Wednesday, April 19, 2017

Make Money Grow on Trees

When it comes to getting rich, so-called experts are full of advice on how to save your way there. There’s no shortage of articles about couples who saved their way to $1 million or “expert” tips on how to save more money.

And these articles are true. You can save more money following their advice. But you have to consider the cost. Because the saver mindset is a very different and dangerous mindset about money than how the rich think about money.

All you need is a million?

Take for instance the couple, Carl and Mindy, who saved $1 million on four years. Their instincts were right.
“I was having this horrific day at work,” 42-year-old computer programmer Carl told Farnoosh Torabi on an episode of her podcast. “I was 38 at the time, and I'm like, 'There's no way I can do this until I'mr 62 or 65 or whatever age people normally retire at.”

Many people feel trapped in their jobs but do nothing about it. Congrats to them for taking action. But in the end, it is still the action of a poor-person mindset about money.

The couple started by analyzing their spending habits. 

“My wife and I wrote all of our expenses in a book,” Carl explains on their blog. “Every time we returned from shopping or paid a bill, we logged it.”

Based on their logs, they determined they could live on $24,000 a year. To be safe, they added a $6,000 cushion and bumped that estimate up to $30,000 a year.

To get there, they decided they needed $1 million saved up to retire by age 42. To achieve this, they did the standard saver playbook: they downsized and cut expenses, while working side jobs and investing in their personal residence and the stock market.

Not a future proof-retirement

While it is great for Carl and Mindy to retire today—and having $1 million in the bank is certainly better than most—their retirement plan is not future proof in my mind.

They use what is called the 4% rule, assuming if they take out 4% of their retirement money per year, they won’t run out.

Perhaps this makes sense for them now in their 40s while they are relatively young. But what will happen when they get older and require more medical attention? Or what if their property taxes go up significantly over the next twenty years? Or what if inflation continues to grow over the next forty to fifty years at 2% a year? Or what if they get tired of living so frugally after all?

Without significant income, they won’t be able to stay afloat. They may enjoy life at $30,000 a year right now, but it will not be sustainable for their entire retirement.

The conventional advice is all about saving

This is not Carl or Mindy’s fault. They were raised in a world that teaches them that saving is the best way to be rich.

Take for instance Mic’s “30 easy money hacks to get a little richer every single day this month”. They include things like:
-    Shop generic
-    Check for Health Savings Account eligibility
-    Review your 401(k) fees
-    Grow your own herbs
-    Transfer $10 a week to an IRA
-    Buy a slow cooker (on sale no less)
-    Use cloth napkins

Of the entire list of 30 ideas to get rich, only one has to do with generating income. The rest are all ways to do exactly what Carl and Mindy did: downsize and cut expenses.

Your mindset about money 

As a kid, my poor dad, my natural father, had this same mindset. Whenever we wanted something in life, he would say, “We can’t afford that.” Perhaps your parents said something similar like, “Money doesn’t grow on trees!”

My rich dad, my best friend’s father, asked a very different question. He would ask, “How can I afford that?”

The difference between my poor dad and my rich dad’s mindset about money was fundamentally one of saving versus earning.

My poor dad always looked to be saving money and cutting expenses. My rich dad always looked to be making money and investing in both his wealth and his quality of life.

Now, which person do you think lived a happier, fuller life? Unfortunately, it was my rich dad. I say unfortunately because it was very hard to watch my poor dad later in life when he had no money, struggled financially, and was very bitter. He worked hard his whole life, but his mindset about money did not serve him well in the end.

Savers are losers; spenders are winners

All of this goes to show that the Rich Dad mantra of “savers are losers” is a vital thing to understand if you want to be truly rich. After all in world where Brexit can happen and global currency markets can wipe out $380,000 of a tennis star’s prize money in a day or two, or where the President can say the dollar is too strong and push it’s worth down half a percent in a day, putting your faith in how many greenbacks you have saved versus how many you can make…makes no sense.

In today’s financial world, spenders are winners and savers are still losers. Of course, by spenders, I mean those who use their money to build their business or invest in cash flowing assets. And to spend wisely this way, you need financial intelligence that goes beyond just downsizing and cutting expenses. You need to understand how to create wealth, and in your own way, actually make money grow on trees.

Monday, April 17, 2017

The secret ways the "Rich" stay rich is buying using Tax Laws for their benefit

Your financial adviser will tell you that debt is bad and taxes are inevitable. But the rich understand that both debt and taxes can be used to create immense wealth.

When it comes to debt, there are two kinds—bad and good. When your financial adviser tells you to stay out of debt, she means stay out of bad debt.

Bad debt comes in the form of borrowing money for liabilities such as using credit cards to buy TVs and take vacations, borrowing a line of credit on your personal home, and more.
Better ways to buy a car than buying a brand new car with a high interest loan 

Staying out of bad debt is good advice, but the problem is that your financial adviser won’t tell you about good debt.

Good debt is debt used to purchase assets like rental property.

When you use the bank’s money to purchase cash-flowing real estate, you use less of your own money to secure an asset by paying only a down payment instead of full price, and your tenant’s rent pays off your debt while you own the asset and pocket the profit.

When it comes to taxes, the rich understand that governments write tax codes to encourage specific types of behavior. If governments want you to build affordable housing, they give you a tax cut. If they want to encourage oil exploration, they give you a tax cut. If they want to see higher employment, they give you a tax cut.

The secret is that most tax benefits are made to help entrepreneurs and investors. With the right financial education, you too can utilize the tax code to not only get richer, but also pay nothing in taxes.

Utilizing good debt and getting richer through taxes takes a high level of financial intelligence. But everyone can learn and put these principles into practices.

Friday, April 14, 2017

Knowledge is power and with power comes confidence

When you’re not confident about your knowledge of money, you let others make your financial decisions for you.

You let your broker decide how your money should be invested. You let your bank tell you what interest rate is worthy of your money. You follow whatever investing trend is popular in the news.

