"Your home is an asset "Get a bill consolidation...
"Your home is an asset "Get a bill consolidation loan and get out of debt "Someday I'll be a vice president "When ! get a raise, I'll buy us a bigger house "Mutual funds are safe "Tickle Me Elmo dolls are out of stock, but I just happen to have one in back that another customer has not come by for yet
Many great financial problems are caused by going along with the crowd and trying to keep up with the Joneses Occasionally, we all need to look in the mirror and be true to our inner wisdom rather than our fears
By the time Mike and I were 16 years old, we began to have problems in schoolWe just began to separate from the crowdWe worked for Mike's dad after school and on the weekends Mike and I often spent hours after work just sitting at a table with his dad while he held meetings with his bankers, attorneys, accountants, brokers, investors, managers and employeesHere was a man who had left school at the age of 13, now directing, instructing, ordering and asking questions of educated peopleThey came at his beck and call, and cringed when he did not approve of them
Here was a man who had not gone along with the crowd He was a man who did his own thinking and detested the words, "We have to do it this way because that's the way everyone else does it He also hated the word "can't If you wanted him to do something, just say, "I don't think
you can do it
Mike and I learned more sitting at his meetings than we did in all our years of school, college includedMike's dad was not school educated, but he was financially louis vuitton women's handbags educated and successful as a result He use to tell us over and over again "An intelligent person hires people who are more intelligent than they are So Mike and I had the benefit of spending hours listening to and, in the process, learning From
intelligent people
But because of this, both Mike and I just could not go along with the standard dogma that our teachers preached, And that caused the problemsWhenever the teacher said, "If you don't get good grades, you won't do well in the real world," Mike and I just raised our eyebrowsWhen we were told to follow set procedures and not deviate from the rules, we could see how this schooling process actually discouraged creativityWe started to understand why our rich dad told us that schools were designed to produce good employees instead of employers
Occasionally Mike or I would ask our teachers how what we studied was applicable, or we asked why we never studied money and how it workedTo the later question, we often got the answer that money was not important, that if we excelled in our education, the money would follow
The more we knew about the power of money, the more distant we grew from the teachers and our classmates
My highly educated dad never pressured me about my grades But we did begin to argue about moneyBy the time I was 16, I probably had a far better foundation with money than both my mom and dad I could keep books, I listened to tax accountants, corporate attorneys, bankers, real estate brokers, investors and so forth My dad talked to teachers
One day, my gucci bag replica dad was telling me why our home was his greatest investmentA not-too-pleasant argument took place when I showed him why I thought a house was not a good investment
The following diagram illustrates the difference in perception between my rich dad and my poor dad when it came to their homesOne dad thought his house was an asset, and the other dad thought it was a liability
I remember when I drew a diagram for my dad showing him the direction of cash flow I also showed him the ancillary expenses that went along with owning the homeA bigger home meant bigger expenses, and the cash flow kept going out through the expense column
Today, I am still challenged on the idea of a house not being an assetAnd 1 know that for many people, it is their dream as well as their largest investmentAnd owning your own home is better than nothingI simply offer an alternate way of looking at this popular dogmaIf my wife and I were to buy a bigger, more flashy house we realize it would not be an asset, it would be a liability, since it would take money out of
our pocket
So here is the argument I put forthI really do not expect most people to agree with it because a nice home is an emotional thing And when it comes to money, high emotions tend to lower financial intelligence 1 know from personal experience that money has a way of making every decision emotionalWhen it comes to houses, I point out that most people work all their lives paying for a home they never own In other words, most people buy a new house every so many years, each time chanel ceramic watches incurring a new 30-year loan to pay off the previous oneEven though people receive a tax deduction for interest on mortgage payments, they pay for all their other expenses with after-tax dollarsEven after they pay off their mortgageMy wife's parents were shocked when the property taxes on their home went to $1,000 a monthThis was after they had retired, so the increase put a strain on their retirement budget, and they felt forced to move
4 Houses do not always go up in value In 1997, I still have friends who owe a million dollars for a home that will today sell for only $700,000The greatest losses of all are those from missed opportunities If all your money is tied up in your house, you may be forced to work harder because your money continues blowing out of the expense column, instead of adding to the asset column, the classic middle class cash flow patternIf a young couple would put more money into their asset column early on, their later years would get easier, especially as they prepared to send their children to collegeTheir assets would have grown and would be available to help cover expensesAll too often, a house only serves as a vehicle for incurring a home-equity loan to pay for mounting expensesIn summary, the end result in making a decision to own a house that is too expensive in lieu of starting an investment portfolio early on impacts an individual in at least the following three ways:


1Loss of time, during which other assets could have grown in valueLoss of additional capital, which could have tiffany silver been invested instead of paying for high-maintenance expenses related directly to the homeToo often, people count their house, savings and retirement plan as all they have in their asset columnBecause they have no money to invest, they simply do not investThis costs them investment experience Most never become what the investment world calls a "sophisticated investor And the best investments are usually first sold to "sophisticated investors," who then turn around and sell them to the people playing it safeI am not saying don't buy a houseI am saying, understand the difference between an asset and a liabilityWhen I want a bigger house, I first buy assets that will generate the cash flow to pay for the house
My educated dad's personal financial statement best demonstrates the life of someone in the rat race His expenses seem to always keep up with his income, never allowing him to invest in assetsAs a result, his liabilities, such as his mortgage and credit card debts are larger than his assets The following picture is worth a thousand words:

Educated Dad's Financial Statement

Income=Expense
Asset < Liability

My rich dad's personal financial statement, on the other hand, reflects the results of a life dedicated to investing and minimizing liabilities:

Rich Dad's Financial Statement

Income > Expense
Asset > Liability

A review of my rich dad's financial statement is why the rich get richerThe asset column generates more than enough income to cover expenses, with the balance reinvested into the asset cartier mens watch roadster co