022-2020 Rich Dad’s ‘Increase your Financial IQ’

Title: Rich Dad’s ‘Increase your Financial IQ’ (get smarter with your money)

Author: Robert T. Kiyosaki

Hello everyone, I have another instalment from the Rich Dad Community books for you, and think that you’ll enjoy this one as well.

I have read four books from his publications, and every time learn something new and eye-opening that gets me to step back and think. The first book (Rich Dad, Poor Dad) was my introduction to his lessons from his rich dad. The next book (Fake) taught me that money (or rather currency) we hold so dear, and save, is not as safe as we might think. Not anymore. The value of money is dropping (as shown in graphs of value of money in relation to gold) and therefore it is not something that we can rely on to hold the same purchasing power. Therefore, investing in real assets is the way to go. Then I came to the next book (Who stole my pension) and learnt that the money we entrust to pension funds to support us when we retire is not always managed well, and that we need to pay closer attention what is happening with our pension monies, and how they are managed. Lastly, I read the Investing Guide. Here he went into significantly greater detail why it is so much more valuable to grow our financial education, and then build up our asset portfolio and potentially become a sophisticated investor.

Through all these books, one message is repeated over and over again. And that is for us to improve our financial intelligence.

When I saw he had a book on this title I thought that this was something I should look into on how he suggests where to improve our education in. The five IQs he introduces you to are:

Financial IQ #1 – Making more money

  • It is no secret, your job will only bring you a certain amount of money p/month. That needs to cover your general and living expenses, hopefully with some remaining funds to save for retirement and also spend some to go out with friends or go on vacation.
  • Yet, this might not get you on the way to become rich. If you truly wish to become rich, you need to think and make a plan what you can do to make more money. One way is to build your asset portfolio, which generates cash flow.
  • Solving this first problem, is the first step to build wealth, which distinguishes those from the comfortable.
  • Solving problem after problem you move closer to realizing what you can do to build your wealth – and all this is a continuous process of being confronted and carrying-on with persistence to overcome every obstacle to achieve the goal.
  • the process of solving those problems makes you rich (with money and experience)

Financial IQ #2 – Protecting your money

  • The next consideration that you will be faced with, once you managed to increase your income/wealth somewhat, is the challenge on how to protect the most of it by legal means
  • The parties that are most interested in collecting money from you are bureaucrats (government), bankers, brokers (stocks, mutual funds, ETFs, etc.), businesses, brides and beaus (people who marry for money), brothers-in-law (distant family who pay their respect to a rich family, and wish to connect again), barristers
  • The key to protect your money is to become educated in a subject (shares, real estate, etc.) and learn how to best invest your money to avoid losing more than the bare minimum to start investing
    • keep nothing of value in their name
    • buy personal liability insurance
    • hold assets of value in legal entities, and gain the benefits of companies

The rules of money have changed when money became a currency, and therefore the wise approach is to convert currency into assets that are not subject to swift change as with currency. Steadily, growing your assets increases your wealth.

Financial IQ #3 – Budgeting your money

  • You need to understand the difference between a budget surplus and a budget deficit. A deficit occurs where your expenses exceed the income you derive. Vice versa, a surplus occurs where more income is made than expenses that need to be covered.
  • What I learned here was that you should take your monthly income, allocate a portion thereof as payment to you (as an additional expense, that you use to grow your wealth) together with your other expenses, and then determine whether you’re in a deficit or surplus position. If you identify that you are in a deficit position, you mustn’t re-structure your budget, but rather see it as a challenge to identify ways to make more money, since you have identified that the way to grow your wealth currently isn’t within your budget.
  • Therefore, it is stressed that you should pay yourself first, and use that to grow your wealth (but classify it as a necessary expense)

Financial IQ #4 – Leveraging your money

  • Using leverage means to get more done with less. Leverage in the financial sense comes in by using money and debt to finance the acquisition of something that we would not otherwise have been able to finance with our current financial position.
  • He stresses the two things he will be on the look-out for is control (over the asset) and leverage (to finance the acquisition of the asset). If you have the education in the field, and have control over the asset, then using wealth is not as risky. But when you have no control or education over the asset, it becomes risky to use leverage to finance the asset.

Financial IQ #5 – Improving your financial information

  • The last IQ is to use the right, and credible information to make decisions for growing your wealth.
  • Some tips for classifying information into are suggested as follows:
    1. differentiate between facts and opinions
    2. stay away from insane solutions to problems that need to be solved
    3. don’t take risky actions
    4. get control over the asset
    5. learn the rules of the game (laws and regulations)
    6. see if there are identifiable trends

After getting to know the five Financial IQs, he also devotes a chapter, which I believe deserves some dire attention, because it relates to getting you mentally ready for this transition. The chapter talks about splitting the brain into the three sections: left (logical), right (creative) and the subconscious. That we need give as much attention to our subconscious as to our left and right brain. The way we do this is bringing ourselves into such an environment that our subconscious becomes comfortable with making this transition to grow our wealth, and the steps we need to take to get there.

