2/14/12

Why the Rich go broke......R. Kyosaki

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Wh the Rich go broke......R. K osaki

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Yesterda 09:06 PM

#1

tdev0011
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Wh the Rich go broke......R. K osaki

One of the best books I have read on the mentality differences between the rich and the poor has been Robert Kyosaki's book "Rich Dad, Poor Dad".

Join Date: Jun 2011 Posts: 151 Thanks: 36 Thanked 203 Times in 59 Posts

Here is a small snippet: "After my stories about making millions and losing millions, I am often asked an important question, Why do rich people go bankrupt?' I offer some of the following possibilities, all from personal experience. Reason #1: People who have grown up without money have no idea how to handle a lot of money. As stated earlier , too much money is often as big a problem as not enough money. If a person is not trained to handle large sums of money or does not have proper financial advisors, then the chances are very strong that they will either stash the money away in the bank or just lose it. As my rich dad said, Money does not make you rich. In fact, money has the power to make you both rich and poor. There are billions of people each day who prove that fact. Most have some money but they spend it only to get poorer or greater in debt. That is why today there are so many bankruptcies being reported in the best economy in history. The problem again stems from people receiving money and then buying liabilities they think are assets. In the next few years, I am certain that many of today's young or instant millionaires will be in financial struggle because of their lack of money management skills. Reason #2: When people come into money, the

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Why the Rich go broke......R. Kyosaki

emotional euphoria is like a drug that boosts your spirits. My rich dad said, When the money high' hits, people feel more intelligent, when in fact they are becoming more stupid. They think they own the world and immediately go out and start spending money like King Tut with tombs of gold. My tax strategist and CPA, Diane Kennedy once said to me, I have been an advisor to many rich men. Just before they go broke after making a ton of money, they tend to do three things. One, they buy a jet or big boat. Two, they go on safari. And three, they divorce their wife and marry a much younger woman. When I see that happening I begin preparing for the crash. Again, much like reason number one, they buy liabilities or divorce an asset, which then creates a liability, and then they marry a new liability. They now have two or more liabilities. Reason #3: When you have money certain friends and relatives tend to become closer. The hardest thing for many people is to say no to people they love when they ask to borrow money. This has not happened to me, but I have seen many families and friendships break up when one person suddenly becomes rich. As rich dad said, A very important skill in becoming rich is to develop the ability to say no' to yourself and the people you love. The people who come into money and begin buying boats and big houses are not able to say no to themselves, let alone their family members. They end up further in debt, just because they suddenly had a lot of money. Not only do people want to borrow money from you when you have money, banks want to lend you more money. Which is why people say, Banks lend you money when you don't need it. If things go bad, not only do you have trouble collecting the loans you made to friends and relatives, the banks then have trouble collecting from you. Reason #4: The person with money suddenly becomes an investor with money, but without education and experience. Again, this goes back to rich dad's statement that when people suddenly have money they think their financial IQ went up also, when in fact it has gone down. When a person has money, they suddenly begin receiving phone calls from stockbrokers, real estate brokers, and investment brokers. Rich dad also had a joke about brokers, The reason they are called brokers' is because they are broker than you. My apologies to any brokers who are offended, but I think my rich dad's stockbroker is the one who told the joke to him originally. I had a friend of my family who came into a $350,000 inheritance. In less than 6 months all that money was lost in the stock market, not to the market but to the
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Why the Rich go broke......R. Kyosaki

broker that churned the suddenly rich person who thought that money made him more intelligent. For those who do not know what churning means, it is when the broker advises the person to buy and sell regularly, so the broker makes the commission on each buy and sell. This practice is frowned upon and severe fines are levied if brokerage houses find their brokers involved in this practice . . . yet it does happen. As stated at the start of this book just because you meet the qualifications of an Accredited Investor, simply a person with money, does not mean you know anything about investing. In today's heated stock market, many companies are investing as foolishly as individuals are. With so much money in the market, many companies are running around buying other companies they hope are assets. In the industry it is often called M&As, or mergers and acquisitions. The problem is, many of these new acquisitions can become liabilities. Often the big company that bought a small company ends up in financial trouble. Reason #5: The fear of losing increases. Many times a person with a poor person's outlook on money has lived a life being terrified of being poor. So when the sudden wealth hits, the fear of being poor does not diminish, in fact it increases. As my friend who is a psychologist for professional day traders says, You get what you fear. That is why so many professional investors have psychologists as part of their team, at least that is why I have one. I have fears like everyone else. As stated earlier , there are many ways to lose money other than through the investment markets. Reason #6: The person does not know the difference between good expenses and bad expenses. I often receive a phone call from my accountant or tax strategist saying, You have to buy another piece of real estate. In other words , I have the problem of making too much money and I need to invest more money in something like real estate because my retirement plan cannot take any more money. One of the reasons the rich get richer is because they buy more investments by taking advantage of the tax laws. In essence, money that would have been paid in taxes is used to buy additional assets, which provide a deduction against income, reducing the taxes due, legally. The tetrahedron illustrated earlier is to me one of the most important diagrams for wealth creation as well as keeping and increasing the wealth created. When I show people the diagram, I am often asked why expenses are part of the structure. The reason is because it is through our expenses that we become richer or poorer, regardless of how much money we make. Rich dad often said, If you want to know if a person is going to be richer or poorer in the future just
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Why the Rich go broke......R. Kyosaki

