Tag: Increase Your Financial IQ

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Increase Your Financial IQ Book Review – Part 5: Improving Your Financial Information

Today, you will learn Financial IQ #5 – Improving Your Financial Information.  This article is the last part of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter With Your Money.

To read parts 1 to 4 of the book review, you can checkout the following links.

Increase Your Financial IQ Book Review – Part 5: Improving Your Financial Information

Information is the most important asset you can have.  For soldiers in the midst of war, using the information they have against their enemies determines whether they will live or die. 

Information is the key to Manny Pacquiao’s victory against the likes of Oscar De La Hoya, Ricky Hatton and Miguel Cotto.  Freddie Roach, his coach, is without a doubt a master strategist.  He is great at identifying the smallest weaknesses of Pacquaio’s opponents and skillfully using those to draw up a game plan for Pacquaio to win each of his fights. 

Today, leveraging the power of information can make you very rich.  Young twenty-year olds have proven that.  Armed with only their dreams and technology, they have built up Facebook, You Tube and My Space and became billionaires. 

The Four Ages of Humanity

  1. Hunter-Gatherer Age
    • Nature provided the wealth. 
    • There’s only one group – everyone is poor.
  2. Agrarian Age
    • Land became wealth. 
    • There are now 2 groups of people:
      • The rich kings and queens who own the lands, and
      • The poor peasants.
  3. Industrial Age
    • People who own the biggest factories, skyscrapers and industries are the new rich. 
    • There are now 3 groups of people:
      • The rich owners of industrial companies
      • The middle class who work for those companies
      • The poor who are still caught up in the Agrarian & Hunter Gatherer age.
  4. Information Age
    • The new super rich are 20 something kids who leverage information to become billionaires
    • There are now 4 groups of people:
      • The super rich – young billionaires leveraging information.
      • The rich who are still struggling to bring their industrial companies to the new information age.
      • The middle class who are now working as employees to more and more companies of the rich and the super rich.
      • The poor who are clueless how they can use technology to become rich.

According to Robert Kiyosaki, a lot of people are struggling today because they are clinging to the Hunter-Gatherer, Agrarian and Industrial Age ideas.  They are “perishing because of obsolete or inadequate information.” They still think having a safe secure job with great benefits is a good idea.  The good news for you is that you don’t have to be like them. You can become rich just by having the “right information.”

Tips on Classifying Information to Become Richer

  1. Facts vs Opinions
    • Know the difference between facts and opinions. 
    • Many people think investing is risky because they don’t know if they are basing their investment decisions on opinions or facts
  2. Insane Solutions
    • Acting on insane solutions is risky.
    • If your investment decision is based on an opinion, it can lead to your financial ruin.
  3. Risky Actions
    • A person who invests for capital gains is investing on an opinion.
    • A person who invests for cash flow is investing on a fact.
    • A smart investor uses both opinions and facts to invest for both capital gains and cash flow.
  4. Control Over the Asset
    • Most people investing in paper assets have very little control over their investments.
    • These investors are hoping their opinions turn into facts – which is very risky.
  5. What are the Rules?
    • Know the rules of money.  Knowing the rules gives you valuable information on how to play the money game.
    • Without rules, there is chaos, and your assets would decline in value.
  6. Trends
    • A small investor with superior information and intelligence about local and global markets can beat the giants who rely only on international information
    • Know and invest with the trend.  The trend is your friend.
    • Robert Kiyosaki says “Financial intelligence is the ability to take information and make it meaningful.”

Rich Money Habits Review Notes:

Today, more than ever, you need the right information.  Information can make you rich or poor.  With the right information, anyone can become rich. The only problem is that in a rapidly changing world, the old ideas of yesterday may no longer work today.  That’s why it is very important to continue to learn and be discerning of the information you receive, always making sure if your decision is based on facts or opinions.

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Bonds Books Business Credit Card Investing Money Mindset Mutual Fund Stocks

Increase Your Financial IQ Book Review – Part 4: Leveraging Your Money

Today, you will learn Financial IQ #4 – Leveraging Your Money.  This article is part 4 of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money.

To read parts 1 to 3 of the book review, you can checkout the following links.

Increase Your Financial IQ Book Review – Part 4: Leveraging Your Money

According to Robert Kiyosaki, leverage, in its simplest terms, is basically “doing more with less”.  It could be in the form of leveraging other people’s money like acquiring a loan for your house. It could be leveraging other people’s time by hiring employees for your business.  Or it could be leveraging technology like putting up an online store to reach out to more people, 24 hours a day, 7 days a week.

