ESCAPE THE RAT RACE
Ø People who become
trapped in the lifelong process of bill paying are like gerbils running in
wheels. Their legs move furiously, their wheels spin on and on, and in the end,
they’re in the same place they started—nowhere. They keep working and working
and their incomes go up, but then so do their taxes and the charges on their
credit cards. Buying a home and a car, going on vacations, paying for the
children’s education, saving for retirement—these successive challenges prevent
the bill payers, no matter how well educated they may be, from ever getting
ahead. This doesn’t have to be your fate. You can escape the rat race. What you
need to do is change the way you think about work and money.
Ø The following are
some of the priceless strategies my Rich Dad taught me to get out of the rat
race and become a business owner and investor. Read this chapter once, twice,
as many times as it takes to absorb the radical way of thinking that was the
Rich Dad gift to me. It took me years before I fully absorbed his lessons. I
would jump off the wheel only to jump right back on, uncertain whether to
follow his advice or the Poor Dad. But those years of indecision and struggle
were well worth it. Thanks to the Rich Dad persistence as a teacher, eventually
I absorbed his strategies and put them to work. After all the blood, sweat, and
tears, at last I was able to jump off the wheel for good and start my journey
down the path to financial freedom. Now, it’s your turn!
STRATEGY 1: BECOME FINANCIALLY LITERATE
Ø The key to riches
is becoming financially literate. It’s a strategy Rich Dad drummed into my head
every time we were together, even as Poor Dad was stressing the importance of
reading books and going to school. Unfortunately, schools don’t teach financial
literacy. That’s why my hard-working, educated dad was getting nowhere.
Ø Rich Dad may not
have been school educated, but because he was financially educated, he left the
rat race behind and became a business owner and investor. Look at it this way:
If you’re going to build the Empire State Building, the first thing you need to
do is dig a deep hole and pour a strong foundation. Most people, in their drive
to get rich, try to build an Empire State Building on a six-inch slab. What
they end up with is a Leaning Tower of Debt that threatens to come tumbling
down. If you want to build riches and hold on to them, you need a strong
foundation of financial literacy.
Ø Financial literacy
requires proficiency in several areas: economic history, accounting, taxes, investing,
and building businesses. These are difficult subjects to master, particu- larly
accounting and investing. But don’t let the level of difficulty scare you off.
Anyone can master these subjects, including you. It’s a matter of choosing to
do so, then moving through the subject material at a pace that suits your
individual learning style.
Ø Becoming
financially literate has nothing to do with how far you got in school. Don’t
worry if you weren’t an A student. Don’t worry if you’re currently working as a
janitor, or gardener, or garbage collector, or even if you’re unemployed. What
matters is whether you’re willing to educate yourself. If so, you can become an
investor (or business owner if that’s your goal) and eventually achieve
financial freedom.
Ø How can you become
financially literate? By opening your eyes, ears, and your mind to information
that’s all around you. Financial magazines like Forbes and newspapers such as
the Wall Street Journal provide a wealth of information. So does the business
page of your local newspaper. So do financial news broadcasts on television and
the radio. Start learning the basics of economic history, accounting, taxes,
investing, and building busi- nesses, and you’ll have the foundation of your
financial literacy.
STRATEGY 2: WORK TO LEARN
Ø Job security meant
everything to Poor Dad. Learning meant everything to Rich Dad. Poor Dad thought
I was going to the U.S. Merchant Marine Academy to learn to be a ship’s
officer. Rich Dad knew that I went there to study international trade. The
academy sent me on cargo runs to the Far East and the South Pacific, where I
learned the art of navi- gating large freighters, oil tankers, and passenger
ships. By the time I graduated from the academy in 1969, I had acquired a
wealth of information about trade, people, business styles, and cultures in
Japan, Taiwan, Thailand, Singapore, and elsewhere—information that would play a
crucial role in the success of my later business ventures.
Ø I left the
merchant marine for the Marine Corps, ostensibly to learn how to fly a plane,
but really to learn how to be a leader. I went to Vietnam, and when I returned
in 1973, I resigned my commission, though I loved flying, to take a sales job
with the Xerox Corporation. I took this job not for the salary and the
benefits, but to overcome my shyness and learn all about marketing and sales.
Xerox has one of the best sales training programs in America. Rich Dad was
proud of me for taking the job; my educated dad was ashamed because he thought
I should have looked for a more “intellectual” job.
Ø Three years later,
shortly before my thirtieth birthday, I left Xerox to form my own company. It
was time to test all that I had learned. If I failed, I would be broke. My
educated dad thought I was crazy to give up job security. Rich Dad thought it
was a great idea to strike out on my own. “If you run the risk of going
broke,” he said, “you should do it
before the age of thirty. You’ll still have time to recover.”
