Read the book with me, pick it up here: https://amzn.to/2OLDCIH

​Learning to sell yourself is key

When it comes to money the only skill most know is working hard. Most people specialize to make money - to be rich it tends to be better to know a little about a lot and rely on experts as needed. This lack of specialization allows you to look at your businesses and make sure things are largely in order. It helps with overall management and oversight. 

Security meant everything to educated dad, learning was key to rich dad - this difference is why they had such drastic views on money. Rich dad's educated the boys from early on that leadership is a very valuable skill. They had this excellent quote that really sells the point:

Workers work hard enough not to get fired, owners pay enough for them not to quit

If you are going to specialize, seek a job with a very high powered union for protection. These unions can help calm the edge on employment. You do not want to be easily replaced, and these unions provide protection self employment usually does not.

The world is filled with talented poor people

This is unfortunate as well. For a lot of people, getting a business degree would have been a better choice. You can do almost anything as long as you know how to sell it.

Essential skills to becoming wealthy:
1.    Management of money
2.    Management of systems
3.    Management of people

Read the book with me, pick it up here: https://amzn.to/2OLDCIH

Lesson 5: The Rich Invent Money

There is a serious problem with our lack of financial literacy, that problem is it holds us back from having the confidence to make moves. This fear and self doubt can be crippling and lock you into an unsatisfying career. You really do need courage, technical, and financial knowledge to go out on your own and start businesses.

Prior to our modern age, people who owned land controlled the wealth. The next era were the industrialists and manufacturing. Now, it is the holders of information and data. It is interesting how these waves come and go, it is so important to learn how to identify an opportunity and not let it slip.

The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth.

This quote is a recurring theme in financial independence books. Basically, you cannot move mountains, but you can take your mind with you. Even if an opportunity fails, and you have to relocate, you can always bring your mind.

One example Robert uses to demonstrate this idea that the rich truly make money is how he started investing in real estate. Basically, he found a great opportunity, the numbers made sense and he knew he could turn a profit. He borrowed the down payment from an investor, purchased the property, the resold it immediately for a profit, paid the investor back, 1031’ed the profits to buy his next place, all within a short period of time.

There are two very different types of investors:

1. Buy and hold, someone who finds a deal, or investment and holds onto it until a much later date.
2. Develop and create, someone who finds a deal and does not let limitations hold them back, they make it a priority to defeat these roadblocks.

    
If you want to be someone who builds these deals, you need 3 skills:

1. Find an opportunity others have missed or passed up
2. Raise the capital investment
3. Organize your team of smart people

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Read the book with me, pick it up here: https://amzn.to/2OLDCIH

Lesson 3: Mind Your Own Business
This is a bit of a call back to chapter one, but the author summarizes it well:

The rich focus on their asset column while everyone else focuses on their income statement.

We open with an interview with Ray Croc, he is known for a little company called McDonald's. He asks a group of MBA students, “What business am I in” and after the obvious guesses (burgers, food, etc.) he corrects them, “My business is real estate”. 

He explains, the problem with the way our schools are designed is they train you to be one thing and single focused. This style of thinking is not a good way to become rich, but it is a great way to be a good employee. If someone asks what you do, you may reply to any number of things (banker, grocer, chef) but rarely do you own the business (bank, grocery store, restaurant).

Also, people may discuss net worth, but net worth is not a great indicator of wealth. A lot of these “assets” cannot be resold for full value, but normally a fraction of their value. Especially with limited time to sell them. 

The best way to build wealth is to keep expenses as low as you can, reduce liabilities and build assets that generate wealth. 

What are Assets?
There are any number of assets, but some examples are:

• Private businesses
• Stocks
• Bonds
• Income-generating real estate
• Royalties
• Anything else that produces income, or increases in values

Rob uses an example that you can take profits and funnel it into real estate, once your dollar is in an asset leave it there. It is a worker that is there to make you more money. Poor people buy luxuries first, but rich people buy them last.

Conclusion
This chapter is interesting, but you can tell it was a bit of an information dump. Still required to understand the next chapter, stay tuned.

Real estate is an interesting stream of “Passive Income”. I say passive with a word of caution, this truly is not passive in the sense that it is hands-off, but, it is a potentially low time investment with a potentially high return. It really does depend on where you buy, and how lucky you get. 

Let’s consider the a sample set of numbers:

Home:
Property Cost: $250,000
Taxes: $4,000 / year
Insurance: $1,200 / year
Down Payment: 25% (62,500)
Total Mortgaged: $187,500
Total Mortgage with Insurance and Taxes: ~$1,450 / month

Now, if this property has 2 units, and each pays $1,000 a month in rent, that is a net gain of $550, just for having people live in your property. Not a bad amount of cash for holding this property. That said, this number is a lie. While you are profiting $550 per month, there are other considerations. Water, sewer, and fire taxes, improvements, and replacements for appliances, landscaping fees, and the list goes on. 