look at the expense column of their financial statement. Expenses were very important to rich dad. He often said, There are expenses that make you rich and expenses that make your poor. A smart business owner and investor knows which kind of expenses they want and controls those expenses. The main reason I create assets is because I can increase my good expenses, rich dad said to me one day. The average person has mainly bad expenses. This difference in good expenses and bad expenses was one of rich dad's most important reasons for creating assets. He did so because his created assets could buy other assets. As he said to me when I was just a kid walking along the beach looking at the very expensive piece of real estate he had just purchased, I can't afford this land either. But my business can. If you understand the tax laws available to the B quadrant, you soon realize that one of the reasons the rich get richer is because the tax laws allow the B quadrant, more than other quadrants, to spend pre-tax dollars, to build, create, or buy other assets. In fact, the tax laws almost require you to buy more investments with pre-tax dollars, which is why I receive those phone calls telling me to buy more real estate or buy another company. The E quadrant on the other hand, must often use after-tax dollars to build, create, or buy other assets. " This book is actually fun to read because he teaches with stories. Ones you can relate to. If you have not yet read this book, then either check it out from the library or buy it from a store / yard sale. No, I do not get any royalties for this, and I did not ask permission to cut/copy a portion of his book. As this is not for any of my own gain, but your knowledge, I hope I am not in violation of the USCode for putting this here. This verbiage was obtained on a free internet site that did NOT display any copywrite protections. (disclaimer done).
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Yesterda 09:36 PM

#2

Dream maker

Thank you for these reminders tdev0011. Robert

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Why the Rich go broke......R. Kyosaki

Junior Member Join Date: Dec 2011 Location: Mid-Atlantic Posts: 11 Thanks: 46 Thanked 28 Times in 6 Posts

Ki o aki i one of m fa o i e

i e .

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P3 (Ye e da )

Yesterda 09:46 PM

#3

ramos
Senior Member Join Date: Jul 2011 Location: st louis, mo Posts: 158 Thanks: 159 Thanked 194 Times in 69 Posts

G ea po I lo e Robe K. I ha e ead a lea i of hi book did o ead he ne e I can' hink of he name a he momemen

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Yesterda 10:03 PM

#4

jamesoro co07
Junior Member Join Date: Sep 2011 Posts: 11 Thanks: 0 Thanked 19 Times in 6 Posts

Ab ol el a g ea po ! Thi one of he man p epa a ion e dina ian ho ld be adhe ing o!! Thank o o m ch fo hi pe inen info! Go RV!!

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Yesterda 10:10 PM

#5

DavidM
Senior Member Join Date: Jun 2011 Posts: 152 Thanks: 529 Thanked 702 Times in 84 Posts

He e' a link o he Rich Dad, Poo Dad a dio book ... h p://people alk adio.com/fo m / ...MP3&highligh =

Be

Rega d ,

Da idM
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Why the Rich go broke......R. Kyosaki

TEX (Yesterda )

Yesterday 10:29 PM

#6

Sequoia
Senior Member Join Date: Jun 2011 Location: Western Washington Posts: 447 Thanks: 633 Thanked 507 Times in 172 Posts

Robert is ver wise. Thank ou!

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Yesterday 11:56 PM

#7 Originally Posted by DavidM

tdev0011
Senior Member

He e' a link o he Rich Dad, Poo Dad a dio book ... h p://people alk adio.com/fo m / ...MP3&highlig h= Thank ou for the link. Now I can listen while I drive.
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Join Date: Jun 2011 Posts: 151 Thanks: 36 Thanked 203 Times in 59 Posts

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