The rich don’t follow the crowds. They set the trends and are gone by the time the trends become mainstream. What’s their secret? They think for themselves about money and make their own financial decisions because they have a high financial intelligence.

The key to building great wealth is having great knowledge to act on and great wisdom to know which course of action is the best.


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, April 13, 2017

The Rich invest differently from the Poor

Warren Buffett has done exceptionally well with investing

Investing for capital gains is like gambling. You invest your money and hope the price goes up. For instance, many people buy a house hoping they’ll be able to sell it for more money later. In the meantime, they have to pay their mortgage and home expenses. Money goes out of their pocket. It becomes a liability.

The problem is that when you invest for capital gains you have no control over whether the price goes up or down, and the bigger issue is, if you do make a profit, you pay the highest rate in taxes.

Conversely, the rich invest for cash flow. So, for instance, they buy investment real estate with other people’s money, find tenants to pay the expenses, and collect rent each month. It becomes an asset. And if there’s capital gains, that’s a bonus.

By investing for cash flow instead of capital gains, the rich have control over their income and pay the lowest rate in taxes—and sometimes nothing in taxes.


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, April 12, 2017

Your house may be a liability


Many people think they know what an asset is. For instance, you probably think your house is an asset—but it’s not. The truth is that just as there are two definitions of an asset.

Accountants use one definition that requires lots of financial calisthenics to make people and companies feel richer than they really are. This keeps them employed and their clients blissfully ignorant.

The rich use another definition grounded in simplicity and reality. An asset is anything that puts money in your pocket and a liability is anything that takes money out of your pocket.

Your house is not an asset because it takes money out of your pocket each month. Even if you own your house outright, you still have to pay for the taxes, maintenance and more out of your own pocket.

Spending on expensive vacations can be a liability
But if you own a rental property, that can be an asset—if it puts money in your pocket each month in the form of cash flow. When your tenant pays rent, they cover your mortgage, maintenance, taxes, and more.


Tuesday, April 11, 2017

Follow the new rules of money or get screwed

Even Bernie Sanders recognizes what a problem the growing gap in incomes represents: "The issue of wealth and income inequality is the great moral issue of our time, it is the great economic issue of our time, and it is the great political issue of our time.”

But much like I don’t agree with Bernie on how to fix the problem, much of what is labeled out there as financial education leaves a lot to be desired. From my experience, it centers on concepts like saving, investing in a 401(k), getting a college degree, paying down debt, and home ownership. In short, it centers on the old ideas about money.

I’ve said it before, when you follow the old rules of money, you’re screwed financially.


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.

Monday, April 3, 2017

Three reasons for market euphoria

What causes people to spend way too much on stocks? It’s an interesting question, especially given the recent euphoria over the IPO of Snap. Most investors today think that the fun will continue. They firmly believe as New Zealand Herald, Mike Taylor writes that “they are in a new paradigm.” Taylor gives three reasons for this mindset:

Anchoring: This is a trait where an investor will "anchor" to a price that is important to them, but may have no relevance at all to the market they are investing in. For example, being focused on doubling your money, and only selling an asset if or when the price reaches this point.

Loss aversion: Recognising a loss is uncomfortable for most people and investors will try to avoid it where possible. That means that if an asset is below the price the investor paid for it, they are prepared to wait in the hope they will get back to break-even. This can prove disastrous if the asset is in terminal decline. At best, it means your capital is stuck in a poorly performing asset when it could be reallocated elsewhere.

Herd behaviour: From a young age, we learn to succumb to peer pressure as the path of least resistance. When it comes to investing, we take comfort if everyone else is doing the same thing. For example, if everyone is buying over-priced internet shares, even if your rational brain tells you this is madness, you justify your decision because, "all my friends are doing it and they are making money, so it must be OK".


Surely, Buffett understands how to avoid the three behaviors Taylor lists. As one of the richest men in the world, he doesn’t get sucked into the euphoria of the markets. He only profits from them. How?

The important caveat from Buffett is that his determination that stocks look cheap based on the current environment of low interest rates. "If interest rates were seven or eight percent, these (stock) prices would look exceptionally high," he said. And of course, by all appearances, interest rates will continue to rise.
Why financial education is a must-have to survive

Unfortunately, the average investor doesn’t understand the fundamentals of the markets, let alone how interest rates impact the value of stocks. They just buy because the market is going up…and everyone else is doing it.

And this brings up an interesting question. What’s the antidote to anchoring, loss aversion, and herd behavior? 

The answer is found in financial education.


By understanding how money and markets work, you are better equipped to see the trends happening…and profit from them. Buffett has built his fortune doing just that. And so have I.

Monday, March 27, 2017

Rich Dad Poor Dad author on Real Estate


Real estate investing, even on a very small scale, remains a tried and true means of building an individual's cash flow and wealth.



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, March 22, 2017

Robots could take away your job

If you’re a real estate investor, you may be scratching your head right now. How in the world do robots relate to investing in property?

It’s simple, really. Once statistic I mention is as follows: it’s estimated that robots “will take the place of 40 to 50 percent of all McDonald’s employees.” What does that mean? It means that many jobs will be eliminated by the rise of robots and AI. And it won’t be just McDonald’s jobs either. According to The Guardian, 6% of all jobs could be lost to automation by the year 2021. That’s just a few years away. And that’s just the beginning.

But again, what does this have to do with investing? As I write in my ebook, “I’m keeping an eye on the robot phenomenon because real estate is based on only one thing: jobs. That’s it. If there are no jobs, there’s no real estate.”

Does this mean that real estate is a bad investment? The answer is only if you buy it wrong. As I point out, it is an illiquid investment. You can’t just back out. So you need to be confident you’re making the right projections based on what is happening in the market. If you get too sunny, you might get burnt.

