Rich Dad, Poor Dad
I just read Rich Dad, Poor Dad by Robert Kiyosaki. I've been meaning to get to it for a while, but it's been just sitting on the shelf. It's really short and not filled with any real specific advice, but still, I wish I read it years ago. I wouldn't have paid attention because I was an idiot years ago, but still... it would've been nice to have in my head.
The basic tenent of the book is that the rich think about money differently than the middle class or the poor do and they teach that understanding to their children, but the rest of us remain clueless. I remember when I went to college having conversations with roomates who were from much better to-do families, amazed at the things they knew and talked about when it came to money. It makes sense... Most of the people I grew up with, money was something to be avoided, because you never had enough. Money meant bills, and it was generally better to avoid the whole subject. People with money, however, know what to do with that money and how to invest that money to make it grow. That's something that the rest of us learn waaay to late in life, I think.
Anyways, the book goes on to talk about how in order to escape the circle of earn/pay taxes/pay bills you need to start investing in "assets". These are basically anything that will return money to you. The author made his cash in real estate, but assets can also be stocks or investments in companies, etc. Basically he says that you can *never* earn enough money to be financially secure with just a job and basic investments like 401ks, and other "safe" investments.
He makes a pretty great case for it. First, unlike a corporation, people have to pay taxes on their earnings *first* rather than last. That means in order to invest $100, you normally have to earn $150 before taxes. Secondly, the cycle of consumerism in the U.S. makes in impossible to get out of that earn more/spend more loop. Everyone thinks that the solution to their problems is just to go up that corporate ladder - or change jobs - so that you can earn more money and then you'll be fine. But what happens is that you always end up spending.
Anyways, like Suzy Ormond and the other financial self-help gurus, Kiyosaki gies the basic advice that you need to pay yourself first. Tend to your assets (and your home, by the way, isn't one) first, grow them to the point that they are generating enough income so that you can then buy the luxuries. People who go out and buy the BMW on credit, then hope they get the raise to help get them out of debt will never escape that vicious circle.
He doesn't suggest starting your own company - which he says is full of headaches and even more risks, but says that even while you have your real job, you need to be tending your real business. That means making sure you're saving, investing, etc. I would normally be skeptical of this sort of advice, because if you have zero to invest, you're not going to get very far. But the idea is that even small amounts invested in the right opportunities can be the basis for more investments later. He talks about investments of $2000 or $5000 which many people can put together. The key is to have some money ready to invest when the opportunity arises, and then take that opportunity when it presents itself.
After reading the book and chatting about with Ana, we realized some of the opportunities we missed because we weren't open to them. A relative of Ana's was selling a one bedroom apartment for about $35,000. It was a dump, but not in a bad neighborhood or anything. The prices here in Madrid for apartments are obscene... so even though the place was a dump inside, by buying, spending a bit of money to restore it, then selling it, we could have litterally trippled our investment or more. The more we thought about it, the more we realized that it would've been possible, and easy to do - even with all the red tape and taxes, etc. involved. These are the things you've got to be aware of - but not long shots. Like Kiyosaki says at one point, profits are made at the time of purchase.
Anyways, lots of food for thought. I mean, you definitely need your bullshit detector on for any of these types of books, but the author never claims its a quick and easy solution, just that it's the way it works, and you can see the kernel of truth in it.
LOL... So much for what I know. Thanks to Dominic for pointing out this link about Kiyosaki: The guy's a con artist. Gotta love it.
The sad thing is that I read the book, found it sorta uninteresting, but at least somewhat educational... sad, sad, sad.