However, if you had 3 units in the same building, that profit goes up to $1550 per month (!) for the same cost. That is about 7% a year in profit on the mortgaged value. Also, something to consider, assuming the house does not increase in value over the years (which it should and potentially at a considerable amount) the mortgage payments are bringing down the principal amount owed as well.  When you sell this property, you get to reclaim that principle, it is like making money twice. 

Also, if you have a few properties and no longer want to manage them yourself, you can hand them off to a property management company. They take a percentage of the collected rent (between 5 and 10%) but handle it all for you. You just collect the excess. This makes it much more passive, but potentially less profitable. 

The biggest problem with real estate is you really need to save your profits. When things happen - they can happen big. For example, if someone stops paying rent, it can take MONTHS to have them properly evicted, which depending on your current holdings may flip your property to a monthly loss. Also, things like hot water heaters, roofs, pipe bursts and similar can cost huge dollars to fix. If you are not in a highly trafficked area, you may not be able to fill rentals in a timely manner. You need to be sure you are saving for these inevitable issues.

Disclosure: I own a few properties they treat me pretty well, however, I do not use a management company, so my time investment is considerably higher than someone who does. 

Wrap Up:
Time investment: 1-8/10
Potential income: 5-10/10
Difficulty: 1-8/10

Read the book with me, pick it up here: https://amzn.to/2OLDCIH
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Lesson 2: Why Teach Financial Literacy
Financial Literacy is so important, and it is very interesting that we do not have requirements for these courses in school. Most kids can ask where the library is in French or Spanish but cannot tell you how compound interest works.

Rule #1: Know the Difference Between an Asset and a Liability
Due to this lack of literacy, people who get a windfall (lottery, professional athletes, rich uncle, etc.) tend to lose it all. They do not understand even the basics. Also, we are apt to miscategorize assets and liabilities. Basically, rich people will take their money and buy things that make them money, a.k.a assets (dividend stocks, rental properties, etc.). Poor people, on the other hand, think their personal house is an asset when in reality, it is a cost center and as such a liability. They also spend far too much on cars, which is the worst investment you can make.

How the Quest for a Financial Dream Turns into a Financial Nightmare
Poor people with limited financial literacy do not understand the fundamental basics of cash flow and because of this, an increase in the amount of money does not lead to more wealth. Their pattern of spending does not change, they just spend more on liabilities.

One very interesting point made here - the number one expense for most people (not houses, not cars, not food) is income tax! This blew my mind, it is so true because the government gets about 40% of my income.

This awakening in the kids had started to cause problems in school when they were 16. They spent so much time with Rich dad, listening in on phone calls and learning how to deal with vendors and partners. It was interesting that a man who dropped out of high school (Rich dad) was now working with and directing very well educated people. He was truly in charge.

Why the Rich Get Richer
As we discussed before, the rich get richer because they tend to spend cash on assets that build wealth. Their assets make more income than they spend.

Why the Middle-Class Struggle
Expenses increase as income increases, they tend to have balanced income and expenses with no real savings.

Conclusion
Still an excellent book. I will see you for lesson 3.

When thinking about passive income generation, it is important to look at skills you already have, these may go a long way to providing you a vehicle for generating passive income.

I have a full time job, and a part time job. I do not do the part time job for the money, I love mentoring and teaching, so I am an adjunct at a local college. That said, one method of generating passive income is to develop a course on something you know well, or would be considered an expert in.

For example, if you are a lawyer and recently passed the bar, you could come up with course content relating to passing the bar, if you are a chef, perhaps a basic knife skills course, a day trader - a course on reading candlestick patterns, the list really does go on and on.

Of course there is an initial investment of time, but once the course is available, this could be something that you dedicate almost no time to that has a return. There are popular sites that you can host your content on (udemy, teachable, skillshare - being a few examples) and get paid when people buy your course. It may be worth researching google trends and similar to see how in demand this topic is before investing the time, but this one can have a huge return on investment.  Even if there is a limited audience, you may be able to make some good side cash.

The time investment varies greatly, if you have never done any video production work (made youtube videos for example) it could be difficult to adjust to video editing, lighting, sound production and similar. That said, once this is done, it should be fairly straight forward. You by no means need to be great at this, a simple video will do in most cases, no rigorous editing or cuts would be required.



Time investment: 7/10
Potential income: 8/10
Difficulty: 4/10

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