Employees are screwed in the age of robots

But the rise of robots, as scary is it might be to some folks who made poor investments, is even scarier to those whose jobs will be replaced.

When I was growing up, my poor dad would always tell me that I should go to a good school so that I could get a good job. To him, financial security meant building a career at a big company that paid well.

As I got older and wiser about money, I realized that my poor dad was wrong. Rather than having a good job being the most secure place financially, I learned that it was the least secure.

Why? Because you had no control. You could be fired or let go at the drop of the hat. If the company you work for is mismanaged, you can do little about it. And you pay the most in taxes. The entire employment system is build to benefit the owners and investors and to minimize the power and security of employees. That, for instance, is why a company like Snap can offer an IPO with shares where no one can vote. And because people do not have financial intelligence, they eat it up.

Today, more than ever, being an employee is the least secure position to be in financially. This is precisely because of the rise of automation and AI. Most employees, however, have no idea that their job could be in jeopardy. Many experts are likening the coming wave of robots to the Industrial Revolution.

And as Tyler Cowen, writing for BloombergView points out, the economic impact of the Industrial Revolution was staggering. As he writes:

By the estimates of Gregory Clark, economic historian at the University of California at Davis, English real wages may have fallen about 10 percent from 1770 to 1810, a 40-year period. Clark also estimates that it took 60 to 70 years of transition, after the onset of industrialization, for English workers to see sustained real wage gains at all.

If we imagine the contemporary U.S. experiencing similar wage patterns, most of us would expect political trouble, and hardly anyone would call that a successful transition. Yet that may be the track we are on. Median household income is down since 1999, and by some accounts median male wages were higher in 1969 than today. The more pessimistic of those estimates are the subject of contentious debate (are we really adjusting for inflation properly?), but the very fact that the numbers are capable of yielding such gloomy results suggests transition costs are higher than many economists like to think.
But whose jobs will be affected, really?

Most people would rather not focus on these unpleasant facts. And if I were a betting man, I’d wager that most employees, if polled, would say they do not believe that robots could do their jobs. But they’d be wrong. According to an article in Wired, “Oxford University researchers have estimated that 47 percent of U.S. jobs could be automated within the next two decades.”

And as Martin Ford, the author of “Rise of Robots,” says in the same article:
I see the advances happening in technology and it’s becoming evident that computers, machines, robots, and algorithms are going to be able to do most of the routine, repetitive types of jobs. That’s the essence of what machine learning is all about. What types of jobs are on some level fundamentally predictable? A lot of different skill levels fall into that category. It’s not just about lower-skilled jobs either. People with college degrees, even professional degrees, people like lawyers are doing things that ultimately are predictable. A lot of those jobs are going to be susceptible over time.

In short, we’re not just talking about flipping hamburgers at McDonald’s. 

So what’s the solution?

Many experts, including Ford, believe the answer to all these lost jobs lies in some form of universal basic income.

Personally, I don’t know if such a system could work. If history is any indication, it won’t. Generally, when given handouts by governments, people are less incentivized to work than they were before.

So, what is the solution? To me, it is an increase in financial education that encourages entrepreneurial thinking.

As I mentioned earlier, my poor dad thought having a good job was the most secure thing you could do financially. Conversely, my rich dad, who was my best friend’s father, taught me that being an entrepreneur was the most secure thing you could do.

Many people balk when they hear this since the cultural mythos around entrepreneurship is that it is inherently risky. But my rich dad taught me that for those with the right financial IQ, it was not. The reason for this is that you have more control, pay less in taxes, and aren’t at the mercy of others.

This is why I’ve advocated for years for true financial education in the school system (not just classes on how to put money into a 401(k) and balance a checkbook). 

In a near future where robots will take many jobs, I believe that entrepreneurship is the key to financial security. At its core, entrepreneurship is based in innovation—finding ways to make money solving problems both large and small. This is difficult to automate because it is not predictable. In the future, the highest-paid people will be those who don’t do predicable tasks like lawyers and accountants but instead will be those who create new solutions and opportunities. That will be our entrepreneurs.

At Rich Dad, our goal is to help as many people thrive while others struggle to survive. The robots are coming. If you want to thrive, increase your financial IQ starting today, and start building a future where you kiss being an employee goodbye and can become an entrepreneur. Your financial security might just depend on it.

Tuesday, March 14, 2017

This is how I paid for my new Bentley car

Everyone loves to buy nice things. Those that say they don't…well, they're liars who can't afford nice things.

From before we can even talk, we're wired to follow after the next shiny things. We're also wired to consume as much as we can. It's the principle of scarcity that we've inherited from our hunter-gatherer days. You never know when you won't have what you need, so you better consume as much as you can today.

This explains why so many people have a hard time controlling their spending. And it explains why consumer debt is dangerously close to what it was prior to the 2008 Great Recession. According to CNN Money, in 2016, "household debt ballooned by $460 billion-the largest increase in almost a decade." According to the article, total household debt is now $12.58 trillion-yes, trillion-as of the end of 2016.

It seems that we never learn…and that we're doomed to repeat our mistakes.

Riding high

As it stands today, there is a euphoria going on in the markets that defies fundamentals. Just last week, the Dow Jones Industrial Average surpassed a record 21,000. It's being dubbed the "Trump Bump," with stocks rising 5% since he took office. Apparently, the markets are feeling very good about President Trump's policy agenda…and are banking on it being implemented.

How great are they feeling?

Well according to the Wall Street Journal, "Sales of vehicles made by Volkswagen AG's Bentley, Ferrari SpA, Fiat Automobiles NV's Maserati, Porsche AG and BMW AG's Rolls-Royce jumped an estimated 18% since the Nov. 8 U.S. presidential election through January, compared with the same period in 2016, according to Autodata Corp. That far outpaces the gains these upscale brands had been notching through the prior 10 months."