Things to note when applying leverage:

  1. There are many types of leverage: leverage of debt, leverage of financial intelligence, leverage of technology and more
  2. Most investors have little control over their investments such as savings, stocks, bonds, mutual funds, index funds.  Without control, the investment becomes risky.
  3. Higher returns does not mean higher risk.  The key to minimizing risk is applying financial intelligence.
  4. Most financial advisors are sales people – NOT investors.
  5. To gain control of your investments, you need to take control of your own financial education.
  6. Leverage can work in two ways – it can work for you, or work against you
  7. Warren Buffet, the second richest man in the world, says “diversification is a protection against ignorance.”

Investing for capital gains vs investing for cashflow

Some people invest only for capital gains.  Their motto is “buy low, sell high”.  When you purchase a house for PHP 1 Million in the hope that you can sell it for PHP 5 Million after a few years, you are investing for capital gains.

Others invest only for cash flow.  They want to receive a steady fixed amount of income every month.  When you invest in Retail Treasury Bonds and receive a regular interest earnings, or invest in stocks that give dividends, you are investing for cashflow.

To invest for both capital gains and cashflow, you need to increase your financial intelligence so you can control the investment and increase its value at the same time provide a steady stream of income for you.

More tips on taking the first step to apply leverage

  1. Don’t let your problem of not having enough money stop you from becoming rich.  Take that first step, make mistakes.  Continue learning even if you fail. The experience will increase your financial intelligence.
  2. Start small and take baby steps.  Take the time to read books, attend seminars and learn from great financial mentors before you invest.
  3. Dream BIG.  Instead of living below your means, let your BIG dreams inspire you to learn and invest carefully to allow you to magnify your income and go beyond your means.

Rich Money Habits Review Notes:

Leverage is a very powerful tool.  But it can work both ways.  It can make you money or it can work against you. Be careful. I experienced the other side of leverage when I got into credit card debt.  To know how I managed to pay for it, you can read my personal finance story.


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Books Business Investing Money Mindset Personal Finance

Increase Your Financial IQ Book Review – Part 3: Budgeting Your Money

Today, you will learn Financial IQ #3 – Budgeting Your Money.  This article is part 3 of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money.

To read part 1 and part 2 of the book review, you can checkout the following links.

Increase Your Financial IQ Book Review – Part 3: Budgeting Your Money

After learning to make more money and finding out ways to protect your money, you next need to learn how to budget your money for maximum utilization.

According to the book, a budget is a plan to coordinate your most important resources (such as money and time) and expenditures.  There are 2 kinds of budgets:

  • Budget deficit
    • excess of spending over income
    • you spend more than you earn
  • Budget surplus
    • excess of income over spending
    • you earn more than you spend

The reason most people are poor is because all their lives, all they’ve known is not having enough money, hence, they only have a plan for “budget deficit”.   They have never experienced having more money than they could ever expect to spend.  They think only lottery winners, corrupt politicians, or greedy businessmen can have a “budget surplus”.   The key to having a budget surplus is realizing that it is possible for you to have it.

There are 2 ways to generate a budget surplus:

  1. You can apply Financial IQ # 1 to make more money, thereby increasing your income, or
  2. You can cut expenses, and reduce your spending.

Both strategies will tip the equation to your favor such that your income will be greater than your expenses and you create that extra cash a.k.a. “budget surplus”.

Most people and businesses only know how to cut expenses, especially in these times of financial uncertainty.  But you can only do so much in terms of cutting expenses without sacrificing your mental, emotional and physical health.  You don’t need to starve yourself to create a budget surplus. If you apply Financial IQ # 1 – make more money, you can stretch the other side of the equation and achieve the same thing.  The same applies to business. A business without sales is NOT a business. So aside from minimizing the costs of your business, you also need to learn to sell more and boost your income!

Robert Kiyosaki offers 4 tips to plan for a budget surplus:

  • Budget tip #1 – A budget surplus is an expense
    • Make spending for budget surplus a priority
    • Pay yourself first, even when income is less than your expenses
    • Use the pressure of not having enough money to think of ways on how to generate that extra cash
  • Budget tip #2 – The expense column is the crystal ball
    • Discover what you’re spending on, and you will know if your plan is working to give you a budget surplus or a budget deficit
    • Robert Kiyosaki’s Rich Dad says, “you can tell a person’s future by looking at what they spend their time and money on.”
  • Budget tip #3 – My assets pay for my liabilities
    • Instead of using your hard-earned money to pay for your liabilities like a car or a flat screen TV, make that money work for you by using it to build assets and use the income from those assets to pay for your car or your flat screen TV.
  • Budget tip #4 – Spend to get rich
    • Know when to spend and when to cut back.  Most people only know how to cut back.  Spending wisely to grow your money is a harder skill to master.
    • Learn to do more with less and use the pressure to become smarter in making more money

Rich Money Habits Review Notes:

  • Budgeting is boring.  That’s what most people say.  However, it is one the most important rich money habits that you will have to learn.  A budget is like a map.  The only way to get to your destination is to know where you are right now, and use your plan to discover how to get to where you want to be.
  • Consciously working on your money habits is a life-long process, and it starts with taking care of the resources that you have – that is budgeting your money and time.  What others don’t realize is that we all have 24 hours in a day.  Some people multiply their impact by providing livelihood to thousands of people and generating more money not only for themselves but for the whole community.  Others just sit around all day never doing anything to make their lives easier.  To me, it is not a question of do we need to budget or not.  It is a matter of realizing that to live your life to the fullest, you need to make the most of what you have.
  • Be patient.  The problem of TV shows is that everything is fast.  Yesterday a child was born. The next day he’s already a teenager.  The next week he himself is already having his own kid.  Life is not a TV show.  It is a series of small steps earned each day.  So have a plan and learn to adjust that plan along the way.  As Robert Kiyosaki says “take it one day at a time.”

P.S. You’ve just read part 3 (Financial IQ #3: Budgeting Your Money) of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money.  How about you? How are you budgeting your time and money today?

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Books Business Credit Card Money Mindset Personal Finance

Increase Your Financial IQ Book Review – Part 2: Protecting Your Money

Today, you will learn Financial IQ #2 – Protecting Your Money.  This article is part 2 of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money.  To read part 1 of the book review, you can checkout Increase Your Financial IQ Book Review – Part 1: Making More Money.

Increase Your Financial IQ Book Review – Part 2: Protecting Your Money

In the first part of the book review you’ve learned that to earn more money, you must learn to solve money problems.  Once you have learned to solve problems and earn some money, the next thing you need to do is to protect that money from what Robert Kiyosaki calls “financial predators”.  Real world predators do not always look the part. Sometimes, they are ordinary people with well-meaning intentions.  Their job is to “legally” take money from your pocket…and your job is to “legally” have them take as little as possible.

According to the book, there are 7 financial predators you need to protect your money from.  They are:

  1. Bureaucrats who legally take money from you through “taxes”
    • Taxes are your single largest expense
    • Know which type of income you’re earning money from and paying in taxes
      • Earned Income – salary, commission, etc
      • Portfolio Income – income from paper assets such as interests, dividends, etc
      • Passive Income – royalties, rental income from real-estate, licensing, etc
  2. Bankers who legally take money from you through “fees”
    • Banks and credit card companies charge you with all kinds of fees, some of them you or your company might not even be aware of
    • For every dollar you have in the bank, the bank can lend out twenty dollars to your credit card.  The bank pays you 5 percent for one dollar and makes 20 percent on twenty dollars.  That is how banks make money.
  3. Brokers who legally take money from you through “commissions”
    • Look for brokers who are students of their profession and invest in what they sell
      • For real-estate brokers, ask them how many properties they are invested in.
      • For stock brokers, ask them which stocks they personally invest in.
    • “Good” brokers make you rich, “bad” brokers make you poor.  Build a relationship with “good” brokers.
  4. Businesses who legally take money from you through “profits”
    • Buy products that make you rich
    • Poor people buy products that make them poor, paying them for years with a very high interest rate
  5. Brides and Beaus who legally take money from you through “alimony/marital asset split”
    • Get a prenuptial agreement before you marry
    • Think of your exit plan before you enter into the agreement
  6. Brothers-in-law who legally take money from you through “inheritance or financial wishes”
    • Consult an estate planning specialist to plan your exit
    • Use legal vehicles such as wills & trusts to protect your wealth from death predators
  7. Barristers who legally take money from you through “court & legal fees”
    • Hold assets of value in legal entities instead of your own name
    • You must buy insurance before you need it…not the moment you need it.

Rich Money Habits Review Notes:

  • Protecting your money is like plugging holes.  You first need to be aware what the holes are before you can actually plan on fixing them to stop the cash from flowing out.
  • Learning to protect your money is a never ending process as the rules regularly change.  The ways to protect your money yesterday may no longer be able to protect your money today or tomorrow.
  • Protecting your money reduces your expenses. The more money you keep, the more money you can utilize for productive endeavors.

You’ve just read part 2 (Financial IQ #2: Protecting Your Money) of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money.  How about you? How are you protecting your money today?

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Books Business Investing Money Mindset Personal Finance

Increase Your Financial IQ Book Review – Part 1: Making More Money

Every month at Rich Money Habits, we will take a deeper look at some of the best business, personal finance and investing books out there.  For this month of November, we will feature Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money.  This article is part 1 of the book review which digs deeper into Financial IQ #1 – Making more money.

Increase Your Financial IQ Book Review – Part 1: Making More Money

The book starts by asking the fundamental question:

“Does money make you rich?”

Take a moment to answer that question.

Do you think money will make you rich?  Do you think winning millions of dollars from lottery will make you rich?  How about having a high-paying job from a lucrative profession like doctors, or lawyers, or IT professionals?  Does having a lot of money make you rich?