In the ‘Guide to Investing’ as well as ‘7 secrets to investing like Warren Buffet’ approximately half the books are dedicated to telling the reader how important it is to become mentally ready for this transition to become richer, and do what needs to be done to achieve that goal. Therefore, the last part is also vital.

Summary:

The book should be read only after having read the first book, since it serves to give more details on the broad ideas that were introduced in the first book ‘Rich Dad, Poor Dad’. As promised, it elaborates more on how one can (and should) increase their financial education in each of the five financial intelligences. It sets one on a clear path that one could follow to start building wealth, from starting to make more money, to protecting it, to investing it wisely. The book gets my rating of 4.6/5

Until next time, happy reading!!! 🙂

016-2020 Guide to investing

Title: Rich Dad’s Guide to Investing (what the rich invest in that the poor and middle class do not)

Author: Robert T. Kiyosaki

It’s been quite a few hectic weeks on my side, but every day offers an opportunity to learn and grow.

I have a grand book that I cannot wait to share with you today.

This is another installment to the Rich Dad Poor Dad franchise, and I am still hooked to them. One of these days I would wish they might send me a free copy to read and review. Fingers crossed, because then I could maybe get you to read it as well, and step up your financial education. 🙂

This is probably the first investment book where I took notes (outside of the book) and keep them close around to make applications to my financial planning. Yes, it was so convincing I took an active step to develop a financial plan for myself after it was suggested in the story.

I wish I could break down all the lessons from the book into a few small paragraphs for you to read, but I don’t think it would serve it justice since many things could possibly be lost in translation, or otherwise the moral of the story not understood. Hence, I have decided to mention some of the most relevant topics that I felt have a strong lesson behind them for everyone.

1…Changing your mindset

Half of the book is dedicated to make it clear that you need to adopt the right mentality if you want to become rich, not just financially secure or comfortable, but rich.

Investing is a plan, not a product or procedure. An investment product /vehicle simply takes you from where you are financially, to where you want to be sometime in the future, financially. Trading is a profession, but is not to be mistake for investing.

Develop a financial plan, refine it and stick with it. You need to develop three financial plans (to become rich, comfortable and secure)

  • First, write down a financial plan for lifetime financial security
  • Then discuss it
  • Second, write a financial plan on how to become financially comfortable
  • Then discuss it
  • Third, write a financial plan to become financially rich
  • Then discuss it

By writing down these plans you become visually aware in what position you are presently, and what it would take for you to move into a new position. Once you become aware what it takes from you you can focus your attention to achieve small goals that build on to that ultimate goal. However, it is very important to note that these plans might require some fine-tuning in the future since many things can happen in between that won’t enable us to stick to the old plan.

In order to achieve a secure or comfortable level one mainly needs to invest their money properly. However, to reach the next level, the rich level, requires something more. It requires from an investor to dedicate their time. Time to learn financial literacy, tax laws, company laws, etc. to understand how to develop a business or how to use those laws to build a strong investment portfolio. Invest your time efficiently.

How do you start your journey on investing like the rich?

…1… Always know what kind of income you are working for (earned income/ portfolio income / passive income)

…2…Convert earned income into portfolio income or passive income as efficiently as possible

…3…Keep your earned income secure by purchasing a security you hope converts your earned income into portfolio income or passive income

…4…it is the investor who is the asset or the liability

…5…a true investor is prepared for whatever happens (train your brain to look for bargains and be prepared to take on an opportunity when it presents itself)

…6…if you are prepared and you find a good deal, the money will find you, or, you will find the money

…7…having the ability to evaluate risk and reward (to be able to evaluate risks properly you need to have the 1) Education, 2) Experience, and 3) Excess Cash)

https://www.richdad.com/six-basic-rules-of-investing

2…Knowing what kind of investor you want to become

When you enter into an investment there are different positions you can hold. However, ultimately we would want to know as much as possible and have much control. Yet, not all investors have the same position and therefore you need to familiarize yourself with the different classes of investors and see how you reach the investor class that you would most comfortable in.

3…What you should keep in mind if you want to start a business

If you have no experience how to run a business, and even less how to start one off, then a good intro of what you should include as important considerations for your foundation lie in the BI Triangle.

https://www.richdad.com/business-systems

Each aspect can serve a valuable purpose in building a strong foundation for a business that should last you for a long period of time. The best thing you can do is read the chapters behind these topics and take great notes.

4…What is a sophisticated investor

A sophisticated investor is simply someone that has attained sufficient Education, Experience and Excess Cash to make more money and hold on to that wealth by evaluating new investments for their risks and rewards.

