Kiyosaki is back at it again, this time with 10 steps for any of us to take when we’re building assets! Now, of course, building assets is incredibly important, but if you’re wondering how to actually identify what an asset might actually look like, I will link back to a previous post on that as well!
My two favorite things about Rich Dad, Poor Dad, that I have definitely brought up before, but it is worth mentioning, are:
1 – He breaks his lessons down in a way that anyone can understand. He is telling lessons from his childhood, where he had taught them, so essentially anyone, child age or older, should be able to understand the underlying lesson of what he is teaching
2 – His lessons are actionable. He gives you specific steps or things that you can focus on to take the lesson that you were just taught to the next step.
I’ve read a lot of books where I learn a lot, but it might be way too in depth for the average person, including me (looking at you, the late chapters of ‘The Essays of Warren Buffett’. But then there’s other books where I learn a lot, close the book and go, “well, that was great, but I still don’t have any idea what to do next.”
Rich Dad, Poor Dad is the first investing/personal finance book that I have read that easily accomplishes both of these two items, so I give it a major thumbs up!
So, 10 Steps to Building Assets – that sounds pretty legit, right? Let’s get going on it!
1 – Find a reason greater than reality: the power of spirit
I’ve talked about this before and I think that Kiyosaki is hitting the nail on the head on this one – you need to find your ‘why’ towards the reason for investing and financial freedom. If you don’t have that ‘why’ then when things get tough, you will quit. I promise.
It’s no different than a diet is. Sure, everyone wants to lose weight or gain muscle or be healthier or something, right? I feel like nobody is ever healthy enough to their own standards. I am no different. I was always a fat kid growing up. I played a ton of sports so I thought I was active enough, but I could never lose weight. I had a thyroid disorder and would sometimes just blame that and call it a day, but then other times I would get really motivated to lose weight.
The ‘why’ for me usually was that I just didn’t want to be the fat friend, or maybe I wanted to look good for a school dance or something. It wasn’t really specific and the ‘why’ didn’t hold great meaning. Until college.
I was nearly 280 pounds and I was about a year from graduating college – I knew that losing weight was just going to get harder and that eventually if I had a family, I might be in situation where I was putting my life at risk and therefore my kids lives at risk of not having a dad, or maybe I couldn’t even play with my children. It broke me up.
I wasn’t even dating anyone at this time, but this now became my why. It wasn’t about me anymore. It was much bigger than that. And guess what, in less than 6 months I weighed under 200 pounds. Because it was bigger than me – it was my future family.
That’s the mindset that you need to find when investing and seeking financial freedom as well.
Kiyosaki suggests that you make a list of things you want and don’t want in life. For instance, I want to be rich because I want to pay for my kids’ college, or that I don’t want to live paycheck to paycheck. Find the things that you want to have and the things that you want to avoid. That is a great starting point to get you on your journey!
2 – Make daily choices: the power of choice
Every day you have the choice if you want to live a rich life or a poor life. The people that live a poor life will say things like “I’ll never be rich” or “I’m not interested in money”. It’s probably not the right response, but when people say these things, I literally will LOL. Not trying to be mean, but you cannot tell me that you don’t want to be rich. Why would you not want that? The lifestyle? Just because you’re rich doesn’t mean you have to buy a bigger house, better car, go on more vacations, anything – you can live the same. Just now you have the option to do all of these things.
Kiyosaki says that everyday he invests in education. He loves to go to seminars to learn and will constantly listen to audiobooks, (also called podcasts nowadays ?), read anything that he can, and just absorb all knowledge. Every single day we have the choice to learn more than we knew the day before, and by choosing to do so will make us more prepared for the next day.
3 – Choose friends carefully: the power of association
He’s not saying that you can’t choose poor friends and that all of your friends need to be rich but choose friends with a rich mindset that bring you up. Choose to associate with people that will bring value to your life and make you a better person rather than constantly drag you down to their level. I know that some people will say that you’re the average of the 5 people you spend the most time with, so those 5 people better be all stars!