Ø The point is most
people focus on working for pay that rewards them in the short term; over the
long term, this strategy can be disastrous because it doesn’t build up enough
assets for a stress-free retirement. If you want to be financially free, you
need to seek work for what you’ll learn, not for what you’ll earn. The skills
you learn when you work for someone else—skills like leadership, management,
sales, and marketing—can be invaluable when you begin to work for yourself,
build a business, or become an investor. They are the skills that can help you
take control of your own financial life. After all, your personal financial
life is your business. Even employees need to learn how to become investors and
business owners.
STRATEGY 3: FIND MENTORS, BUILD A TEAM
Ø In addition to
working to learn—that is, while you are working to learn—you need to seek out
mentors and advisors who can teach you the valuable skills you’ll need to
become a business owner and investor. No one climbs Mount Everest alone, and
you shouldn’t try to climb your personal financial mountain without the aid of
others. Without support, you’ll never reach the top.
What
Is a Mentor?
Ø A mentor is a
successful person whom you’d like to emulate. A mentor is distinctly different
from someone who tells you how to do something—someone who instructs, but whose
experience is limited.
Ø Rich Dad was my
first real mentor. He didn’t just dispense advice; by building his business and
using it to invest, Rich Dad had actually accomplished what I wanted to
accomplish.
Ø Rich Dad wasn’t my
only mentor. Back in 1996, through a mutual friend, I met a man I’ll call
Peter. He is a distinguished and articulate man who has had his own companies
listed on the American and New York Stock Exchanges and on the NASDAQ.
Ø During the course
of his career, he’s taken nearly 100 companies public. At the time of our
meeting, Peter had done everything that I wanted to do. He was a man who
guarded his privacy, and the chal- lenge for me was how I could convince him to
take me on as an apprentice.
Ø Over the course of
several months, I pressed my case with Peter and finally got him to agree to a
meeting to talk it over. I told him that I could support myself and my wife
with the income from my real estate investments and that I would work for him
for free if he would teach me everything he knew. Naturally he was skeptical.
But
once he saw that I was serious, he decided to take my offer on a trial basis.
Ø There was a
bankrupt goldmine in Peru he was considering buying. He asked me to drop
everything and fly to Peru at my own expense, inspect the mine, meet with a
bank, find out how much it wanted for the mine, then fly home, and give him a
report. That caught me off guard! At first I hesitated. I had appointments
scheduled for that week. Moreover, I wasn’t sure I was up to the challenge. But
deep inside I knew this was a defining moment for me.
Ø In those few
seconds, I realized that if I chose not to go to Peru I would lose this
valuable potential mentor. Setting aside self-doubt and swallowing all excuses,
I decided to take a leap into the unknown. “Okay, Peter. I’ll do it.” I flew to
Peru and inspected the mine. It turned out to be an unwise investment, and I
recommended against his buying it. He agreed with my findings and, more
important, agreed to teach me.
Ø For almost a year
and a half I worked as an apprentice to Peter, after which he offered me a
partnership in his private venture-capital company. Since then, my association
with him has been personally rewarding and financially profitable. And it wouldn’t
have been possible if I hadn’t asked him to be my mentor. By shunning doubt and
excuses, I gained the courage needed to take the next step toward my financial
goals.
What Is a Team?
Ø In addition to
mentors, you’ll want to surround yourself with a team of competent, loyal
advisors. A team assembled with care will help you as you set out on your quest
for financial freedom. Your team is your protection and your technical expertise. You don’t need
to have all the answers as long as you know who to call.
Ø Although you may
not be aware of it, you already have a financial team in place. Members of that
team include your family, co-workers, and friends—anyone you ask for financial
advice. Question: Do these informal advisors share your goals, and is their advice
sound in light of your goals? Just as important, have they practiced what they
preach and met with financial success? If not, it might be time for you to
assemble a new team.
Ø Of course, if you
plan to set out to work for yourself, you’ll need more than just friends and
family—you’ll need a team of professional advisors. One secret of the rich is
their humility. They surround themselves with people who know more than they
do. They surround them- selves with experts. Depending on the nature of the business
you build or the investments you make, your team could include a mortgage
banker, an intellectual property lawyer, a corporate lawyer, an accountant, an
insurance agent, a tax strategist, a stockbroker, or a score of others. Bear in
mind that the team list will constantly change along with the strate- gies and
plans for your business.
Ø Make it a point to
show your advisors the kind of respect and attention you want them to show
you—and your business. The best advisors are those who care about you and your
financial goals. I have certainly had good advisors along the path to financial
freedom, and I’m thankful to each and every one of them for extending my
business and investing horizons.