He has considered how he can obtain control over most of the following areas:

…a Control over oneself

…b Control over the income- and expense ratios, as well as the asset- and liability ratios

…c Control over the management of the investments

…d Taxes in the company

…e Control over when to buy/sell an investment

…f Brokerage transactions

…g Control over ETC (the entity, the timing of payments, characteristic within the firm)

…h Terms and Conditions of the agreements

…i Access to information of the invested company

…j Philanthropy

More on these you can get from the Rich Dad Poor Dad Company website https://www.richdad.com/sophisticated-investor

5…Also giving back

As much as the book teaches you how to grow wealth, it also stresses the importance on giving back. Yes, giving back is just as important. Some do it by giving donations to institutions, others build institutions. With Robert he sells his books at affordable prices, and hosts regular seminars. However, it remains for us to come and attend.

I have taken my time to read this book, and absorb as much as possible to reflect on the most important points. Even though I haven’t made a plan to start a business right away, the key points i have taken away as of today are the following:

  • drafting a financial plan
  • update my financial literacy
  • analyse investments efficiently, and don’t invest blindly

Summary:

This book is something that I would recommend to anyone who wants to have a guide to get their financial situation under control, and also develop a plan to work towards a strong financial goal. The book is written to be easy understandable, and elaborates in great depth the importance of each lesson.

Therefore, the book deserves a whopping 4.9/5

Keep it up everyone!

013-2020 Who stole my pension

Title: Who stole my pension

Author: Robert Kiyosaki & Edward Siedle

I might have finished this book last week, but I only bring you my review today. Last week we had quite the weekend and so I just decided to postpone for a short while.

I am still young and hope to have a few more decades to live and earn enough to build up my asset column until the day that I call it quits and start receiving payouts from my pension. Therefore, you may say that you don’t need to spend too much time on checking in on your pension.

What the idea is behind the book is that it explains to you that you should actually not rely on the idea that you will be taken care of with the pension that you built up in your years of work. Rather, you should take more control, and make sure that the overseers of your pension you are relying on are doing their jobs properly right now, and not mismanaging your funds.

The first half of every chapter is written by Edward, and then Robert closes off the second part with his contribution. Edward explains that pension funds which he has looked into have not been doing their jobs well enough, and to rectify for their mistakes they cut benefits to the beneficiaries, you. I’ll be honest, that sounds like that may be happening, and that is really sad that people do this to other people.

Us youngsters may think that we don’t need to worry too much about this right now, because still have a while to go, and that if the pensions of the older retirees go bust right now, that it won’t be our problem. Well, I think you may be surprised. I don’t believe that we will get off that easily. I think that if their pensions are lost, the government may intervene and bring in policies to help them get something out of the collapsed system. Maybe taxes, maybe something else. And if you have parents that could lose their pensions, they might just fall back on us to take care of them.

So, as much as we may think we are not impacted by this, it could just be that we get hit by this in a way we didn’t think about before, and by then that will have become our new reality.

Summary:

Although I received the message which they wanted to convey to us as readers, that people managing pension funds are being reckless, and to make up, they cut pension benefits (pay-outs) to its beneficiaries, and that we should therefore take a more active role to keep them in line, the book didn’t really feel like it gave very much new information. I didn’t get much more value than I did when I bought the other books from Robert (“Rich dad, poor dad” and “Fake”) and therefore don’t rate this book as highly among my reading list.

I therefore rate this book with a 2/5, because it does bring attention to the mismanagement issue for our pensions, but it doesn’t give very much helpful information in the book to learn much more.

Regardless, I still think the message they are relaying to us is important for all of us, and that we should take steps to ensuring we can become financially independent.

003-2020 Fake

Title: Fake (The truth of Fake-Money, Fake-Teachers and Fake-Assets)

Author: Robert Koyosaki

This was the second book that I took to read from the author Robert Kiyosaki. The first book he published, and which has sold world-wide is ‘Rich Dad, Poor Dad’ of which I have also previously written a review.

When I stood in the book store to look at a new book to read, my thoughts were with investing and whether there was a book that could explain how we can distinguish useful and true information/news in the media from the fake news, and thus use the true news to assist with making proper and informed investment decisions. That’s where I came across this book, which I believed to have just that.

However, it may not have held the information I was looking for at the time, it did give me valuable insight in another respect, which I am glad to have obtained from this accidental selection.

In the beginning he makes it clear that he wishes to teach the reader about three big lessons: 1) Fake Money, 2) Fake Teachers and 3) Fake Assets. The book breaks those lessons into the different chapters, but reference is made to those lessons continuously, that all three should be taken together to assist in the attainment of financial wealth.

