Read this like your life depends on it…because financially, it does.
“In late 1974, I purchased a small condominium on the fringes of Waikiki as one of my first investment properties. The price was $56,000 for a cute two-bedroom, one-bath unit in an average building. It was a perfect rental unit… and I knew it would rent quickly.
I drove over to my rich dad’s office, all excited about showing him the deal. He glanced at the documents and in less than a minute he looked up and asked: “How much money are you losing a month?”
“About $100 a month,” I said.
“Don’t be foolish,” rich dad said. “I haven’t gone over the numbers, but I can already tell from the written documents that you’re losing much more than that. And besides, why in the world would you knowingly invest in something that loses money?”
“Well, the unit looked nice, and I thought it was a good deal. A little paint and the place would be as good as new,” I said.
“That doesn’t justify knowingly losing money,” smirked rich dad.
“Well, my real estate agent said not to worry about losing money every month. He said that in a few years the price of the unit will double, and in addition, the government gives me a tax break on the money I lose. Besides, it was such a good deal that I was afraid someone else would buy it if I didn’t.”
Rich dad stood and closed his office door. When he did that, I knew I was about to be chewed out as well as be taught an important lesson….
…On that day, I learned more about money and investing than I had in all my previous 27 years of life.”
(pp. 97-98 of The Cashflow Quadrant by Robert Kiyosaki)
The 11 Secrets to Make Money With Your Mind
1) How to handle “You can’t do that” – when you bring up a winning investment proposal, your advisors/realtors/etc may say “You can’t do that”. What they really mean is “They can’t do that”. It does not mean that it can’t be done. Don’t listen, make it happen.
2) $1.4 Trillion Looking for a home – everyday money is circulating electronically, it is invisible because most of it is electronic. If you know how to take care of money, money will flock to you, and be thrown at you. People will beg you to take it.
3) Train your eyes to see only 5% and your mind to see 95% when you invest – “The average person is 95 percent eyes and only 5 percent mind when they invest,” said rich dad. Be sure to only take advice from people who actually know what they are doing, and know their numbers…who know how to take care of money.
4) Train your brain to see money – The ability to make money begins with financial literacy, with understanding the words and the numbers
5) Know what real risk is – understand each investment, and how much is put in, how much the costs are, the return, possible set backs and pluses, practice with small investments and work your way up. Practice, practice, practice
Bad advice is risky – most people learn about money by modeling what their parents did with money, they hear advice or see what others do, and they can’t tell the difference between good and bad advice
6) Your advisors are only as smart as you – If you are financially naive, they must by law offer you only safe and secure financial strategies. If you are an unsophisticated investor, they can only offer low risk, low yield investments. They’ll often recommend “diversification” for unsophisticated investors. Few advisors take the time to teach you. Their time is also money. So if you will take it upon yourself to become financially educated and manage your money well, then a competent adviser can inform you about investments and strategies that only a few will ever see. But first, you must do your part to get educated. Always remember, your adviser can only be as smart as you.”
7) Know the difference between an asset and a liability
8) Understand THE GAME OF MONEY – Who is indebted to whom?
Money is debt – The more people you are indebted to, the poorer you are.
Words that lure you into the losing position of the game are:
“Low down, easy monthly payments”
“Don’t worry, the government will give you a tax break for those losses”
Who owes you?
The more people who owe you, the richer you are.
9) What is your interest rate…really?
10) If you take on debt and risk, you should be paid.
11) Understand the difference between facts and opinions
Common opinions are:
“You should marry him. He’ll make a great husband.”
“Find a secure job and stay there all your life.”
“Doctors make a lot of money.”
“They have a big house. They must be rich.”
“He has big muscles. He must be healthy.”
“This is a nice car, only driven by a little old lady.”
“There is not enough money for everyone to be rich.”
“The earth is flat.”
“Humans will never fly.”
“He’s smarter than his sister.”
“Bonds are safer than stocks.”
“People who make mistakes are stupid.”
“He’ll never sell for such a low price.”
“She’ll never go out with me.”
“Investing is risky.”
“I’ll never be rich.”
“I didn’t go to college so I’ll never get ahead.”
“You should diversify your investments.”
“You shouldn’t diversify your investments.”
Do you due diligence.
Understand the investment, do the math yourself, ask all the questions, after you analyze, act.