STRATEGY 4: WORK FOR YOURSELF
Ø The Rich Dad
central strategy for achieving financial freedom was to build a business of his
own. His reasoning was that most people work first for the owners of the
companies that employ them, then for the government through taxes, and finally
for the banks that own their mortgages. No wonder they have little left at the
end of their working days!
Ø To escape the rat
race, Rich Dad would say, you need to work for yourself. Now, I’m not saying,
“Quit your job.” I am saying, “Take responsibility for your
financial future.” You can consider a
part-time business on the side, for example.
Ø If you do want to
start your own business, you’ll have to be very determined to make it work. But
if you are determined, you’ll have a head start down the path to financial
freedom. If you choose not to start a business, then you can still achieve
financial freedom, albeit more slowly, by keeping your expenses low, reducing
your liabilities, and diligently building a base of solid assets.
You’ll see what I mean by
solid assets in the list below. Check any assets you own:
Businesses that don’t
require your presence (you own them, but they’re managed or run by other
people; if you’re self-employed and have to work, your work isn’t a business,
it’s a job)
- Stocks
- Bonds
- Mutual
funds
- Income-generating
real estate
- Notes
(IOUs)
Intellectual property,
such as copyrights on books, music, and scripts and patents on inventions that
may generate royalty income, just to name a few
Anything else that
produces income or appreciates in value and can be readily sold
Ø If you checked off
all of the above, you can stop reading. Chances are, however, that you’re here
because you can only check three or fewer of these asset categories. If that’s
the case, then you’re reading the right material.
STRATEGY
5: CREATE MONEY
Ø “Money isn’t
real,” Rich Dad once told me. “It’s an idea.” It took me some time to absorb
this lesson, but I finally did, and then I used it to make myself rich. You can
do the same.
Ø Here’s a simple
example: In the early 1990s, the real estate market in my hometown of Phoenix,
Arizona, was horrible. Houses that were once $100,000 had plummeted to around
$75,000. Although short of cash, I recognized that this was a good time to buy.
Instead of shopping at the local real estate office, I began shopping at a
bankruptcy attorney’s office and at the county courthouse. Soon I came across a
great deal: a $75,000 house for only $20,000. With a $2,000 ninety-day loan,
for which I paid $200 in interest, I made a down payment on the property.
Within days I resold the house for the still-bargain price of $60,000. I had
created a $40,000 profit for myself out of essentially nothing. Total work
effort: five hours over a few days’ time.
Ø It’s not at all
out of the ordinary for millions to be made instantaneously out of nothing. By
nothing, I mean no money was exchanged. Deals are clinched with a hand signal
in a trading pit, a blip on a trader’s screen, a call to a broker to buy and a
second call a few moments later to sell. Money doesn’t change hands in these
transactions—agreements do.
Ø So, how can you
create money? By doing any of the following:
• Finding an opportunity that everyone else has
missed—A friend of mine bought a rundown house that nobody else wanted. He tore
the house down, subdivided the property into five lots, and within two months
sold the whole package to a builder for $75,000—three times what he’d paid for
it.
• Learning how to raise money—The average
person only goes to the bank. But there are many ways to raise capital that
don’t require a bank. Let’s say you want to buy a piece of investment real
estate but you don’t have the cash for a down payment. You might be able to
take out an equity loan on your home, or obtain seller financing, or sell your
idea to an “angel,” or form a group of investors to purchase the property. If
there’s a will and a promising financial deal, there’s a way.
• Working with knowledgeable people to help you
reach your financial goals—This goes back to the advice I gave you earlier
about building a team. You don’t want to jump at every moneymaking opportunity,
just the smart ones. Having a team of skilled advisors can help you quickly
identify the good deals.
STRATEGY 6: GIVE BACK
Ø While you’re
pondering the Rich Dad get- rich strategies, there’s one more you should
consider: charitable giving. Many people think the rich are all greedy. That’s
not true. Some rich people are greedy, just as some poor people are. But for
every greedy rich person there is a rich person who understands the importance
of giving, and society is the better for it.
Ø Rich Dad was no
exception. He strongly believed that to make a fortune and then hoard it was a
misuse of money’s power. “When you create wealth,” he said, “it’s your responsibility
to return it to society.” Rich Dad practiced what he preached. He taught me
that giving back was a necessary step in getting rich.
Ø In fact, even
before you become wealthy, you should adopt the practice of giving. Why?
Because giving will help teach you to take control of your cash flow.But
there’s another, more important reason for giving. Newton’s law states, “For
every action there is a reac- tion.” If you’re a greedy Scrooge, people will
respond to you in kind. You have to give money to get it back. Remember, give
and you shall receive.
Source : Robert kiyosaki's RICH DAD POOR DAD BooK
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