In the WSJ article, "What Do You Buy When Trump Wins? A Bentley," writer Chester Dawson explains this bump in luxury car sales, "Dubbed the 'wealth effect' by economists, perceived gains in portfolio values can prompt ultrahigh net worth buyers to splurge on hard assets such as fine art, real estate and luxury cars. Some in the auto industry also are seeing a 'Trump bump' based on expectations of fiscal stimulus and potential tax cuts under the new administration that will boost corporate profits and keep stocks on the ascent."

High Net Worth does not equal high financial intelligence

This goes to prove that "ultrahigh net worth" does not equal ultra-high financial intelligence. Buying luxury goods because the market is overheating is the very definition of counting your eggs before they hatch.

In most cases, the folks who are buying these luxury goods aren't doing so because they are actually wealthier. They are doing so because they look wealthier on paper. They have not sold their stocks. They simply hold stocks that, for now, have higher value. But one only has to look at the dot come bubble burst of the early 2000's and the real estate crash of the late 2000's to realize that wealth on paper and true wealth are two different things.

The story in the WSJ about luxury cars caught my attention because it is a good parallel to another story I like to tell about when I wanted a Bentley (whose sales are up 10.8% according to the WSJ since Trump, coincidentally).
How to buy a Bentley

Some years ago, I talked with my wife, Kim, about my desire to purchase a new Bentley. We both agreed that it would be easy for me to pay for the car in cash. We had the money. But having the money wasn't the issue. As big believers in mindset-and delayed gratification-we both agreed there was a better way for me to get in the driver's seat of this new dream.

Both Kim and I sat down and determined what it would cost for the new car on a monthly basis-what our cash outflow would be. We then, together-and this was fun, went shopping not for a new Bentley but instead for a new asset that would pay for the Bentley.

Kim and I found a great asset, and after six months we had enough cash flow from the asset to pay for the monthly costs of my new car-and some. The best part of the whole exercise is not only did I have my new Bentley but I also had a cash-flowing asset that actually increased my wealth, not just made me look richer on paper.
Two ways to view wealth

This is a simple story, but an important one. There are two ways to view wealth. One is on paper. That is how most news outlets, and frankly, most CPAs view it. The traditional balance sheet is smoke and mirrors, accounting tricks to look wealthier than you are.

The other way to view wealth is the Rich Dad way. It is much simpler. It's based on this one important truth. An asset is anything that puts money in your pocket. A liability is anything that takes money out.

Given this definition of wealth, paper assets that grow in value while providing no cash flow are not assets. They are actually liabilities since you had to pay out of pocket for them. They only become assets when you sell them. But that isn't advantageous because then you only have the cash on hand. And cash, like electricity, is a currency. It must move somewhere else to have value. Otherwise it dies. In the case of electricity, it dies quickly. In the case of cash, it dies slowly, eroded over time by inflation.

The ultra-rich who are buying new Porches, Maseraties, and Bentleys in this market bull run are those who are spending wealth they don't truly have. I hope it works out for them. But if history is any indicator, it won't. But, they have good attorneys to bail them out.

What's scarier is when the middle class starts following suit. They are the ones that always get wiped out. And when the middle class starts spending like the rich-running up consumer debt like 2008 levels-it's time to watch out. The markets are ready to crash.

I think the biggest stock market crash is yet to come. The question is, will you be a victim-or will you be ready to thrive?

Sunday, March 12, 2017

Australian housing bubble

It's pretty bad when the Australian property market is making news all over the world.

Foreign investors are queuing up to buy anything they can get their hands on. This is causing average Australian punters to think they need to start buying now. It has created a bubble.



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.

Monday, February 27, 2017

Games are a great way to learn about money

Sad news, apparently, for Monopoly fans this week as Hasbro announced that they were removing the classic thimble game piece from the popular board game.

Of course, it's not really Hasbro that made the decision. They opened public voting on what piece to remove in order to make room for more modern game pieces "like the hashtag, the wireless phone, and the rubber duck." After four million votes, the thimble was gone.

I don't really have a horse in the race when it comes to Monopoly game pieces, but this little piece of news did bring up some fond memories of playing the game with my best friend, Mike, and his dad, my rich dad.

Rich dad told us that, "One of the great formulas for wealth is found in this game: four green houses, one read hotel."

This one great formula rich dad spoke of was that of cash flow. Monopoly is a cash flow game. You purchase property, balancing cost and location, and collect rents when people land on your properties. In order to make more money, you develop and improve those properties, building houses and, eventually, hotels.

For example, having one green house on a property you own could make you $10 when someone lands on it. Then, two houses could make you $20. Three could make you $30. And a hotel could make you $50. Basically, more green houses and red hotels means more cash flow. It's a simple game, but an important lesson.

Playing Monopoly in real life

My rich dad didn't just play Monopoly with us on his sunny patio. He also played Monopoly in real life. He built his fortune from the ground up, starting with some small stores and moving into more and more sophisticated investments. Eventually he did own his own hotel right on the beach-and then a few more.

As I shared before , I learned four valuable lessons from my rich dad by watching him play Monopoly in real life:
-    Investing is not risky
-    Investing is fun
-    Investing can make you very, very rich
-    Investing can set you free from the struggle of earning for a living and worrying about money

Games make you a better investor

And this brings to mind a simple truth: games make you a better investor. A lot of people like to read or listen, but it's proven that you learn better by simulating than any other method of education.

