Tuesday, March 13, 2007

Rich Dad didn't work for me

My dear readers, I'm glad you're still around. You can tell the difference between when I'm writing cheese and when I'm writing fact. This story is real.

I'm not superhuman. I cannot jump over tall buildings or dodge bullets. I'm just a normal guy working a normal job, although a job I actually enjoy doing at a company that treats me great and has good benefits. I do have a brother who was a tenth of a second from making the Olympics and I myself am a pretty good athlete, although not good enough to go pro. That's it. That's me. A guy sitting at a desk with a strong work ethic who likes telling jokes and loves sports.

Several years ago, when I first started blogging, I told you I've been following Robert Kiyosaki's Rich Dad advice. Some of you warned me against it, but I failed to listen. I do thank you for telling me the truth, it's my fault I had my ears closed.

So now looking back, everything I did was wrong. Before doing it his way, I worked hard at the job I went to college for, invested conservatively for the long-term, and made a lot of money. I took a lot of that money and re-invested it into other things after reading the Rich Dad books, namely real estate.

Rich Dad talked about assets vs liabilities. So I ran the numbers, bought three properties, and everything looked good. Right? Wrong. It's not easy like it is in the books.

Bad tenants destroying your properties take a positive cash flow and turn it into a negative cash flow. He didn't say that. Or that tenants skip out without telling you, or don't pay you period until you have to forcibly evict them.

Meanwhile, my buddy didn't read the books and did the opposite of what he was supposed to do by the books. He bought houses with huge negative cash flows and worried profusely how he would pay for them. This is exactly what Kiyosaki tells you NOT to do. Well, he timed the market right and turned out to be wealthy. Now, he's living in a million dollar house and I'm renting from him (and renting out our final house to people who have a long history of paying rent and not destroying homes).

Luckily for us, I didn't entirely listen to Kiyosaki. He says that 401k's and mutual funds are bad investments and the stock market will crash in 2010 when the Baby Boomers start to retire. We'll see. If he's right, I'll ride it out. The S&P 500 over the past 90 years went up around 10% a year or more. Sometimes it drops 20%, sometimes it goes up 30%. It's all good because over any given long period of time, it averages over 10%. So I simply have my 401k mostly invested in the S&P 500 index.

I did some research and found out that you were right. Kiyosaki is a fraud. There never was a Rich Dad, and the whole series started making money as a marketing tool for Amway (which changed its name to something like Quick something). Not only that, he's not super rich and in fact has a net worth a dozen times less than he's claimed. He is a millionaire though, but that's because of the books. He's never been a successful businessman nor investor.

So, don't be stupid like me kids. Stay in school, finish it. Buy a home and live in it. Invest wisely. Don't get divorced (divorce is one of the top killers of wealth) and don't spend your money on stupid shit. Follow that advice, the advice my retired father gave me, and you'll be rich.

Unfortunately for me, I listened to the wrong Dad when I was making a boatload of money. My father's retired. Kiyosaki's still working. They're about the same age. Sure Kiyosaki has more money (all from his book sales) but my Dad is happy. I sincerely doubt Kiyosaki is.


As for 300, I told you all I'd do a review, but I sold it and no longer have exclusive rights to it. I gave it a 9 dead zombies out of 10. It's Frank Miller at his best, better than Sin City. Zack Snyder did a great directing job. Of course with Miller, don't expect historical accuracy and definitely don't take the kids. Very violent.


Blogger tweetey30 said...

Hi. I have to say one thing here. Well lots of things but you get the point.LOL... You know one time my husband and I when we had just started out on this journey together before we moved from my hometown in Mn. This lady came over to do a drug test or something for work. She said she had this friend that could help make us rich. LOL.. Right. Well anyway this friend came over and we went to a few meetings with them. Well guess what they were into??? LOL> AMWAY!!!!!No thank you. I suppose you could get rich with it if someone wants to listen to your crap about it but most people we told, told us to stop doing it and didnt want anything do with it or us until we stopped. Your right about those Rich Dads out there. Just to get your money. They could careless about making us rich only themselves. Well enough said. Tweets

3/14/2007 4:42 AM  
Blogger lime said...

well here's a true story about a different 'rich dad.'

