion for our customers."

If that's the case, I'd hate to see what the bad apples look like at Wells Fargo.

Par for the banking course

Of course, none of this should be surprising news to those who have paid attention to the banking industry over the last decade or more. I've written plenty about other bank scandals, such as Barclays manipulating LIBOR in 2012. As I wrote then, "Barclays has tried to sweep this incident under the rug by settling with British and U.S. authorities to the sum of $453 million. But this scandal is only growing." Of course, today, you'd be hard pressed if the average person remembered or even knew about this.

Most likely, people will forget about this Wells Fargo scandal in another four years time.

All this should come as no surprise. As I also wrote, "Money may not be everything, but it is important. Integrity, on the other hand, is everything. And money is a great barometer of people's integrity. When a lot of money is on the line, people will start to do unexpected things. Money often reveals who we really are."

Money has revealed the banks for what they are: greedy institutions that will do anything to get more of your money, even lie, cheat, and steal.

Yet, billions of people hand their money over to them each day.

It reminds me of the famous line from Shakespeare's "Julius Caesar." As Caesar is being stabbed to death by the Roman Senate, he looks at his "friend" Brutus, and proclaims, "Et tu, Brute?"

So, what's the moral of the story?

Banks never have, and never will have, your best interest in mind-but they want you to think that way. They want you to believe they are your friends. Just take a look at their advertising.

Rather, they are institutions made to sell financial products like loans, credit cards, mutual funds, and more. Their financial advisors are not advisors at all. They are salespeople. And like Brutus, they will stab you in the back when they get the chance.

It's time to up your financial education

Today, more than ever, it pays to know that the financial cards are often stacked against you. And it pays even more to know how to play the game of money on your own.

Today, more than ever, you must increase your financial intelligence. If you don't, you'll be sold down the river before you know it by a banker with a smile and his fingers crossed.

And never, never forget that the banks are not your friends.

Monday, October 3, 2016

Start investing in Assets and stop working for a Paycheck

Money is the problem. It’s the money, stupid. We’re printing it, we’re printing it, we’re printing it, and it’s corrupt. And it’s toxic. Stop working for money, start acquiring assets. Use your brain.

Wednesday, September 28, 2016

How the rich get ahead by spending

What does it mean to be rich? Most people would say that being rich means having a high paying job and lots of nice things like cars, houses, and designer clothes.

But it’s not how much money you make that makes you rich. Take, for instance, the lottery winner who has lots of money but burns through it on all sorts of knick knacks. There are plenty stories of broke lotto winners. In fact, nearly one-third of all winners declare bankruptcy.

The same can go for young athletes who make it to the pros. One day they are broke, eating ramen for lunch and dinner, and the next day they are millionaires. Many of them simply don’t know how to manage their money.

But it’s not just lotto winners and athletes that don’t know what to do with money once they have it. Take a look at the findings of a recent survey of 7,000 people on their saving habits:
    "Of those whose incomes were less than $25,000, 38% had $0 saved, and 35% had less than $1,000. People who earned more fared better, but still reported low amounts of savings in savings accounts. Of those with incomes of $100,000 to $149,999, 18% had $0 saved in a savings account, and 26% had less than $1,000. And for earners of $150,000 annually or more, those numbers dropped slightly to 6% and 23%, respectively."

It may surprise you to see that those who are considered “rich”, those making over $100,000 a year in salary, save nearly as little as those who make $25,000. It does not surprise me.

Welcome to the rat race

When I created my board game CASHFLOW, I did so to help people escape the rat race. The rat race is the cycle of poor financial habits that most people make in order to keep up with the Jonses. Most people, no matter how much money they make, can’t escape the rat race. Instead, they increase their lifestyle spending to match their new income.

There isn’t a problem with increasing lifestyle spending. I like nice things as much as the next person. Rather the problem is how that increase in spending is financed—mainly through a salary.

As an employee, most “rich” people are one bad economic downturn or disastrous decision by a company CEO from their own economic ruin. One exercise I like to ask people to do is to list out every expense they have in one column and then their income in another. Then I ask them to cover the income column. “How long,” I ask, “Would you survive without your salary?” For most people this is a moment of truth…and panic. It’s their first insight into their rat race.

The reason most people don’t save, including the so-called rich, is that they don’t understand how to make money work for them. They are poor when it comes to financial intelligence.

Cut expenses?

Unfortunately, most people’s initial reaction to the rat race is to cut their expenses. This can work for a time, but the reality is that you can never cut all your expenses. And let’s face it, cutting the fun things out of your budget is a miserable thing to have to do.

Cutting expenses is what the poor do. The rich do not cut expenses. Rather, they ask, like my rich dad taught me to ask, “How can I afford it?”

The rich, instead of cutting expenses, increase them. The key is that they increase a certain type of expense that will later make them richer.

The power of paying yourself first

If you understand the power of cash flow, you will understand ...why 90 percent of people work hard all their lives and need government support like Social Security when they are no longer able to work. The reason is they pay themselves last.

In order to be rich, you must have the self-discipline to pay yourself first. By this, I simply mean using your income to invest in cash-flowing assets before you pay your bills or buy anything fun. This in turn will create more income that you can use to invest in more, cash-flowing assets. Do that and you'll have more money than you know what to do with.