A couple years ago, I shared a wonderful TED Talk by Gabe Zichermann called " Changing the Game in Education ." As I wrote then:
    Zichermann talks about how the modern education system is fundamentally opposed to our nature as humans. Asking us to sit down and pay attention does very little for our education, when in reality we learn more by trying, making mistakes, and achieving. Experiencing the chemical benefits of the pleasure we feel when dopamine is released through our achievements helps us remember and learn far more efficiently.
    He then goes on to make the case for why gamification is the future of education-including an amazing example of a teacher using Monopoly at a school in California's Inland Empire to teach kids about money, among other things. The result: a jump of 40 kids in the top rankings of the California Math Test, up from less than 10 at the start of the program. - Robert Kiyosaki

And as R.F. Mackay writes for Stanford University :
We may think we're pretty smart, but in fact we have very little notion of how humans learn. Kids know: They play games. Until, that is, they go to school. That's when the games stop. And often, so does the learning. - R.F. Mackay, Stanford University

This is why, even though we have books and seminars, we've always said the best way to learn how to invest is to play our financial education board game, CASHFLOW. We've seen that those who devote themselves to mastering this game, in addition to reading and hearing great talks, go on to much greater success in investing.

Perhaps this is because as Dan Schwartz, who runs the AAA Lab, "a technology and learning lab" at Stanford, has discovered , "one of the best negative predictors of performance was the act of walking away after failure." Games allow us to keep coming back to the table after we've failed, thereby improving our performance significantly over time.

Learning by doing, not hearing

In 1950, a nun who was a history and geography teacher in Calcutta was called on to help the poor and to live among them. Instead of just talking about caring for the poor, she chose to say very little and helped the poor with her actions, not just her words.

Because of this, when she did speak, people listened.

She had this to say about the difference between words and actions: "There should be less talk. A preaching point is not a meeting point. There should be more action on your part."
Games as meeting points

At Rich Dad, we made a conscious choice to incorporate games into our education methods because they require more action than a lecture. As Mother Teresa said, "A preaching point is not a meeting point." Our games are meeting points.

Games provide a social interaction for learning and helping someone else learn. When it comes to investing, there are too many people trying to teach by preaching. We all know that there are certain things that are not best learned by simply reading and listening. Some things require action to be learned, and games provide this elementary action step to learning.

Creating understanding

Confucius once said: "I hear and I forget. I see and I remember. I do and I understand."

Ultimately, we believe that games create more understanding. And the more understanding people have, the more they can see the other side of the coin. Instead of seeing fear and doubt, the players begin to see opportunities they never saw before because their understanding increases each time they play the game.

There are many stories of people who have played our games and have had their lives suddenly changed. They have gained a new understanding about money and investing, an understanding that pushed out some old thoughts and gave them new possibilities for their lives.

A world of opportunity

Again, rich dad taught me to be a business owner and investor by playing the game of Monopoly. He was able to teach his son and me so much more after the game was over when we visited his business and real estate.

I wanted to create educational games that taught the same fundamental and technical investing skills that rich dad taught me, far beyond what is taught in Monopoly. As rich dad said, "The ability to manage cash flow and to read financial statements is fundamental to success on the B and I side of the CASHFLOW Quadrant."

That is why I developed my first board game, CASHFLOW. And that is also why we continue to develop new games and apps taking advantage of new technologies.

Each game teaches new skills, opens up your mind to a world of opportunity, and drills home the lessons of cash flow. With repetition, those lessons will become ingrained in your psyche and how you approach your financial future.


Games as meeting points

When I was deciding how I wanted to teach financial education and the investment skills my rich dad taught me, I made a conscious choice to incorporate games into my methods. I did this because games require more action than a lecture. As Mother Teresa said, “A preaching point is not a meeting point.” Our games are meeting points.

Games provide a social interaction for learning and helping someone else learn. When it comes to investing, there are too many people trying to teach by preaching. We all know that there are certain things that are not best learned by simply reading and listening. Some things require action to be learned, and games provide this elementary action step to learning.

A world of opportunity

Rich dad taught me to be a business owner and investor by playing the game of Monopoly. He was able to teach his son and me so much more after the game was over when we visited his business and real estate.

I wanted to create educational games that taught the same fundamental and technical investing skills that rich dad taught me, far beyond what is taught in Monopoly. As rich dad said, “The ability to manage cash flow and to read financial statements is fundamental to success on the B and I side of the CASHFLOW Quadrant.”

That is why I developed my first board game, CASHFLOW. And that is also why I continue to develop new games taking advantage of new technologies, like our brand new app, Capital City: The Finance and Strategy Game.

Each game teaches new skills, opens up your mind to a world of opportunity, and drills home the lessons of cash flow. With repetition, those lessons will become ingrained in your psyche and how you approach your financial future.

Friday, February 24, 2017

The rich get richer because they can spot an opportunity better


Most people never get wealthy simply because they are not trained financially to recognise opportunities in front of them. The rich have learned how to recognise opportunities as well as how to create them.



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, February 22, 2017

Keeping up with the Jones is tiring


People think that working hard for money and then buying things that make them look rich will make them rich. In most cases it doesn’t. It only makes them more tired…And if you notice, the Joneses are exhausted.



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.

Monday, February 20, 2017

Australia Housing bubble


Foreign investors are queuing up to buy anything they can get their hands on. This is causing average Australian punters to think they need to start buying now. It has created a bubble. It's pretty bad when the Australian property market is making news all over the world.

Tuesday, February 14, 2017

How to finance your real estate investments


When I discuss the idea of OPM or Other People's Money, most people are on board with it-excited even-about the possibilities. But then they become intimidated by the idea of how exactly to find and use OPM.

This is normal for people. When we learn new ideas, our mind does its best to create reasons why the idea is wrong or it won't work. Our mind tells us things like, "No one would ever give you money," "You can't find good enough investments to attract OPM," or, "Using OPM is taking on too much risk. Better off just putting money into your retirement account."

In reality, the hardest part of OPM is knowing how to find the right real estate investment to attract money, but even that isn't difficult if you take the time to learn how to do it.

Once you have the right property, getting OPM becomes quite easy-if you know where to look. And when you begin to build your real estate portfolio, it gets even easier.

Below are six solid sources of OPM you can put to work for you and your real estate investments.

Banks
This one should be obvious. If you own a house, you know what it's like to go to a bank to apply for a mortgage. Most people don't think of it this way, but a mortgage is a form of OPM. Generally, with a single-family home, a bank will cover up to 80% of a home's value. You, as the purchaser, will pony up the other 20%.

