Get Ready Now For 2021

Dear Reader,

Heading into the fourth quarter of 2020, it’s easy to reflect and see that for many people, life is a struggle due to a lack of financial education. 

Much of this financial crisis was caused by a lack of financial education. Though people often don’t think so, I am an advocate for education. I believe education is more important today than it ever was. Without financial education as part of the core curriculum, schools do a huge disservice to our children, our country, and the world, failing to prepare them for the real world.

In my opinion, unless you take action now, your 2021 may not be different than your 2020. So here are the most important lessons I can teach you to be prepared for next year: 

Know What Risk Is

When people say to me that investing is risky, I simply say, “Investing is not risky. Being uneducated is risky.”

Investing is much like flying. If you’ve been to flight school and spent a number of years gaining experience, then flying is fun and exciting. But if you’ve never been to flight school, I’d leave the flying to someone else.

Rich dad firmly believed that any financial advice was better than no financial advice. He was a man with an open mind. He was courteous and listened to many people, but he relied ultimately on his own financial intelligence to make his decisions. “If you don’t know anything, then any advice is better than no advice. But if you can’t tell the difference between bad advice and good advice, then that is risky.”

Rich dad firmly believed that most people struggle financially because they operate on financial information handed down from parent to child, and most people don’t come from financially sound families. He often said, “Bad financial advice is risky, and most of the bad advice is handed out at home—not from what is said, but from what is done. 

The Four Best Assets for Investment

At the age of nine, when my rich dad began my financial education with the game of Monopoly, he wanted me to have a bigger picture of the world of investing.

Once you decide which asset class is best for you, and which asset class you are most interested in, then I suggest studying that asset class and investing your time before investing your money. The reason I say this is because it is not the asset itself that makes you rich. You can lose money in any of the asset classes. Rather, it is your knowledge of each asset class that makes you rich. Never forget that your greatest asset is your mind.

The following are some of the basic big-picture asset classes he wanted me to spend my life learning. 

Business

Of all the asset classes, business is the toughest. Business is the most powerful of all assets, but it requires the most skill to start, build, and manage. That may be why the richest people in the world are entrepreneurs. The richest people in the world are entrepreneurs such as Bill Gates of Microsoft, Richard Branson of Virgin, and Jeff Bezos of Amazon. 

It can be a long road—and a tough one—but when they win, they often win big.

The ability to sell is essential for entrepreneurs. The reason most businesses fail is that the entrepreneur lacks adequate sales skills. In 1974, IBM and Xerox had the best sales training. I was hired by Xerox and was sent to Leesburg, Virginia, for intensive sales training. It took me four years of training to go from the last place to first place in sales. 

Real Estate

In 1973, I took my first real estate sales course. Today, Kim and I are tens of millions of dollars in debt, debt that produces millions in income, much of it tax-free. In the past year, banks have lowered interest rates which reduces our mortgage payments and increases our profits. Real estate is great because debt and taxes make the investor rich.

Real estate is a management-intensive asset, is illiquid, and if mismanaged can cost you a lot of money. After a business, real estate requires the second-highest level of financial intelligence. 

Commodities

Commodities are a good hedge or protection against inflation—which is important when governments are printing a lot of money, as they are today. The reason they buffer against inflation is that they are tangible assets that are purchased with currency. So when the currency supply increases there are more dollars chasing the same amount of goods. This causes the price of the commodities to rise, or inflate. Good examples of this are oil, gold, and silver, all of which are worth much more than they were a few years ago thanks to the Fed’s printing presses.

Paper Assets

Kim and I rarely invest in paper assets because paper assets offer the least control. When you look at stocks, bonds, or mutual funds, the investor has zero control over income, expenses, assets, and liabilities.

Paper assets have the advantage of being easy to invest in. Additionally, they are liquidity-scalable, which means investors can start small by buying only a few shares, and thus it takes less money to get into paper investments than some of the other asset types.

Take a moment and ask yourself which asset class (or classes) you are most interested in. There is no right or wrong answer.

Why I Invest in Gold & Silver

I love gold and silver. I began collecting silver coins when I was nine years old.

I would rather hold gold and silver than cash. Since I am able to print my own money—legally— I do not need to worry about saving money for a rainy day. 

With governments printing so much money, I feel safer saving gold and silver. Kim and I do not count gold and silver as cash-flow assets since they do not put money in our pockets. Rather, we hold gold and silver much like a person would keep money in a savings account. Gold and silver are liquid, and when politicians are printing more and more money, gold and silver have a better chance of retaining their purchasing power.

But just like any other asset, the prices fluctuate. For me when the prices go down, I buy more.

Understand How to Minimize Taxes

When you say to a child, “Go to school and get a job,” you are sentencing that child to a life in the land of maximum taxes. It is also true when you say to a child, “Become a doctor or lawyer because you will make a lot of money.” 

Employees and people who are self-employed pay the most in taxes.

Those working in the B and I quadrants pay the least in taxes, and some times pay zero taxes, even while making millions of dollars. One reason for this is because those in the B-I quadrants produce much of the wealth a nation needs and hence are rewarded for creating jobs and building homes or offices for people and businesses to rent.

Cash flow from assets such as apartment houses is taxed at passive income tax rates, the lowest tax rates.

On top of plain passive income, real estate investors have other forms of cash flow that can offset their tax exposure: appreciation, amortization, and depreciation, which can be tax-free income. 

As I’ve said throughout my many years, knowledge is the new money. Continue to educate yourself on money and investing. Increase your financial IQ. 

Also, study the CASHFLOW® Quadrant and understand what makes you poor: taxes, debt, inflation, and retirement accounts. Train yourself to think on the B and I side of the quadrant and learn how to minimize your losses in taxes, debt, inflation, and retirement accounts. By shifting your knowledge to the B and I side of the CASHFLOW Quadrant you can position yourself to have the best year ever. 

Regards,

Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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