“I would say that one of the hardest things about wealth-building is to be true to yourself and to be willing to not go along with the crowd.” Don’t simply just jump on and buy ZM because other people are doing it during the coronavirus or sell all your stocks because you’re timing the market. As Kiyosaki said, “There is always another wave. People who hurry and catch a wave late usually are the ones who wipe out.”
Don’t wipe out. Don’t time the market. Don’t buy the rumor and sell the news. Stick to your strategy and your low-profile, boring investments will get you there faster than riding the CNBC train. I promise.
4 – Master a formula and then learn a new one: the power of learning quickly
Did you say FORMULA?! Oh Kiyosaki, you’re speaking my language, brother!
Baker’s follow a recipe, athletes follow a workout plan, you should follow a formula of studying! Kiyosaki says that similar to the saying, “you are what you eat,” he likes to tell people that they “are what they study.”
What does that mean to me? Start to learn the things that you want to know. If you want to be financially independent, start learning that now.
We live in a world where you have so much information at your fingertips. Podcasts, YouTube, blogs, books, literally anything! If you’re not learning, that’s 100% on you, and I don’t feel bad for you. Instead of scrolling Instagram when you’re bored, why not check out an investing Instagram account?
5 – Pay yourself first: the power of self-discipline
Ah, maybe the hardest one to actually do! Take your money and invest/save it according to your plan BEFORE doing anything else, INCLUDING paying your bills. Yes, I said before paying your bills. I know that might seem wack, but you should.
Kiyosaki has talked before about how when your back is up against the ball and you have to pay a bill, you will find a way to do it. On the contrary, if it’s the end of the month and you’ve only invested $50 into your retirement and you’re aiming for $100, are you going to go driver Uber, cut grass, deliver food for Grubhub, or simply just do whatever it takes to get that extra $50? Highly doubt it. Will you do it if it means that your cell phone will be shut off? I bet you will. That’s a whole another tangent that I could go on about our phones, but I’ll spare everyone…lol.
Kiyosaki gives two tangible tips to make sure that we successfully pay ourselves first:
1. “Don’t get into large debt positions that you have to pay for. Keep your expenses low. Build up assets first. Then buy the big house or nice car. Being stuck in the Rat Race is not intelligent.”
2. “When you come up short, let the pressure build and don’t dip into your savings or investments. Use the pressure to inspire your financial genius to come up with new ways of making more money, and then pay your bills. You will have increased your ability to make more money as well as your financial intelligence”
6 – Pay your brokers well: the power of good advice
This might seem odd in a world of zero fee brokerages, but I really get what he’s saying here – don’t hesitate to spend money on those that will teach you. If you need a financial planner, make sure that you ask the right questions beforehand but also make sure that they’re continuing to add value, both with their education to you and also by saving you time. If they’re not doing both of those, you don’t need time.
A discount broker is like a discount doctor, chef, etc. Do you really want to sacrifice quality or price? At times, it makes sense, but not all the time. You need to know yourself, know what you’re looking for from that broker and then attack.
Now let me be clear, I am not advising you to go pay a commission for trades that you’re doing online like anyone else can offer for free. I am telling you that if you really want some education and learning, seek it, and when you find it, don’t be afraid to pay for it. The ROI on education is always worth it, from my experience.
7 – Be an Indian giver: the power of getting something for nothing
Not going to lie, the title of this step might need some work, but I think that the underlying lesson is great. When the Europeans came to America, they would get cold and the Native Americans would give them a blanket. The Europeans would think it was a gift (or so Kiyosaki says) and then not give it back, so therefore the term Indian Giver was born.
Kiyosaki says that he applies this mindset with his finances too.
He has frequently purchased very cheap real estate in cash when he knows that the cash flow is going to quickly pay for the investment that he had to make. He bought a condo for $50K and was able to recoup $2500/month for four months in the summer and then $1K/month for the remaining 8 months, meaning he made $185K/year, or $54K in 3 years. So, by paying cash, he avoided interest and in three years he owned a property that was likely going to appreciate in value, and now was making an average of $1500/month. Not shabby!