This isn't always the case, however. For first-time homebuyers, an FHA loan can cover up to 97% of the purchase price with the buyer only having to contribute the other 3%. Of course, there are stipulations on this, such as you have to live in the home for a certain number of years before you can rent it out.

When it comes to real estate investing, when a property gets to a certain size, it no longer is viewed as a residential property but instead as a commercial property. This means that any bank looking to make a loan will base the loan criteria on the operating income of the property, not on the "market value" like they do for a home.

Often times, if you can make the business case for a loan to cover not only a portion of the purchase price, but also for the execution of the business plan to grow the property's value, you can fund a lot of your capital costs with the bank's money.

Banks are notoriously conservative, so if you're looking to have little-to-no money in a deal, a bank might not be your best option. But it can be a good place to start.

Private lenders
While banks are generally public institutions that have high regulatory requirements, you can work with private lenders and equity firms that are willing to invest in real estate. These could be angel funds, investment groups, and more. You'd be surprised how many institutions are out there with the sole purpose of finding good investments to pour money into. You can find these lenders by either asking other investors you know or by doing some searches on the internet, where you can find things like private lender associations. These loans can be a bit more expensive with higher interest rates, so weigh your options.

Seller carryback
A seller carry back is where the seller of a property acts as the lender. There are a number of reasons why a seller might do this. Perhaps they are tired of the work required to operate a piece of property, or maybe they are looking for a steady return by collecting set interest on their money rather than rely on rental income ups and downs.

Because it is a private transaction, there are many options for seller carrybacks, and it just depends on your negotiating skills. The seller could finance all or part of the property. The rate could be at market or it could be higher than market depending on risk. The seller could participate in part of the profit in exchange for a lower rate and you doing the work and management to execute the business plan. The options are nearly limitless.

You never know if a seller will be willing to carryback, but as with all things, it never hurts to ask.

Investors
If you have a good investment property, it will be easy to line up private investors who will want to provide the equity money for the property. Often times this is how you can raise the money for the percentage of the purchase price that a bank will require you to pay.

So, for instance, if you are buying a four-plex and the bank requires you to put down 25%, you would use private lenders to raise most or all of the equity money needed for that 25%.

This means you need to put together a solid investment prospectus that shows the potential of return for the investors. Ideally, you would have done that for the bank as well, so it should be ready to shop.

This is how Rich Dad Advisor Ken McElroy does his deals, and he has grown his portfolio from one apartment building to thousands of units in multiple states.

Government Tax Credits
If you are interested in doing investing in properties that the government subsidies, like affordable housing, you can utilize a slew of tax credits to help fund your real estate investment. These types of investments require a high-level of financial intelligence, so you don't want to just jump in. But if you do the work to become a pro, you can make a very good living.

Additionally, you can find tax credits for building or retrofitting properties with environmentally friendly enhancements. It varies from marketing to market, so do your homework and see what you can get.

Cash flow on operations
This is where things get very fun and why I believe real estate is one of the best ways to accelerate the velocity of your money. Once you have a good real estate investment property and a plan for growing its value, you can utilize that property itself as a means to generate cash out of thin air for other real estate deals.

I hit on this in my last post when I talked about how to improve a property for greater cash flow and value:
    As an example, let's talk about Rich Dad investor Ken McElroy. Ken, as you may know, is a real estate mogul specializing in apartments-a real estate class called multi-family housing.

    What Ken and his partners do is find apartment buildings that under-perform. Because the value of a commercial real estate asset like an apartment is based off the Net Operating Income (income after expenses), any opportunity to increase NOI is an opportunity to see a healthy return.

    For Ken and his team, a variety of factors could help with this. For instance, the current landlord could be renting units well-below market rates. Turning those units and raising the rent could dramatically increase NOI. Or perhaps retrofitting units with washers and dryers, as well as a cosmetic facelift could increase rents by anywhere from $25 to $50 a month. Multiply that by hundreds of units and you'll see a lot of lift in income.

Since the bank values a property on the Net Operating Income, not on "market value", a lift in income is a sizable lift in value. You can use this higher value to do a refinance, pull money out of a property tax-free, and then redeploy it into another real estate investment. Continuing the cycle over and over again over many years exponentially grows your portfolio-and your wealth. And it's all done with OPM.

Monday, February 6, 2017

Being a millionaire may not be all it seems

There's no doubt about it, from an early age we teach our children the value of saving money. "A penny saved; a penny earned," we chime. And when they are a bit older, we spin tales of the magic of compounding interest. Save enough, children are told, and you'll be a millionaire by the time you're ready to retire!

Of course, we don't tell them about historically low interest rates, or the power of inflation to eat away at the value of money over time so that being a millionaire is worthless by the time you retire. Those are inconvenient financial truths.

It seems as if the "wisdom" to save your money is timeless, in that it won't go away, even though it's proven to be wrong. Even today you find "financial experts" who push the save to be a millionaire myth.

Playing with numbers

Take for instance a video shared on Business Insider, "How much money you need to save each day to become a millionaire by age 65". Breaking it down by age, it gives the following amounts:

    Age 55: $156.12 per day / $56,984 per year
    Age 50: $73.49 per day / $26, 824 per year
    Age 45: $38.02 per day / $13,879 per year
    Age 40: $20.55 per day / $7.500 per year
    Age 35: 11.35 per day / $4,144 per year
    Age 30: $6.35 per day / $2,317 per year
    Age 25: $3.57 per day / $1,304 per year
    Age 20: $2.00 per day / $730 per year

If you're in your twenties or thirties, you're probably feeling pretty good about these numbers. You might even be tempted to think it's worth it to start saving your money. After all, who doesn't want to be a millionaire by the time they're 65? If you're in your forties or fifties, you're probably looking at those numbers and feeling a huge pain in your stomach. I don't know many middle class families with an extra $10K to $56K to save each year.