1..Fake Money – He introduces you to the three forms of money that we currently have in the world today : Gold (God’s money), Currency (Government money) and Cryptocurrency (People’s money). The lesson he holds is that the government’s money is only worth so much as much the people have faith in the government. That the government is able to print more and more money (which could have severe economic consequences). If people (or the world economy) loses faith in the government, the demand for the currency drops, and the abundant supply in circulation makes it less valuable. This is all in the hands of the government, whereas God’s Money (Gold, Silver) is in your hands, and cannot be printed in more quantities by the government if it is in a difficult situation (as with paper money for Quantitative Easing or Troubled Asset Relief Programs).

2. Fake Teachers – He criticizes that the education that is taught in schools is only to produce people to become active members of the working society. This is definitely essential, of course, for a modern economy to function. However, it doesn’t teach anyone about financial education, which is also essential in any economy, which is mostly a driving force into a better age. Also, he distinguishes between true teachers and fake teachers, those who teach what they have experienced from the real world, and those that teach the theoretical aspect without having applied it themselves in the real world.

3. Fake Assets – Here he makes a clear distinction between what is an Asset and what is a Liability to your pocket. Not just that, but also what constitutes real Assets (tangible), and fake Assets (paper investments).

I have given the briefest of explanations of what was covered in the book for the three lessons, but there are many more in the book. Therefore, I would say that should you wish to get the true benefit of the lessons that he wishes to teach his readers, buy yourself a copy of the book instead of reading my short review. It has more, and explains it much better.

Three other things I wish to share with you, which I didn’t mention above, but thought truly fascinating to share were:

  • 1971 when Nixon took the Dollar off the Gold Standard (ie. a currency’s strength is not determined by the volume of gold reserves that are held in the country), and the government money was no longer backed by tangible Gold reserves. Government money was now only debt.
  • That one should use debt (with Government Money) only to buy real Assets, which generate recurring income
  • Tax should not just be seen from the perspective of the government taking money away to fund its activities, but also from the perspective that it provides incentives to individuals that take on projects for society, which benefits the people, thereby the incentive is tax deductible

Therefore, I definitely gained much more insight in many topics, and will be on the look-out for more of his books and teachings in the future.

Summary:

Terrific reading material, well-written, easily understandable and the knowledge gives every reader something to think about. As he closed off his first book (Rich Dad, Poor Dad) he said “every decision you make with every Dollar you hold today, will influence your future life” – not those precise words, but the message is clear. Rating I afford is 4.75/5 🙂

024-2019 Rich Dad, Poor Dad

Title: Rich Dad, Poor Dad

Author: Robert T. Kiyosaki

I bought the pocket-sized booklet of this top-seller, and am really satisfied with what I got from this read.

The approach followed by the author to tell this story is quite interesting. And it all starts with the entertaining title of the book. Before I bought myself a copy of this book, I wondered how he would give financial advice from a poor man and rich man’s perspective, and was given the answer straight away in the first chapter when he confirmed that the story is based on his time of growing up. His real dad being the ‘poor dad’ of the story and his ‘rich dad’ being the dad of his best friend. And the way he tells the story (/teaches the lessons as he grows up) was really well done.

He emphasizes on multiple occasions that schools only teach us the skills to become active and contributing members of a functioning society. Which is needed of course, for a society to function the way it does today. But there is more we could learn for ourselves, and live somewhat differently, making our lifestyles a little better.

This financial knowledge is introduced in this first book and has the following disciplines: 1) The Rich don’t work for Money, they make Money work for them; 2) It’s not how much you make, but how much you keep; 3) Mind your own business; 4) The history of taxes and the power of corporations; 5) The Rich invent Money; 6) Work to Learn – Don’t Work for Money; 7) Overcoming obstacles; 8) Getting started – There is Gold everywhere

Especially the first chapter was a little tricky for me to get in. “Don’t work for money”. I really had think on that, and even when I thought I had understood what was taught, when I read the subsequent chapters I understood more and more that that initial understanding wasn’t quite right. And gradually I learnt what he meant, and now believe I understand his lesson much better. So much so that I try and look around me for potential business ideas.

The great thing about growing up in a developing country, and then moving to a developed country, is that chances are that some ideas in place in the latter country have not yet been implemented in the former country. Thus, I look and see whether that business idea would have any feasibility in my home country.

Lesson 2 of the book I have already implemented before starting off the book, and lesson 3 is currently in progress. Having read the lessons and already seeing that to some small extent I was already on the right path, I was really excited to think of ways to take the next steps and improve my asset-base 🙂

Lesson 6 also gives good supporting reasons why we should never stop learning, and should in fact invest into our education, more so than make ‘conspicuous consumption’.

Summary:

The book was a fun read, teaches the lessons in a clear and understandable way. After every chapter there is a summary of the matters that were discussed in the chapter (however, the summary is almost written in the same manner that the chapter was written, and therefore it feels like the summary is not helpful). The lessons are sound, and the author strongly urges the reader to understand what the reader just read. The book got a rating of 5.7/5