Tuesday, December 5, 2006

The Magic of Making Mistakes By Robert Kiyosaki

My real dad came from the world of academics, a world where mistakes are perceived as bad and to be avoided. My rich dad came from the streets. To him, mistakes were opportunites to learn something new, something he did not know before.
Street Smart Versus School Smart My rich dad was very successful financially for many reasons. At the top of the list was his attitude towards making mistakes. Like most of us, he hated making them, yet he was not afraid of making them.

Each time he made a mistake, instead of being depressed, he often seemed happier, wiser, more determined, and often richer from the experience. He would say to his son and me, "Mistakes are how we learn. Every time I make a mistake, I always learn something about myself, I learn something new, and I often meet new people I would never have met."

As I watched my real dad struggle financially and professionally, my rich dad said, "To be successful in the real world of business, you have to be school smart as well as street smart. In school, you're given the lesson first. On the street, you're given the mistake first and then it's up to you to find the lesson. Since most people have not been taught how to make mistakes and learn from them, they either avoid mistakes altogether, which is a bigger mistake, or they make a mistake but fail to find the lesson from the mistake. That is why you see so many people making the same mistake over and over again." Rich Dad said, "I am so rich because I've made more financial mistakes than most people. Each time I made a mistake, I learned something new. In the business world, that something new is often called 'experience.' But experience is not enough. If a person truly learns from a mistake, his or her life changes forever, and what that person gains instead of experience is 'wisdom.'"

The Art of Making a Mistake Rich Dad taught us the art of making a mistake and gaining wisdom from it. "The first thing that happens after you make a mistake is that you become upset. At this point of upset, you find out who you really are," he said, going on to describe the cast of characters who are brought to center stage when upsets from mistakes occur:

The Liar. "I didn't do that."

The Blamer. "It's your fault, not mine."

The Justifier. "Well, I don't have a good education so that is why I don't get ahead."

The Quitter. "I told you that it would never work."

The Denier. "No, there is nothing wrong. Things are fine." Rich Dad said, "If you want to learn and gain wisdom from this priceless mistake, you have to let 'The Responsible You' eventually take control of your thinking."

Mental Attitude Quiz

What are your attitudes to risk, making mistakes, and learning?

What are the attitudes of the people around you to risk, making mistakes, and learning?

Are there still some financial, professional, or business upsets that remain unresolved?

Are you still angry with some one else in regards to money?

And if you are upset with someone else or yourself, what lesson can you learn and be grateful for being courageous enough to have taken a risk and maybe learned something.

Sunday, December 3, 2006

How Do I Get Started? 12 Steps to Financial Freedom

Below are 6 steps from Robert Kiyosaki that will help you increase your financial IQ and assist you on your journey to financial freedom.

1. Control Your Thoughts
Your life is a reflection of your thoughts. To control your thoughts, simply control what you say. Don’t say what you don’t want to think. Positive thoughts bring about positive results. Don’t say you can’t… because you can.

My poor dad would always say, “I can’t afford it!” My rich dad, on the other hand, forbade me from saying, “I can’t afford it!” and challenged me to ask instead, “How can I afford it?” The word “can’t” closes your mind, while the phrase “How can I?” opens your mind.

2. Learn the CASHFLOW Games
Have fun learning and increasing your financial IQ. The more you play the CASHFLOW games– the richer you become. They will change the way you think. The games teach you to have money work for you so you don’t have to work for money.

Too often, people just can’t see great opportunities in front of them. Playing the game helps you to open your mind and the more you play, the better you get. You will see your thoughts change.

3. Teach the CASHFLOW Games
Teaching the CASHFLOW games, in addition to playing often, is the Fast Track to learning. Give and you shall receive… it’s the law of reciprocity.

Make an agreement with yourself to teach the game to others. Agree to teach the games on a regular basis and see YOUR learning accelerate. Volunteer to teach at schools, clubs, classes and groups.

4. Look at Your Friends
When you look at your friends, you look in your mirror. Tell me who your friends are… and I’ll tell you where you’re going.

Who are the six people you spend the most time with? Make a list and next to each name, write what quadrant of Rich Dad’s CASHFLOW Quadrant they are in (Left side: E= Employee; S= Self-Employed or Specialist or Small Business Owner; Right Side: B= Big Business - 500+ employees; I= Investor). If they’re Es… do they want to become Bs and Is? Do they - like you - want to have their money work for them?

You can tell a lot about a person from the friends they have. The same is true for a partner or spouse. It’s important to grow and learn together.