Now, here's the kicker, at the end of the video, the following assumptions (or should I say disclaimers?) are given:

"For simplicity sake, the calculations assume a 12% annual return and don't take taxes into account."

That indeed is some magical compounding interests-and mythical too. Let's break this down a bit.

What's a realistic return?

In the last 30 years or so, there has only been one time where interest rates on CD's reached 12%. That was for a 5-year CD in 1984. Over the last decade, the S&P has only returned 8.65% on average. In the same time period, the 3-month T-bill has returned 0.74% and the 10-year T. Bond has returned 5.03%. In fact, if you look at this chart by Aswath Damodaran, you'll see that since 1928, you'll be hard-pressed to find any standard investment or savings vehicle that returns 12% over a sustained period of time.

Perhaps you're ready to concede the point that 12% is lofty in terms of return assumptions, but maybe you're still pretty comfortable with the idea of a 10%, 8% or even a 6% return. The problem is not only does the video assume a high rate of return that most people will never achieve, but it also does not factor in taxes, which can eat up significant portions of your returns. For instance, savings account interest is taxed at a marginal rate. This simply means that it is taxed at your income bracket. So if you're taxed at a 25% rate for your income of say, $65,000 a year, you're savings interest earnings are also taxed at that rate.

You can begin to see how this pop financial advice begins to quickly fall apart.

Savers are losers, but who is the winner?

For years, I've preached that savers are losers. Hopefully the examples above will open your eyes as to why.

But the question becomes, why would financial advisers continue to push savings? As always, follow the money. The traditional vehicles by which most people save allow for financial institutions to charge fees. These fees can be especially devastating to a retirement account like a 401(k). Take this example from "USA Today":

    Let's say, for instance, you save $10,000 a year for 30 years in your 401(k). If you average 7% returns annually and pay 0.5% in annual expenses, you'll finish with about $920,000 saved. However with 1.0% in annual fees, that total drops to a little less than $840,000 - and if you suffer 2.0% in annual fees, your finishing total is just under $700,000.

Adding them all up together, lower returns that most models assume, losses to taxes, and payouts to financial institutions in the form of fees completely decimates the assumptions made by the Business Insider video, and frankly, most savings models out there. Savers truly are losers, and it's the financial institutions that win.

Bad debt vs. good debt

So, if savings isn't the way to become rich, what should you do?

The short answer is go into debt.

Maybe that answer surprises you. After all, you've probably been told since you were a child that debt was bad. And it can be. But it can also be good-very good.

Let's take a moment to define what I mean by bad debt and good debt.

Bad debt is money that takes money out of your pocket. It makes you poorer. This can be credit card debt from purchases for things like clothes or TVs. And it can even be the mortgage for your personal home. In short, if it's not making you money, it's bad debt.

Good debt is another story, and most people aren't even aware that it exists. Good debt puts money in your pocket month in and month out. "How can this be?" you might ask. Glad you asked. Let's talk about a concept called OPM or Other People's Money.

How good debt works, aka (OPM)

The rich know how money works. They understand that the best way to get a high return is to have as little of their own money in a deal. Rather, they spend their time finding the best deals and then present them to investors who are willing to use their money to fund the deal. When structured right, OPM allows an investor to secure a valuable, high return, cash-flowing asset for little-to-nothing.

As an example, let's talk about Rich Dad investor Ken McElroy. Ken, as you may know, is a real estate mogul specializing in apartments-a real estate class called multi-family housing.

What Ken and his partners do is find apartment buildings that underperform. Because the value of a commercial real estate asset like an apartment is based off the Net Operating Income (income after expenses), any opportunity to increase NOI is an opportunity to see a healthy return.

For Ken and his team, a variety of factors could help with this. For instance, the current landlord could be renting units well-below market rates. Turning those units and raising the rent could dramatically increase NOI. Or perhaps retrofitting units with washers and dryers, as well as a cosmetic facelift could increase rents by anywhere from $25 to $50 a month. Multiply that by hundreds of units and you'll see a lot of lift in income.

Once they have a solid business plan in place, Ken and his team to investors and raise the capital they need to purchase the property (OPM). Once the asset is secured, they execute on their plan, as well as bring their considerable management expertise to the table.

Already, both Ken and his investors enjoy a good return from the property income since they only purchase cash-flowing assets. This can often be in the double digits. But here's what separates the rich mindset from the poor one.

Once the property is substantially increased in value from the business plan, say over a course of three years, Ken and his team refinance the property, pay back all the investors their original capital plus a generous return on that capital, and still have ownership in the building that cash flows each month. And the beauty for Ken and his team is they create this wealth with a little bit of their capital and a bunch of capital from other people. So their returns are higher the whole way through.

At this point, Ken and his investors are enjoying income with no money in the deal. That is an infinite return. And that is why debt infinitely trumps savings.

The good news is you can begin to invest like this. It might now be with large apartment buildings at first, but it can grow into that. My wife, Kim, invested with OPM for her first investment-a rental house in Portland, OR. Today, she owns thousands of apartment units. She used this method of good debt to increase the velocity of her money from one small house to a huge portfolio. And you can too. It starts with thinking differently about money, increasing your financial intelligence, and getting to work today.

Monday, January 30, 2017

Rules of success inspirations - interview footages




Click on the video above or link to watch the full interview

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.

Sunday, January 22, 2017

How to be a real estate investor and succeed

Many people want to be successful real estate investors. The problem is that the average person starts at the last step of the investment cycle rather than at the beginning. Because of this, they often fail.

What is the last step? The property.

It seems counterintuitive, but the property is actually the least important part of becoming a successful real estate investor. In fact, you could have one of the best properties in the world, but if you don't complete three crucial steps prior to buying that property, chances are that, for you, the property will be a huge disappointment.

Here are the four essential steps needed for being a successful at real estate investing.

