Are you ready to follow Robert Kiyosaki’s advice?
Money & You by YAP MING HUI (Saturday September 1, 2012)
I am thrilled that my last article, What
Robert Kiyosaki Didn't Tell You, garnered positive feedback. It shows that
many people are thinking about the impact Kiyosaki's work can have on their
finances.
As such, I would like to continue the
discussion about investors
taking on and managing risks (or investors being unable to manage such risks).
Kiyosaki is right to say that we must
take an active interest in
how we manage our wealth and assets.
Rising inflation and the high costs
of living are proof that we can no longer afford to be lackadaisical with our
personal finances.
That said, in a book he co-authored
with Donald Trump, Why
We Want You to Be Rich: Two Men, One Message, Kiyosaki said this: “If you do not decide to become rich, the
chances are you will become poor.” I feel that this is simply untrue: I don't think that if
you decide not to become rich, you'll be poor.
The problem is that Kiyosaki's
statement evokes fear in many people, especially the middle class. Petrified
that they are going to be poor, many take a leap of faith by either investing
aggressively in property or starting their own business.
Many people do this in the belief
that they are conforming to another of Kiyosaki's fundamental points and that
is to take on a good debt.
According to Kiyosaki, there are two types of debts: bad debts
and good debts.
Bad
debts are those taken to
finance your lifestyle and enjoyment.
Good
debts are ones taken to
fund your investments that will grow your wealth.
Naturally, Kiyosaki advocates you
taking on more good debts. However, remember that when you take on good debts,
you are also exposing
yourself to financial risks. In addition, there's no such thing as good risk or
bad risk.
So, when you take on
good debts, how much risk are you being exposed to? Also, are you ready to
manage such risks?
It is the failure to consider these
questions that have led people to follow Kiyosaki's advice with disastrous
consequences.
Those who invest in properties are
usually excited by the high possibility of becoming wealthy. However, those who
fail are often the ones who rush to take out loans from banks without giving
their actions careful thought. Unable to rent or sell these properties, many
can't service their loans and suffer financially. In some cases, their
suffering includes their mental and physical health.
I personally benefitted from
Kiyosaki's advice as it gave me the assurance and encouragement to start my own
business more than 10 years ago.
I thought it would be smooth sailing
all the way and business would pour in. After all, I had created a workable
business plan, saved enough money and believed that people wanted to know the
services offered by independent financial advisors.
In no time, I realised that starting and managing a business
wasn't going to be easy, especially when independent financial advisory
services were relatively new and unknown.
However, I was lucky because I had
the necessary support, knowledge
and experience to manage my business risks by virtue of being involved
in a business that emphasises risk management.
I was able to avoid some of the traps that people fall into when
they don't manage their risks properly.
Let me give you a real-life example:
A 28-year-old engineer is frustrated in his job. He sees his
bosses driving fancy cars and going on annual holidays to exotic places and
wonders if he'll ever be in the same financial position. He decides that the
only way to become rich is to become his own boss.
So, he quits his job and opens a restaurant. Only, he has not prepared a written business
plan, has little capital, no idea how to manage cash flow or his staff
and knows nothing
about the food and beverage industry.
After three years, he is still struggling and now borrows money from relatives
and friends to keep the restaurant afloat.
Two years later, his business has completely failed and he's declared a bankrupt.
When he falls back on the only thing he knows, which is
engineering, he's already 33-years-old and has been out of the job market for
five years. He'll be hard-pressed to find an employer willing to employ him.
If this same 28-year-old engineer
were to approach me, I would tell him to optimise what he has now to achieve
financial freedom first.
In the process, he will learn about
managing and minimising the financial risks he may be exposed to.
In particular, I would tell him to
continue working, but not give up on his dream to become wealthy and start his
own business. Then, when he's comfortable, he can take on more risks.
Planning process
The rationale behind the advice I
give this 28-year-old engineer is this:
The process of planning and preparing for a successful
business might take a few years.
What is important is that throughout
this process, he continues to have a steady source of income, thereby, reducing his mental stress and any strain on his finances.
He will also be able to invest his savings and
accumulate his wealth.
When the time comes for him to assume the risk of running a
business, at the very least, he will be financially secure.
It may appear to be a slower and more conservative
approach than Kiyosaki's, but it is, by far, a safer way to achieve wealth.
So, are you ready to follow
Kiyosaki's advice?
In a nutshell, you're ready if you
feel comfortable taking
various business and investment risks. This will mean being in a
position to manage and minimise possible stress that can come with such a move.
Naturally, it is an added advantage
if you know how to adapt
Kiyosaki's money-making ideas within a Malaysian context.
You must also be equipped with sufficient
knowledge and experience about your investments.
Most important of all is to have a back-up plan in place to
support you and your family financially in the event such money-making ventures
fail.
No doubt, this is a lot for the
average Malaysian to consider if he wants to start on the journey to becoming
wealthy.
It is possible for him to become lost
along this journey.
Bear in mind that every journey begins with a
single step and you should take that wisely.
In my new book, Set Yourself Free,
I emphasise how important it is for you to have clarity about your present
financial position. Then, by using a new tool I've created called “The Money
Matrix”, I show you how to successfully plot a safe path to wealth, with
minimum effort and risk
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