Saturday, February 20, 2010

Rich Dad Poor Dad

Dear readers ,

Hi again. How are you guys doing? There are things I would like to share with you guys in my journal this time.
Today’s topic we are going to focus is MONEY. I’ve received a lot of requests for this and people have been asking me to share. Well, nothing great. Just my 5 cent thought. Let me share something about what I read before, is a very famous book named “Rich Dad Poor Dad” many knew about the book, but very few have read. So let me share it with you.

Firstly, ask yourself, does school prepare children for the real world? “Study hard and get good results and you will find a high-paying job in a big company with great benefits,” my parents used to say.

A problem with school is that you often become what you study. So if you study, say, cooking, you become a chef. If you study the law, you become a lawyer/attorney, study the accounts, you become an accountant, and study of auto mechanics makes you a mechanic. The mistake in becoming what you study is that too many people forget to mind their own business. They spend their lives minding someone else’s business and making that person rich, but not themselves.

That is why we hear so often:
“Salary is too low.”
“Wait till I got my promotion.”
“I am going to go for extra courses so I can get a better job.”
“I’m quitting in two weeks, I found a job with a better pay.”

The primary reason the majority of the poor and middle class are fiscally conservative, which means “I can’t afford to take risks” is that they have no financial foundation. They have to cling on their jobs simply to survive. They have to play it safe. A kind of mindset “no job, can’t survive.”

Ray Kroc, the founder of McDonald’s, admitted he is not interested in the hamburger business but the real estate. He knew his primary business focus was to sell hamburger franchises, but deep inside what he never lost sight of was the location of each franchise. He knew that location is very important in terms of business success. Basically, the person that intends to buy McDonald’s franchise was also paying for, buying, and the land under the franchise for Ray Kroc’s organization. McDonald’s today is the largest single owner of real estate in the world, owning even more than the Catholic Church.

“The poor and the middle class work for money. The rich have money work for them.” – Robert Kiyosaki

If you can’t make up your mind decisively, then you’ll never learn to make money anyway.
I am glad to myself that I am angry about working with the little money I earn at sea.
If I had not gotten angry that I guess I would not be picking up books about money. You see, true learning takes energy, passion, a burning desire. I believe anger is a big part of that formula, for passion is anger and love combined. When it comes to money, most people want to play it safe and feel secure. So passion does not direct them. Fear does.

Many people went to school and got an excellent education, so he could get a high-paying job. But he still has money problems in future since he never learned anything about money at school. On top of that, many fresh graduates are just believed in working for money.

Not everyone would want to learn about money work for them simply because it’s easier to learn to work for money, especially if fear is your primary emotion when subject of money is discussed.

The pattern of get up, go to work, pay bills, get up, go to work, pay bills... their lives are then run forever by two emotions, fear and greed. Offer them more money, and they continue the cycle by also increasing their spending. They feel the fear of not having money. Instead of confronting the fear, they react instead of think. They react emotionally instead of using their brain. Then, they get a few bucks extra in their hands, and again the emotion of joy and desire and greed take over, and again they react, instead of think. So their emotions do their thinking.

It’s like the picture of a donkey, dragging a cart, with its owner dangling a carrot just in front of the donkey’s nose. The donkey’s owner may be going where he wants to go, but the donkey is just chasing an illusion. Tomorrow there will only be another carrot for the donkey.
We have to learn to use our emotions to think, not think with our emotions.

Having money to burn, the child goes to places where other young people just like to hang out, and they meet people, they date, and sometimes they get married. Life is wonderful now, because today, both men and women work. Two incomes are bliss. They feel successful, their future is bright, and they decide to buy a house, a car, a television, take vacations and have children. The happy bundle arrives. The demand for cash is enormous.

                The happy couple decides that their careers are vitally important now and begin to work harder, seeking promotions and raises. The raises come, and so do another child and the need for a bigger house. They work even harder; become better employees, even more dedicated. They go back to college/university to get extra specialised courses so they can earn more money.

Maybe they take a second job. Their incomes go up, but so does the tax bracket they’re in and the real estate taxes on their new large home, and all the other taxes. They get their large salary pay check and wonder where all the money went. buy some mutual funds and buy groceries with their credits card. The children are now 5 or 6 years of age, and the need to save for college increases as well as the need to save for their own retirement.

The happy couple, born 35 years ago, is now trapped in the Rat Race for the rest of their working days. They work for the owners of their company, for the government paying taxes, and for the bank paying off a mortgage and credit cards. Back to the kind of mindset I mentioned before, “no job, can’t survive.”

