SOME THOUGHT PROVOKING SCAM DISGUISED AS WISDOM By Robert Kiyosaki
Introduction
A Quick Note from Robert
Throughout history, cultures have tightly grasped their dearly held beliefs
so commonly accepted, so religiously observed, that to question them is
sacrilege. They are so sacred that to call these beliefs scams is to doom
oneself to isolation and abuse. When it comes to money, these scams have
toppled every past fiat government in history.
Our culture is no different. Our beliefs are no less sacred. The beliefs and
scams are so sacred and hold so much power that when they are wrong their
damage is immense. These scams assisted in the crisis of 2007.
When the global financial crisis began in 2007, many people clung even
more tightly to their sacred beliefs and their jobs in the hope of not being one
of those who were laid off. Millions held on tightly to their homes, even though
they could not pay the mortgage. Most cut back on their spending and saved
more, even though the federal government was printing trillions of dollars,
destroying the purchasing power of their savings. Workers stuffed even more
money into their retirement plans, even though the stock market had crashed,
wiping out their prior gains. And school enrollments boomed, as more people
headed back to school, even though unemployment was soaring. The faith in
the scams held strong. What else could people do?
The crisis did not have the effect of causing people to question the causes
and the beliefs that created the crisis. Instead people clung the lies, their job
and the system wide scams that created the problem. Rather than let go,
most people clench their fists tighter and wait for the crisis to pass, praying
that their political leaders can solve this global crisis and that happy days
will return.
The problem is that the coming decade, the years from 2010 to 2020,
will prove to be the most volatile world-changing decade in world history.
Unfortunately, the people clinging to the relics of the past— relics such as
job security, savings, a home, and a retirement plan— will be those who are
most ravaged by the global financial storm approaching.
A few know they must make changes. Yet without a strong financial
education, they do not know what to do or how to change.
Rich Dad’s vision has always been to provide comprehensive financial
education with quality, free resources when possible to as many people as
we can. The mission of Rich Dad Scams is to take you from the established
mindset about money to the enlightened mindset, to put a bullet to the head of
bad financial advice, and to help you take charge of your financial future.
I hope you enjoy the following. Please share it with your friends, family,
and co-workers—anyone you know who could benefit from the collective
knowledge of the Rich Dad team.
Comprehensive financial education is still the surest way to financial
freedom, both personally and as a society. Together we can make a
difference.
Rich Dad Scam #5: Save Money
The Rich Dad Scams I’ve identified are, very simply, the things you are
taught about money that are wrong. They keep you from becoming rich.
They are the ideas the rich have built into society to keep you poor and them
rich. Unfortunately, they’re so driven into our minds that it can be hard to
recognize them as lies.
This chapter’s scam is Rich Dad Scam #5, “Save Money.”
Time and money changes
“If you save money, you will have money.” “Save money for a rainy day.”
“A penny saved is a penny earned.” These are common lessons parents teach
their kids about money. Unfortunately, there’s one big problem with them:
they’re lies.
The big problem with Rich Dad Scam #5, “Save Money,” is that it used to
be true. A generation or two ago, saving money paid off. You could set aside
a certain amount of money and retire on it. Your parents or your grandparents
might have done just that, and it worked. But what worked for them cannot
work for you in today’s economy. To understand this, you must understand the
history of money.
In 1971, Richard Nixon took the United States off the gold standard, the
system where every dollar in the US economy was based on a dollar’s worth
of gold that the country owned. When Nixon did this, it destabilized the
economy and kick-started inflation and a number of other factors that affect
the power of your dollar. Before 1971, money was money, backed by the value
of gold. If you saved 10 percent of your income every year, it could turn into
enough to retire on. After 1971, money became a currency that could go up
and down in value with nothing of value backing other than the good faith and
credit of the United States. That is why there have been so many fluctuations,
peaks and valleys, in the economy.
Real money
Money is something that holds its value, which is a different concept
from currency, which is a representation of that value. When the US went
off the gold standard, US dollars really stopped being money and became
a currency. Money is something that keeps its value. Currency fluctuates in
value, and the US dollar has kept losing value since 1971.
