How to Survive the Main Street Crisis
If you’ve read Rich Dad Poor Dad, you may recall that the title for chapter one of the book is, “The Rich Don’t Work For Money.” One of the reasons why those in the E and S quadrants have problems with that statement is because most went to school to learn to work for money. They did not go to school to learn how to have other people’s money work for them.
When Kim and I started The Rich Dad Company, we borrowed $250,000 from investors. We paid the money back once the company was up and running. Today, the business has returned multi-millions of dollars, not only to Kim and me but to companies and individuals associated with Rich Dad. As I said, capitalists are generous.
My point is that the moment a person knows how to make money out of nothing or with other people’s money or a bank’s money, they enter a different world. It’s a world almost exactly opposite the world of those in the E and S quadrants where they experience hard work, high taxes, and low returns on investment.
The reason most people believe saving is smart and a 10 percent return in the stock market is worth it is simply due to a lack of financial education.
Your best ROI is not a return on your investment, but a return on your information. This is why financial education is essential, especially for the uncertainty of the world ahead.
Taxes are Stealing Your Wealth
“Go to school to get a good job” are words that, from the beginning, program you to be an employee who pays the highest percentage of his income in taxes. When you are advised to work hard to make more money, you are inadvertently pushed into a higher tax bracket and sentenced to work for the highest taxed income: earned income.
Those educated in the mindset of the B and I quadrants operate by a different set of tax rules and can earn a lot more money and pay much fewer taxes if any.
One of the ways that the government steals the wealth of its citizens is through taxes. Printing dollars is an inflationary tool that the government uses to devalue the dollar—the more dollars there are in circulation, the less each dollar is worth. That is what we call a hidden tax, and it is a second way the government steals the wealth of citizens.
Today, the U.S. government uses inflation to steal from its own citizens by devaluing their labor and savings. In other words, the more counterfeit dollars the United States prints, the more dollars it takes for you and me to live.
Print Your Own Money
To me, being able to print your own money is one of the better advantages of investing in your financial education. Since the government is printing more money, doesn’t it make sense to print your own money… legally? Doesn’t printing your own money make more financial sense than working harder and paying higher percentages in taxes, saving money in the bank and losing purchasing power to inflation and taxes, or risking your money for the long term in the stock market?
The way you print your own money is by achieving an infinite return on your money. The definition I use for an infinite return is “money for nothing.” More specifically, I print my own money when I get back all the money I used to acquire an asset, still own the asset, and enjoy the benefits of the cash flow from the asset.
With a strong financial education, I can print my own money via a business, real estate, stocks, and even commodities such as gold, silver, and oil. Again, the key is going for an infinite return—going for money for nothing.
#1 Print Your Own Money in Business
Kim and I started the Rich Dad Company at our kitchen table. Rather than use our own money, we raised $250,000 from investors. In less than three years, thanks to the growth of our business and the profits it provided, we returned 100 percent of our investors’ money, plus interest, and an additional 100 percent on their money to buy their shares back. Today, The Rich Dad Company puts millions of dollars in our pockets, even though we have none of our own money invested in the business. By definition, that is an infinite return.
#2 Print Your Own Money in Real Estate
With real estate, our business plan is to use debt, other people’s money, to achieve an infinite return and print our own money.
For example, let’s say we buy a two-bedroom, one-bath house in a great neighborhood for $100,000. We pay $20,000 as a down payment and borrow $100,000 for the house and extra money for improvements from a bank and/or investors.
We improve the property by adding an extra bedroom and a bathroom. We raise the rent from $600 a month to $1,200 a month.
We refinance the property at a new appraised value of $150,00 and when we refinance the house, the banker gives us a loan of $120,000 (80 percent of new value). We get back $20,000, plus get an extra $20,000 to invest in a new property.
The loan interest at 6 percent costs approximately $600 a month. Expenses are another $300 a month, which puts a net $300 a month in our pocket in the form of cash flow. The new loan and expenses are financed by rent from the tenant.
#3 Print Your Own Money with Paper Assets
There are many ways you can print your own money with paper assets such as stocks. One way is to use option strategies.
For example, let’s say I buy a thousand shares of a stock for $2 a share. I then go to the options market and sell an option to buy my thousand shares for a $1 premium per share ($1,000) for 30 days. If the stock hits $3 per share or higher, the person who purchased the option can buy the stock at $3. If the stock does not hit $3 in 30 days, I keep his option money of $1,000. Again, notice that I buy for the long term and sell time by the month.
In this overly simplified example, selling a 30-day option puts $1,000 immediately in my pocket. If I sell another 30-day option with the same stock on the same terms and the stock does not go above $3, I make another $1,000 off my original $2,000 investment while still owning my stock. I will have made 100 percent of my initial $2,000 back, and have printed my own money via my financial knowledge. To me, this makes more sense than leaving your money in mutual funds for the long term.
#4 Print Your Own Money with Gold and Silver
I have printed my own money by building gold and silver mines and selling shares of the company in the stock market. I realize that taking a business public is not realistic for most people’s current situations, yet it is one of the best ways to take an idea and create a personal fortune.
The B and I Quadrants
Once you’ve learned to print your own money, you are now on the right side of the CASHFLOW Quadrant. This is where you start playing by the rules of the rich.
To be clear, there are rich people in all four quadrants. There are many rich employees and self-employed specialists such as doctors, lawyers, sports stars, and artists. In the E and S quadrants, there are both rich and poor people. But the richest people in the world live in the I quadrant. There are no poor people in the I quadrant. The amount of wealth they have may vary, but no one is poor.
Editor, Rich Dad Poor Dad Daily