Revisit Rich Dad Poor Dad – Lesson 5

In the lesson 5 from the book Rich Dad Poor Dad – The Rich Invent Money. Once we leave school, most of us know that it is not as much a matter of college degrees or good grades that count. In the real world outside academics, something more than just grades is required. It is called guts. This factor, ultimately decides one’s future much more than school grades.

I regret during my university days and even MBA days, I was chasing good grades, spending too much time mugging in the library. My friends were busy starting their businesses on the side, doing more meaningful things than gunning for grades. Maybe that’s why they are more successful than me. I know the answer is guts, take the leap, but I lack the courage to act on the answer. Often in the real world, it is not the smart that get ahead but the bold.

Your financial genius requires both technical knowledge as well as courage. If fear is too strong, the genius is suppressed. Learn to take risks, to be bold and let the genius convert that fear into power and brilliance. I realize when it comes to the subject of money, most people would rather play it safe. They will ask,” Why take risks? Why should I bother developing my financial IQ? Why should I become financially literate”

You got to take risk to create more options.

Why develop your financial IQ?

I do it because now it is the most exciting time to be alive. I will welcome change rather dreading change. I rather be excited about making millions than worry about not getting a raise. It will be full of turmoil and it will be exciting. So why bother developing your financial IQ? Because if you do, you will prosper greatly. If you don’t, this period of time will be a frightening one. It will be a time of watching people move boldly forward while others cling to decaying life rings.

Many people are struggling, often working harder, simply because they cling on old ideas. They want things to be the way they were, they resist change. I know people who are losing their jobs or their houses, and they blame technology or the economy or their boss. Sadly they fail to realize that they might be the problem. Old ideas are their biggest liability. It is a liability simply because they fail to realize that while that idea or way of doing something was an asset yesterday, yesterday is gone.

Some people will sit and wait for the “right” opportunity. There are people who get the “right” opportunity and then not have enough money. Then, they complain they would have gotten out of the Rat Race if they had more money. So they sit there. They see all the good deals, but they have no money.

Some have the money, the time is right, they have the card, but they cannot see the opportunity staring at them. They fail to see how it fits into their financial plan for escaping the Rat Race. Most people have an opportunity of a lifetime flash right in front of them and they fail to see it. A year later, they find out about it, after everyone else got rich.

Financial intelligence is having more options. If the opportunities aren’t coming your way, what else can you do to improve your financial position? If opportunity lands in your lap, you have no money and the bank won’t talk to you, what else can you do to get the opportunity to work in your favour? If your hunch is wrong and what you have been counting on does not happen, how can you turn a lemon into millions. This is financial intelligence. It is not so much what happens, but how many different financial solutions you can think of to turn a lemon into millions. It is how creative you are in solving financial problems.

Most people know one solution: work hard, save and borrow.

You want to increase your financial intelligence because you want to be the kind of person who creates your own luck. You take whatever happens and make it better. Few people realize that luck is created, just as money is. If you want to be luckier and create money instead of working hard, then your financial intelligence is important.

The single most powerful asset we all have is our mind. If it is well trained, it can create enormous wealth in what seems to be an instant. An untrained mind can create extreme poverty that lasts lifetimes by teaching it to families.

Putting money away every month is a sound idea. It is one option which most people subscribe to. The problem is this, it blinds the person from what is really going on. They miss major opportunities for much more significant growth of their money.

The world is passing them by.

Financial intelligence is made up of these four main technical skills:

1. Financial literacy. The ability to read numbers
2. Investment strategies. The science of money making money
3. The market. The supply and demand. Someone was buying and someone was selling.
4. The law. The awareness of accounting, corporate, country rules and regulations. Always play within the rules.

The combination of these kills is needed to be successful in the pursuit of wealth, whether it is through buying small houses, large apartments, companies, stocks, bonds, mutual funds, precious metals, or the like. So why bother developing your financial intelligence? I know why I continue to learn and develop. I do it because I know there are changes coming. I welcome change than cling to the past. I want to continually develop my financial intelligence because at each market change, some people will be on their knees begging for their jobs. Others, meanwhile will take lemons that life hands them and turn them into millions.

Currently, I am handing out my resume begging for jobs. Maybe I should pause, take a break and assess what I can do with my life.

Back to Rich Dad Poor Dad – the more so-called sophisticated you become, the more opportunities will come your way. Another case for developing your financial intelligence over a lifetime, is simply that more opportunities are presented to you. An the greater your financial intelligence , the easier is to tell whether a deal is good. It’s your intelligence that can spot a bad deal, or make a bad deal good. The more you learn, the more money you can make because you gain experience and wisdom as years go on. You will have friends who play it safe, work hard at their profession, and failing to gain financial wisdom which does take time to develop.

My overall philosophy is to plant seeds in the asset column. That is my formula. I start small and plant seeds. Some grow, some don’t.

On the road to financial freedom, always remember to have fun, it is only a game. Sometimes you win and sometimes you lose, you learn. But have fun. Most people never win because they are afraid of losing. If you look at how humans are designed to learn, we learn by making mistakes. The same is true for getting rich. Unfortunately, the main reason most people are not rich is because they are terrified of losing. Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success. Ask any rich persons whether they have never lose money.

I look at money like a game of tennis. I play hard, make mistakes, correct, make more mistakes, correct and get better.

There are 2 types of investors.

1. The first and most common type are people who buy a packaged investment. They call a retail outlet such as real estate company or a stock broker or a financial planner and buy something. It could be a mutual fund, a REIT, a stock or a bond. It is a good and clean way of investing.
2. The second type are investors who create investments. This investor usually assembles a deal, much like there are people who buy components of computers and put it together. It is customizing. It is putting opportunities together or know people who do.

To become the 2nd type of investor, you need 3 main skills. These skills are in addition to those required to become financially intelligent.

1. How to find an opportunity that everyone else has missed. You see with your mind what others miss with their eyes.
2. How to raise money. The average person goes to the bank. The second type of investor needs to know how to raise capital and there are many ways that don’t require a bank.
3. How to organize smart people. Intelligent people are those who work with or hire a person who is more intelligent than they are. When you need advise, make sure you choose your adviser wisely.

There is always risk, so learn to manage risk instead of avoiding it.

Read here for Rich Dad Poor Dad lesson 1
Read here for Rich Dad Poor Dad lesson 2
Read here for Rich Dad Poor Dad lesson 3
Read here for Rich Dad Poor Dad lesson 4
Read here for Rich Dad Poor Dad lesson 6