5. Keep Accurate Records
To be successful, you need good records. At a minimum, that means a bookkeeper.

As your team expands, it should include an accountant and an attorney. If you have accurate records, it is easier to get rich.

6. Understand the Asset Classes
The wealthiest people know how to acquire assets in all three classes. There are three asset classes: Business, Real Estate and Paper Assets.

Business is the best asset of all. The richest people in the world own businesses.

Real Estate investment has great tax advantages – and your banker will lend you money to buy real estate. The tax code offers great tax incentives for businesses and real estate investors.

Paper assets are the easiest to get into, but carry the highest risk.

The best plan is one that has investments in all asset classes. The richest people have investments in all three asset classes. The least successful investors focus on only one asset class. Even two of the three is better than only one.

7. Find your Passion and Have Fun!
What are you good at? What are you passionate about? You will find greater successes if you play to your strengths. Think about what you enjoy most and how those skills and talents can support your dream of financial freedom.
Most importantly: Have Fun!

8. Never Stop Learning
The world is changing - fast. And the only way to keep pace is to never stop learning. Keep educating yourself and insist that your team does, too. Read books, attend seminars and surround yourself with friends and partners who share your commitment to life-long learning.

9. Look at Deals
Start looking at deals! And not just a few - hundreds of them! Look at 100 real estate deals and 100 companies you could invest in. Train your mind to see opportunities that your eyes don't see.
• Business Deals
Call a business broker and ask for information on a business that is for sale.
• Real Estate Deals
Call a real estate broker and ask for proformas on a real estate property that's on the market.
• Paper Asset Deals
Call a stock broker and ask for a financial report from a public company.

10. Start a Wealth Library
Every time you hear a word you don't know - look it up! Then use it. Every type of investment has a vocabulary that you need to master. And starting a Wealth Library is a good beginning.
Build your wealth library - build your financial IQ - build your wealth.

11. Attend Seminars
Attend one seminar or course each year to open your mind and keep it open!
Education is a life-long process and attending seminars is both educational and energizing. Your goals should include attending seminars that help build your financial IQ as well as those on personal development. If you have a partner or spouse, it's important to learn and grow together.

12. Keep Score
It's important to know your goals and to keep score so you know how you're doing. As they say, "Out of sight, out of mind." Your future is determined today - not tomorrow.
I might not always be happy with the returns I'm getting on my assets, but I know what they are.
Keeping score is a way of measuring, and goals need to be measurable.

Saturday, December 2, 2006

Mind Your Own BusinessBy Sharon Lechter

Are you minding your own business? If you are an employee, it is not what you do from 8-5 that counts. It is what you do with your paycheck after you receive it that counts.

In other words, what you do from 8 to 5 is your profession or your job. What you do with your paycheck is your business. Too many people rely on their employer or their government to take care of them.

Who are you working for? Let’s say you have a salary of $ 48,000 per year. In other words, you are paid $4000 per month to mind your employer’s business. Then you receive your paycheck and it is for only $2500. The $1500 of withholding taxes is you minding Uncle Sam’s business. Then you have to make your mortgage payment to the bank of $1500, which represents you minding the bank’s business. Oh, and let’s not forget that credit card balance that you let get away from you. That $400 payment is you working for the credit card company. Another $440 goes for living expenses. What are you left with? At the end of the month you are lucky to have $160 for investment, that’s $1 per hour that you are earning working for yourself.

Let’s review:

Salary:................. $4,000 You working for your boss
Less: Taxes ..........$1,500 You working for the government
Less: Mortgage.... $1,500 You working for the bank
Less: Credit Card.... $400 You working for the credit card company
Less: Living $.............440 You working for your creditors
Less: Net ................$160 You working for you!

It isn’t how much money you make that counts, it is how much money you keep. Most people work for everyone else but themselves. Financial struggle is often a direct result of people working all their lives for someone else and at the end of their working days they have nothing left for themselves.

To become financially secure, you need to mind your own business. Your business revolves around your asset column, as opposed to your income column. Learn the difference between assets and liabilities and start buying or building assets. Assets include businesses, real estate and paper assets.

The rich focus on their asset column while everyone else focuses on their income column. Many people think we are telling people to quit their jobs. For some that may be the right answer, but it is not the right answer for everybody. We want people to take more responsibility for their own financial decisions. Realize that you have the choice with every dollar you receive, how you are going to spend it.

Start buying or building real assets, not liabilities or personal effects that have no real value once you get them home. Build your asset column and keep it strong. Once a dollar goes into it, never let it come out. Think of each dollar as your employee. Money in your asset column is money working for you instead of you working for money.