Today, savers are losers. Why? The bank pays you a lower interest rate on
your savings than the inflation rate. In essence, this means that your money in
the bank loses more value than it gains over time. It’s a losing proposition to
save. The dollar you save today will be worth less a year from now.
If, however, like an entrepreneur or an investor, you put that dollar to work
for you, then you have a chance of a return that is much higher than inflation.
You have an opportunity to make money instead of losing it.
Currency collapses
Historically, once money isn’t based on something concrete, like gold, its
days are numbered. Once your money is simply a piece of paper that really
only represents debt, a currency, how can it sustain itself? It can’t.
My team and I are all big believers in diversifying into gold and silver, real
concrete representations of money, not currency. Precious metals have been
the true measures of wealth for thousands of years. If we learn from history,
we see that currencies collapse. Gold is consistent. It is truly money.
Making your money work
So, if you can’t put your money in the bank, what can you do? The answer
is to get aggressive. Putting money in the bank is passive. Putting your money
out in the world is putting it to work. Why put your money in the bank where
it will lose value when you can put it to work for you in assets where you can
turn your money into more money? That sounds like a better idea to me.
Rather than believing the Rich Dad Scam #5, “Save money,” I encourage you
to instead invest your money in cash-flowing assets. That is the true path
to wealth.
Rich Dad Scam #6: Your House is an Asset
It seems like every financial “expert” says, “Your house is your biggest
asset.” When I wrote Rich Dad Poor Dad, I said that your house was a liability.
That was like spraying water on a hornets’ nest. The so-called experts
lambasted me. At the time, the real estate market was skyrocketing. Everyone
called me a contrarian, out to sell books. Today, after one of the worst housing
crashes in US history, they aren’t laughing anymore.
This chapter is about one of the biggest Rich Dad Scams of all, “Your
house is an asset.”
Money in, money out
Your financial planner, real estate agent, and accountant all call your house
an asset. But in reality, an asset is only something that puts money in your
pocket. If you have a house that you rent out to tenants, then it’s an asset.
If you have a house, paid for or not, that you live in, then it can’t be an asset.
Instead of putting money in your pocket, it takes money out of your pocket.
That is the simple definition of a liability.
This is doubly true if you don’t own your home yet. Then it’s the bank’s
asset, and it is working for them, but it’s not earning you anything.
So what is an asset?
In business terms, assets are your pros and liabilities are your cons.
You need assets to offset your liabilities. Once you get away from the Rich
Dad Scams, it’s easier to think in those terms, to think like an entrepreneur.
But what exactly are assets?
The simple definition of an asset is something that puts money in your
pocket. This is accomplished through four different categories, one of which
is real estate. When I say real estate, I don’t mean your personal residence,
which is a liability. What I mean is investment real estate, which is a great
investment because it puts money in your pocket each month in the form
of rent.
There are three other primary assets: business, paper, and commodities.
If you are an entrepreneur or a business owner, your business is an asset.
Paper assets are stocks, bonds, mutual funds, and so on. Finally, commodities
include gold, and other resources like oil and gas, and so on.
My wife and I started out making our money in real estate, putting our
money to work in properties that we could rent them out and see ongoing
returns. After that, we diversified, so now we have some money in all of four of
these asset areas.
Invest for cash flow, not appreciation
The Rich Dad Scam that your home is an asset was prevalent when I first
wrote Rich Dad Poor Dad. That was in 1997, and everyone’s home values
were climbing. It was easy to assume that your house was an asset because
it was potentially making money for you in the long run through appreciation.
People bought into the scam hook, line, and sinker, taking out home equity
loans to buy cars, vacations, TV’s, and more. Today, those same people are
so underwater that many of them are defaulting and going into foreclosure.
Most people aren’t saying their home is an asset any longer.
A lot of Americans got a fast, ugly financial education when the real estate
market turned around. They realized very quickly that their homes were
not assets.
The difference between my poor dad and my rich dad was a financial
education. And that’s not a classroom and books education, that’s a nutsand-
bolts, street-smart education, a way of looking at money that is true and
that works, not just what the rich want you to believe.
Rather than invest for appreciation, my rich dad taught me to invest for
cash flow and to treat appreciation like icing on a cake. I encourage you to do
the same.
comment if you like this.
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#robertkiyosaki
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