He also applied this to investing – when his broker calls him about a company that is about to roll out a new product or really cool idea, he will roll some money into that company. After the company moves up a bit, he will take out the initial amount that he put in so worst comes to worst, he can’t actually lose money in this company at this time.
Personally, I am a bit more focused on investing for the long-term, but I do play around the way that Kiyosaki said that he does as well, and I do like his strategy in that case!
8 – Use assets to buy luxuries: the power of focus
Kiyosaki tells an awesome story of one of his friends that asked him if he should buy his son a car. Kiyosaki basically said to do whatever he felt was best, and I think that his friend did an awesome thing…
He gave his son $3000 for a $3000 car, but instead made him invest it in the market. He told him that once he got to $6000, he could take $3000 for the car and put the other $3000 into his college fund. Unfortunately, his son had lost almost all of the money that he gave him, but he was addicted!
Not only addicted to the stock market but addicted to learning. He said that his son was so into the “new game” that he just learned that he was seeking knowledge and education on his own and that was well worth more than $3000. That is the type of lesson that will set his son up for years of success down the road.
That is how you get someone to focus on owning assets and not liabilities. That is an amazing lesson that I recommend for any parent and I promise I will use this same lesson someday.
9 – Choose heroes: the power of myth
As a kid, we all had heroes. Maybe it was a sports hero, a role model, a teacher, anything that replicated something that you wanted to be just like! Personally, I replicated my baseball swing after Jim Thome, and I looked up to Brett Favre like he was the most important person in my life as a diehard Green Bay Packer fan. These heroes weren’t actually heroes, but they were to me, and they inspired me to try to do everything to be like them.
It’s no different as adults, but likely our heroes have changed a bit, maybe into role models, and they’re likely targeted towards different things. I’m thinking like “relationship goals” or maybe a certain person that donates a ton of money to charity, or a certain investor, or business leader, etc. It’s important to have these heroes, or role models, for us to try to emulate their lifestyle and/or actions.
“But heroes do more than simply inspire us. Heroes make things look easy. Making it look easy convinces us to want to be just like them.” I totally agree with Kiyosaki here. The more heroes we have, the more we will dive in and try to learn more about them, and that just makes us a better person at the end of the day.
10 – Teach and you shall receive: the power of giving
Kiyosaki tells us that the best teachers are also the ones that receive the most. The more that you’re willing to share your expertise, the more that you will find people are willing to give you their expertise back.
“Poor people are more greedy than rich people.”
This quote stood out to me because rich people are willing to share and in turn they will receive. If you’re only sitting there trying to get some for you, you will never be rich. The best way to gain knowledge is to share knowledge.
“It reminds me of the story of the guy sitting with firewood in his arms on a cold, freezing night. He is yelling at the pot-bellied stove, “When you give me some heat, then I’ll put some wood in you!””
This cracks me up. Don’t be scared, or turned away, from sharing.
Honestly, this is exactly how I even got started working with Andrew at einvestingforbeginners.com. I wanted to learn about investing and also try to create some extra money. I attacked this plan by asking Andrew how I could help him, and I wrote a blog for him to show him the type of writing that I could create. I didn’t know if he could say yes. But I wanted to show him that I could help him, first. I felt that if he saw value from me, then I would in turn get value back from him, both with writing my blogs and more importantly from the knowledge that both himself and Dave have been able to shed on my investing journey.
All 10 of these steps, each and every one of them, has a tangible takeaway that you can implement on your daily life right now. Don’t get overwhelmed and try to make a huge overhaul all at once, but just work on making one or two changes in your life and see how it goes.
If you’re craving even more information on building assets, check out this podcast episode where Andrew and Dave really hit even deeper on how you can build assets in the Adult World! Or if you’re really enjoying the Rich Dad, Poor Dad book reviews, in an earlier chapter I talked about how to identify the cash flow pattern of an asset!
The biggest thing for me, personally, was truly understanding the difference of an asset and a liability, and how it really is pertinent to my daily life….my oh my, Kiyosaki – Rich Dad, Poor Dad strikes again!