Paying yourself first is not easy. In fact, it can be scary, especially when the bills are piling up. But you must develop the self-discipline to do it.

Saving is not paying yourself first

It’s important to note that saving does not equal paying yourself first. I’ve written a lot about why savers are losers. If you simply save money each month, you will never get ahead financially.

Rather, you must save with a purpose. Both Kim and I have some savings set aside in the form of liquid assets like cash, gold, and silver, which we can use in an emergency. But the majority of our money goes into saving for investing into cash-flowing assets. It is these cash-flowing assets that then put money into our pockets each month. And it is cash-flowing assets—i.e., money working for you—that gets you out of the rat race.

When you have passive income coming in each month from your investments, you don’t need a job and you don’t need a salary. You are financially free, and only then are you truly rich.

Monday, September 26, 2016

Dont chase the buck or a paycheck

Lesson No. 1 in ‘Rich Dad Poor Dad’ is the rich do not work for money. That opens your brain up, well, what the heck do they work for then? If you act like a mule, chasing the carrot -- the buck, the bonus, the paycheck, the commission, whatever you guys chase, you’re never going to ask the question: what are the rich working for? I work for assets.

Thursday, September 22, 2016

I avoid investing in Hawaii, California, New York due to high taxes

Real estate is a long-term hold. It’s not liquid. I don’t care if the market is up or down. What I’m looking for is a bargain. I make most of my money when the markets crash. I made most of my money in 2007. I made even more money in the subprime crash. I don’t care about the overall economy or the markets. I’m looking for an opportunity that no one else sees. I like residential real estate. I don’t invest in REITs or anything paper.

I do not invest in Hawaii, California and New York because of the taxes. Real estate is really not about real estate. It’s about debt, taxes and laws. I go to the areas that are favorable to investors, to capitalists. I stay out of areas that are more socialist-inclined, like California.

Monday, September 19, 2016

Learn about numbers and accounting to get good financial education

I flunked out of school three times, because I can’t write, and I couldn’t type. 

I flunked out of accounting. What do I write all day about? And type all day about? Accounting. Accounting is the subject. If you’re going to do anything, start with a bookkeeping course. You’ve got to know your numbers. Numbers tell you a story. After you get through a basic bookkeeping course…then you can take basic business accounting. 

That’s how you learn, it’s in the numbers. If you can’t read the numbers, you don’t know what’s going on. It’s not that hard to get ahead quickly because most people highly educated, with good grades, have no financial education.

Wednesday, September 14, 2016

You can learn things from others even if you are very smart

Choose your teachers wisely. In Sunday school, in the story of Christ, there are the Three Wise Men. They went in search of a teacher. That is the key to life. No matter how wise you are, you can always learn from someone else.

Robert Kiyosaki is a Japanese American investor and author of popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Monday, September 12, 2016

What job should young people go for

Don’t just look for money and a high-paying job. That’s selling yourself like a whore. The question I ask young people is, ‘What would you do for free? If you could do anything, what problems do you want to solve?’ Go find a way to solve it.

Everybody is born an entrepreneur. I never met a child not interested in money, but the system beats it out of you. Take a job for what you want to learn.

What life skills do I want to accomplish? How am I going to get those life skills? If you’re going to be dangled by a paycheck, you’re a whore. That’s really what you are.

There are fewer jobs today. We need more entrepreneurs to create jobs. Our schools create employees. That’s the crisis right now.”

Wednesday, September 7, 2016

The Fed is stuck

The Fed is in a precarious position. They've propped up the economy for so long with artificially low interest rates that they have to time the increase of those rates nearly perfectly or risk an economic crash.

As San Francisco Federal Reserve Bank President John Williams said, "If we wait until we see the whites of inflation's eyes, we don't just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark."

What could this damage look like?

Spencer Jakab, blogging for The Wall Street Journal provides one example. Jakab points out that years of "ultra-low interest rates" led to lots of average Joes and Janes investing in "into funds owning stocks or bonds offering at least a little bit of yield."

Jakab writes, "…a recent paper co-authored by a Fed economist warned of the possibility of 'run-like behavior' in such funds when rates eventually rise."

If you know anything about bubbles, the term "run-like behavior" should raise your eyebrows.

For years, the Fed has pushed people into investments through low interest rates that will start to underperform at best or crash at worst once those rates are raised.

The average investor always gets hurt

For the professional investor who knows how to read the signs of the times, and for big banks on Wall Street who get a heads up well ahead of the time, this is not an issue. But as Jakab rightly points out, the average investor is usually left in the dust.

This is the problem with investing in funds. They are designed for those with low intelligence-those who don't actively manage their investments. When markets drastically change, however, these passive investors lose-often big.

Increase your paper asset IQ

Personally, I'm not a big fan of investing in paper assets like stocks, bonds, and mutual funds. I prefer real estate, commodities, and my business. But paper is a legitimate asset class where your can do well-provided you know how to play the game.

Today might be a good time to take a look at your portfolio, and to take back control of your investing. If you don't know how to invest like a pro, it might be time to start your education.