You can start minding your own business today!

Friday, December 1, 2006

Top Tips For Controlling Debt

Tip #1 - Understand the difference between good debt and bad debt.

Tip #2 - Get a handle on your spending.
Awareness is an important first step in gaining control.

Tip #3 - Evaluate the debt you owe.
(See Kim's article in this issue... Her plan will help you do it!)

Tip #4 - Review 'best bets' on borrowing.
Take a good look at your options and decide what choices are make the most sense for you?

Tip #5 - Expect the unexpected.
Don't let life interfere with your plan. Correct and adjust - and move forward!

How We Got Out Of Debt

More and more people are getting swallowed up by debt. I'm sure you've read and heard many of the statistics and stories in the news.

One of the keys to financial independence is to get rid of your bad debt and acquire good debt. Bad debt is debt that makes you poor, such as credit card debt, car loans, school loans - this is consumer debt. Good debt is debt you acquire that actually works for you. The best example of good debt is a mortgage loan on a rental property that throws off positive cash flow every month. Good debt is money that you borrow to purchase assets that puts money in your pocket.

In 1985, Robert and I had a good deal of bad debt. And even though we kept making payments every month, we never seemed to make a dent in the amount of debt we owed. Each month we paid a little over the minimum on each one of our credit cards as well as on our car loan. Obviously, there had to be a better way to get ourselves out from under our creditors. And sure enough there was.

"Stick with the Formula"
This is the formula that Robert and I followed to pay off our debt. You'll find that if you follow this formula you will be out of debt much quicker than you imagined. Most people find themselves "bad" debt-free within 5 to 7 years. The key is to stick with the formula. You will not get ahead if you say, "I'll just skip this one month," and then two, and then three. If you stick with the formula it then becomes a habit you follow for a lifetime.

Here is the formula we used:

Step 1 - Stop accumulating bad debt. Whatever you purchase via credit cards must be paid off in full at the end of each month. No exceptions.

Step 2 - Make a list of all your consumer (bad) debts. This includes each credit card, car loans, school loans, home improvement loans on your personal residence, and any other bad debts you have acquired. (One item on our list was an outstanding debt to a partner from one of Robert's past businesses.) You can even include your home mortgage in this list.

Step 3 - Next to each items listed make 3 columns:
- Amount Owed
- Minimum Monthly Payment
- Number of Months

Enter the appropriate numbers into each column. To arrive at the number of months, simply divide the amount owed by the minimum payment.

Step 4 - Based solely on the Number of Months begin ranking each debt. Put a "1" next to the lowest number of months, a "2" next to the 2nd lowest number and continue up to the highest number of months. This is the order that you will be paying off your various debts.

Get Your First Win!
The reason you will start with the debt with the lowest number of months is that you want to have your first "win" or success in this process as soon as possible. Once you get that first credit card (or debt) paid off, you'll begin to see the light at the end of the tunnel.

Step 5 - Come up with an additional $150 to $200 per month. If you are serious about getting out of debt - and, more importantly, becoming financially free - then generating this extra money will not be difficult. To be candid, if you cannot generate an additional $150 per month then your chances of becoming financially independent are slim.

Step 6 - Pay the minimum amount on every debt you have listed EXCEPT for the one you've marked with a "1." On this first debt to be paid off, pay the minimum amount due plus the additional $150 to $200. Keep doing this each month until your first debt is paid off. Scratch that first debt off your list.

Step 7 - Congratulate yourself!

Step 8 - Pay the minimum amount due on every debt you have EXCEPT for the one you've marked with a "2." On this debt, pay the minimum amount due, PLUS the entire amount you had been paying on debt #1. For example if on debt #1 your minimum amount due was $40 and you added the additional $150 then you were paying a total of $190 each month. On debt #2, if the minimum amount due is $50, you will now pay $50 plus $190 or a total of $240 per month.

After a debt is paid off then take the total amount you were paying on that debt and add it to the minimum amount due on your next debt to get your new monthly payment. You will be amazed at how quickly this amount adds up and how quickly your credit cards, car loans, etc. are paid off.

Continue this process until all the bad debts on your list are paid off.

Step 9 - By this time the monthly amount you are paying on your last debt is likely to be quite substantial. Keep paying that amount every month. Except now - instead of paying it to creditors - you pay it to yourself for only one type of purchase: assets that give you positive cash flow each month. You will be out of the Rat Race faster than you ever dreamed!

Kim Kiyosaki