Step 1: Establish your personal investment philosophy
As my friends Robert Helms and Russell Gray, the Real Estate Radio Guys, often say, "There are no problem properties; there are only problem owners."

There is always a right owner for any property, which is why it's key to determine what kind of owner you are before you ever invest any of your hard earned (or your investor's hard earned) dollars into an investment property.

Investing is a lifestyle, and you have to determine what kind of lifestyle you're looking for.

Some important questions to ask:
    What do you want real estate to do for you?
    Where do you want to go in your investing journey?
    Who do you want to work with?
    What do you want to spend your time doing?

The Real Estate Radio Guys share a story about a C class apartment investor that netted $1 million a year. They were excited to meet him because many of their students aspired to have that kind of income from a property. But when they met him, their whole paradigm changed because he was working 16-hour days, 7 days a week, and he hated his life. Money wasn't the problem. His personal investment philosophy did not match the reality of the property and location he picked.

There are other investors, however, who live to work on and invest in C class apartments. It's all about what you're looking for in life. Your mission as a real estate investor is to make sure you understand clearly who you are, what you want out of real estate, and then make sure that what you acquire fits that mold.

Step 2: Determine what market you want to be in
Another saying I like from The Real Estate Radio Guys is, "Live where you want to live; invest where it makes sense."

Many people think they need to invest in their own backyards. While that may be a good idea, it's not a necessary one. Rather, you should find a market that meets the needs of your personal investment philosophy.

For instance, if your personal investment philosophy were to invest for monthly cash flow, it would make no sense invest in a number of properties with an aggressive, highly leveraged debt ratio that allowed for no cash flow. Nor would it make sense to invest in a high appreciation market where prices didn't pencil out for positive cash flow.

Rather, you would need to find the right market that provided affordability and cash flow, even if it didn't appreciate much. For cash flow investors, that's a great market. For flippers or appreciation investors, it's a nightmare market. But you only know that if you understand what kind of investor you want to be.

Step 3: Assemble your team
As rich dad said, "Business and investing are team sports." In order to be successful in any market, especially ones that you don't live in, you need to have the right team.

This team should include an attorney, a CPA, a bookkeeper, and a real estate agent and/or broker, and you should rely on them heavily to give you expert advice about your market and the properties you'll be looking at.

Without a team in place to give you expert advice, the chances of you making a huge mistake are high.

Step 4: Purchase the right property
Finally, and only after determining your personal investment philosophy, finding the right market, and assembling your team, should you start looking at properties.

And if you do steps 1-3, it won't be are to find the right one.

Monday, January 9, 2017

I wanted to be rich since I was 5 years old


[Watch the video above or click here]


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, January 4, 2017

New Years Resolution for 2017

Here we are in 2017. I hope you and yours had a good New Years celebration. As you know, this is the time of year when everyone does some looking within. If you're like most people, you've either made or are thinking through some resolutions for the New Year.

Did you know that most resolutions revolve around three things?
-    Health
-    Money
-    Experiences

Think through the resolutions you've made in the past, and most likely they will fall into one of those three categories. And these are also the most commonly broken resolutions as well. You can probably relate.

Personally, I don't do resolutions. I think it is much better to have a mindset that is always growing and evolving. I don't need a new year to make change in my life. I need to continually be examining where I am and where I want to go, all through out the year.

To do this, I build habits into my life that help me grow personally and financially each and every day. Here are five of them that you can put into practice starting today.

1) Keep up with the news
There is no substitute for knowing what is happening in the world and the markets. Each morning I get up and read a number of financial papers, blogs, newsletters and more. I also watch the news throughout the day.

As I've written before, knowledge is the new money, and if you want to be wealthy, you need to constantly be filling your knowledge bucket.

What you'll find is that the more you read, the more you'll start to understand. You'll then begin to notice patterns, and sooner than you think, you'll know what moves to make with your money well before most other people.

2) Read one book a month, at least
News is important to keep up on, but some ideas require much deeper exploration. Throughout my career, my success has come because I've chosen to read books that educate me about history, business, and money. While most people are content to watch TV or play video games, the person who commits to reading books will be light years ahead in the game of life.

Personally, I read multiple books each month. If you're just starting out, however, commit yourself to at least one book a month. That's much more than the average reader, and the knowledge you gain will be priceless. Don't know where to start? Here are two books I recently recommended.

3) Play more games
Head knowledge is important, but studies have shown that the best way to learn is to do. Games-or simulations-are proven to be great ways to learn by doing. Not only are they fun, but the applied knowledge also helps you retain more and understand how money and investing work in real life.

We stated Rich Dad as a game company focused on teaching financial truths through games. Thousands of people around the world get together to play CASHFLOW, our board game that teaches you how to get out of the rat race. You can either purchase a copy of the game for yourself, or you can play online for free.

4) Get fit
It's cliché to say you're going to hit the gym in the New Year, but it underlies a fundamental truth-when you are in shape you feel better, and as a result, things in your life are better.

Rather than preach a certain method or way to get in shape, I simply like to encourage people to find something they enjoy and do it until they don't enjoy it any longer. That could be the stair machine at your local gym, but it could also be something as simple as taking a nightly walk after dinner with your partner.

If you focus on your physical health, your mental health will be sharper, you'll have more energy, and you will be more successful.

5) Give back
Kim and I have shared our 10/10/10 plan before. In short, you invest 10 percent of your income, save 10 percent of your income for emergencies and special opportunities, and give 10 percent of your income to charity or your church.

Most people do well at saving their money, though probably not 10 percent of it. Some people do well at investing their money, though again probably not at 10 percent. But very few people do well at giving their money away.

Kim and I believe that in order to receive you must give. You cannot have a healthy and wealthy mindset if you are stingy and greedy. We also believe that what goes around also comes around. Call it karma or whatever you want, but if you are generous with the world, the world will be generous with you.