Many people have heard stories how instant millionaires lost their millions after a few years. Or how someone who was once rich and famous had his house foreclosed.  Or how a high-paying manager begged for his job back because he can no longer afford the lifestyle that he once had.

If not money, what then makes you rich?  According to Robert Kiyosaki,

“…it is not real-estate, stocks, mutual funds, businesses, or money that make you rich.  It is information, knowledge, wisdom, and know-how, a.k.a. financial intelligence, that makes one wealthy.”

What is Financial Intelligence?

Robert Kiyosaki describes Financial intelligence as that part of our mental intelligence we use to solve our financial problems. Financial IQ, on the other hand, is the measure of that intelligence.

What money problems do you have?  Are you having the problem of “not having enough money”? Are you

  • using your credit card whenever you’re short on money?
  • constantly worrying about the rising cost of living?
  • paying more in taxes after an increase in income?
  • afraid of emergencies?
  • receiving bad financial advice?
  • waiting for the next paycheck to pay for last month’s rent?

While the rich do not have these problems, they too have their own money problems – “too much money”.  Some of these are

  • needing to keep their money safe and invested
  • not knowing whether people like them or their money
  • looking for smarter financial advisors
  • raising spoiled kids
  • worrying about estate and inheritance planning
  • looking for ways to “legally” avoid paying excessive government taxes

Which problems would you rather have?

The 5 basic Financial IQs

According to Robert Kiyosaki, you need to learn the 5 basic Financial IQs to solve your money problems.  These are:

  1. Financial IQ #1: Making more money
  2. Financial IQ #2: Protecting your money
  3. Financial IQ #3: Budgeting your money
  4. Financial IQ #4: Leveraging your money
  5. Financial IQ #5: Improving your financial information

Financial IQ #1: Making more money

How do you make more money?  The key according to Robert Kiyosaki is to “solve problems”.  People will gladly pay you money if you solve their problems.  I know I’ll be more than happy to pay you money if you can fix my broken LCD TV at a reasonable price. Would you gladly pay your doctor if they solve your ailing stomach? Would you pay your financial advisor if they can make you more money than what you pay them?  Or how about paying your “star” employees “millions” whenever they bring you “billions” in income?

Solve people’s problems and make more money.  As the famous quote from Zig Ziglar says

You can have everything in life you want, if you will just help enough other people get what they want.

Which problems do you want to solve?

Which problems do you want to solve?

Do you want to solve the problem of “hunger” by providing quality meals at an affordable price.  That’s what a lot of food businesses are doing.  Or do you want to solve the problem of “not having enough time to eat”.  That’s what the fast and “instant” food delivery businesses are trying to solve.

What are you naturally good at? Perhaps you can use any of your skills to solve other people’s problems.

Are you good in math?  Be a great financial analyst or an accountant and help people and businesses solve their financial or tax problems.

Do you like speaking to people?  Become a powerful speaker.  Share your message by leveraging your highly sought after skill of public speaking.  Inspire people to take action and solve their problem of a dull and boring life.

Do you love making great movies?  Learn to be a great director or a movie producer.  People will pay you to entertain them because you are solving their problem of “not having fun”.”

Solving problems is a process

The key according to Robert Kiyosaki is realizing the fact that problems will never go away.  After you solve a problem, another problem will come up.  Only in this process of solving problems one after the other will you gain financial intelligence.

You have to go through the process of solving whatever money problems you are facing right now.  Don’t run from it.  Face it head on.  Use your mind to think of ways on how to solve your money problem.  As Robert Kiyosaki’s Rich Dad says,

“You can quit when you win, but never quite because you’re losing.“

The reason instant millionaires end up poor after winning the lottery is because they want only the money but not the process of learning how to build their wealth.  This is the same thing as people wanting to get paid more than the value they are providing.  Their greed is making decisions for them.  Some people even claim that “greed” has caused the current financial crisis that we are in right now.

The other side of the coin is also dangerous – fear.  Don’t let fear hold you back.  Enjoy the process of learning.  Feel the fear and face it head on. This is the same reason why employees would rather gladly receive the small steady paycheck than take a chance at building their own fortune.  Take a leap.  Live out your dreams.  As Hellen Keller says,

“Life is either a daring adventure or nothing.”

Rich Money Habits Review Notes:

  • What I liked about the book is that it offers other (unconventional) ways to think about money.
  • The book is not about financial advise, so it does not discuss any “how to” details on investing in real-estate or businesses.
  • There are a lot of strong comments about the book so it is NOT for everyone.  My hope is that after reading the rest of the book review in the coming weeks, you’ll pick up a thing or two to help you with your money problems.

You’ve just read Rich Money Habits’ review of Robert Kiyosaki’s Financial IQ #1 – Making More Money.  Now, go out, solve problems and start making more money! 🙂