Today, I am still challenged on the idea of a house not being an asset. And I know that for many people, it is their dream as well as their largest investment. And owning your own home is better than nothing. Well, I don’t expect much from most readers to agree with it because a nice home is an emotional thing. And when it comes to money, high emotions tend to lower financial intelligence. I know from personal experience that money has a way of making every decision emotional.
·         When it comes to houses, I point out that most people work all their lives paying for a house they never own. They rented. Or most people buy a new house after so many years, each time incurring a new 30-year loan to pay off the previous one.
·         Even though people receive tax deduction for interest on mortgage payments, they pay for all their other expenses with the after-tax dollars. Even after they pay off their mortgage.
·         Property taxes
·         Houses do not always go up in value. It depends on the current market and value of location.
·         The greatest losses of all are those from missed opportunity.
*If all your money is tied up in your house, you may be forced to work harder because your money continues blowing out from your expenses column, instead of adding to the asset column, the pattern of classic middle class cash flow.
*  If a young couple would put more money into their asset column early on, their later years would get easier, especially as they prepared to send their children to college.
*  Assets would have grown and would be available to help cover expenses.
*  All too often only serves as a vehicle for incurring a home-equity loan to pay for mounting expenses.
·         Loss of time, during which other assets could have grown in value
·         Loss of additional capital, which could have been invested instead of paying for high-maintenance expenses related directly to the home

Initially, this mainly cause of loss of education. Too often, people count their house, savings, and retirement plans as all they have in their asset column. Because they have no money to invest, they simply do not invest. I am not saying don’t buy a house. I am saying; understand the difference between an asset and a liability. When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.

If I want to increase my expenses, I first must increase my cash flow from assets to maintain this level of wealth.

We must know the difference between an assets and liability.
Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets.
ASSET – something that puts money in my pocket
LIABILITY – something that takes money out of my pocket

The more my assets grow, the more my cash flow grows. And as long as I keep my expenses less than the cash flow from these assets, I will grow richer, with more and more income from sources other than my physical labour.

The rich buy assets.
The poor only have expenses.
The middle class buy liabilities they think are assets.

So what kind of assets am I suggesting that you acquire? In my world, real assets fall into several different categories:
·         Business
*You don’t need to learn how to cut hair if you wanted to open a barber shop.
*Well, own them, but they are managed or run by other people.
*“An intelligent person hires people who are more intelligent than they are.”
* If I have to work there, it’s not a business. It becomes my job.
·         Stocks
·         Bonds
·         Mutual funds
·         Income-generating real estate
·         Royalties from intellectual property such as: music, scripts, patents.
·         Anything that has value that produces income and has a ready market.

So if you don’t learn to master the power of money, you will become a slave to money.
Money doesn't create man but it is the man who created money” – Warren Buffet
In other words, if you don’t first handle fear and desire, and when you get rich, you’ll only be just another high-paid slave.

Well guys, that is all about it. I know I am quite long winded when it comes to money matters. Well, it’s just a sharing article. Some find it useful, some find it hurtful. Nothing is too late. Life is so wonderful out there.
Nobody go to sea for fun, nobody go to university for fun. Each of us has our own vision to know what we desire for.
It’s all about money, which keeps the world moving.
V.B. Regards

Sailing out

Friday, February 5, 2010

How not to be a millionaire.

How not to be a millionaire.
You have your first pay check.
That’s the good news. You should stop reading this article right now. I will not be held any responsible for what is about to say. It could get quite depressing.
With your first pay check, you want to get a car.
Welcome to the world of debt repayments, road tax, auto insurance, and ever increasing fuel, sky-high parking fees, tolls, traffic offences, maintenance fees and those occasional, completely unavoidable little accidents that seem to happen when you are replying all those important phone call or putting on lipstick. You know, things like that.
Speaking of make up, you do have to look your best at all times.
Lets’ get this straight; make-up, designer handbags, shoes, clothes, scents and accessories cannot be classified as indulgences. These are life and death things only a true woman will ever understand. Money is never an issue.
You can of course add facials, body treatments, hair salon sessions, manicures and pedicures, and the occasional waxing to the list. Nothing is too insignificant when it comes to taking care of the most important thing in your life, you.
Bargains are irresistible.
Even normal priced items cannot be denied their place of consideration. It’s only fair.
You need to shop. It doesn’t matter for what. It’s genetics.
Then you have an epiphany.
You suddenly decide that you want to stand on your own two feet. That’s a grave mistake waiting to be punished.
Essentially, it means you don’t want to reply on your parents anymore. Your parents try to dissuade you while they secretly thank their lucky stars.
You move out.
            You rent that dream single’s pad. You fill it with minimalist designer furniture. You make sure it’s completely air-conditioned. You invest in a proper kitchen even if you can’t cook.
            You are now officially bankrupt. You were merely broke nine paragraphs ago.
            Now, if you really want to enjoy everything that life has to offer way before an appointment with your personal plastic surgeon becomes a routine you can’t live without (providing of course, that you can actually afford one),
It’s time to use your money make money.