this 'rich dad' was rich because he bilked every firend and family emember he could out of their life's saving. convinced them to invest it in some scam business that never existed. his family lived wuite well not knowing where the money came from. then one day it all came crashing down and the 'rich dad' went to prison.

the youngest son grew up, got married and had his own kids and spent a lot of time pining for a bigger house and newer cars and thinking there was somethign really wrong with him becuase hsi living standard wasn't what his family's was when he grew up. then his wife who grew up with a factory working, minimum wage earning single mother told him to shut up and be thankful because his family had everything they needed (even if every 'desire' was not met), and he could not realistically compare himself to his father because his father's 'wealth' was ill-gotten and the son's was honestly earned.

the end.

3/14/2007 5:17 AM  
Blogger Moni said...

Awe Zombie I'm sorry things didn't pan out for you now. That doesn't mean they won't in the future. I know it's easy for me to have a Polyanna outlook when it's not me in the situation. Well, I am in a similiar situation. I know deep down that you are a shrewd businessman. Everyone has setbacks and some "get rich quick schemes" are pretty appetizing.

Take care and it's going to alright. :)

3/14/2007 10:14 AM  
Blogger exMI said...

Real estate is always a risky investment. It all depends on getting GOOD renters or really being able to time market swings well so you know when to get out again. Better luck next time.

3/14/2007 12:02 PM  
Blogger tshsmom said...

I'm with Lime! I believe in quality of life, not quantity of life.
Material possessions wear out and are forgotten. Life's memories with your family last forever.
I went to a funeral last weekend. The minister's sermon was about how we ALL end up with only a nightstand and a dresser when we enter the nursing home. Do we want to fill this furniture with cash and jewels, or do we want to fill it with family photo albums, music we enjoy, and books we want to read?

3/14/2007 12:54 PM  
Blogger Notta Wallflower said...

I don't know anything about investing, so I never put my money into anything that I'm unsure of. Up until recently, I've never had a savings. The whole single parent thing sort of kills any kind of savings account. :-P Right now we save up a certain amount at a time and sock it away in safe investments to save up for a down payment. We have a ways to go, but we're gettin' there.

3/14/2007 6:55 PM  
Blogger Bsoholic said...

I too agree with Lime and tshsmom - quality over quantity.

However, I do know what damage bad tenants can do to a property, having crappy roomates for a while, as well as working for a property management company. People sure can suck in that aspect.

All in all - I have no real point to make that hasn't already been made.

You'll recover though, no doubt.

3/14/2007 8:54 PM  
Blogger S.M. Elliott said...

Whoa, thanks for writing this. Now Rich Dad is goin' on my hoax blog soon...I was always suspicious of those books, because my first exposure to them was through my ex's flirtation with (you guessed it) AMWAY.

I've always thought you have to be slightly screwy to be successful in real estate. All the rich landlords I've met are...well...nuts.

And lime's right: oodles of the Rich Dads out there are also White-Collar Criminal Dads.

3/14/2007 9:31 PM  
Blogger S.M. Elliott said...

This comment has been removed by the author.

3/14/2007 9:32 PM  
Anonymous Anonymous said...

Lime's comment is sobering.

Timely, sage advice MR. ZS. We're in the market for a small home in Maine... a rental now, a landing place spot for later. The good news is that we could handle the payment, even if it sat empty. We'll see... we've never been very adventurous with our cash... never "leveraged" anything... took my dad's advice, which is essentially good advice, which is your advice in the post. Our household would represent the results of your current phinancial philosophy.

Thanks also for inspiring me to write about my dad's wisdom.

P.S. The missuss and I are pretty regular in SF, now that our little girl is in Pacific Heights. Perhaps I can buy you a beer some time.

3/15/2007 5:58 AM  
Blogger Sadie Lou said...

Bad tenants destroying your properties take a positive cash flow and turn it into a negative cash flow. He didn't say that. Or that tenants skip out without telling you, or don't pay you period until you have to forcibly evict them.

Oh Zombieslayer. Dan and I went to a money making seminar in our town a few summers ago. The money maker was real estate. The speaker was a loan guy. He convinced us that the more assets you have (real esate) the more $$ you have.
He said to buy as many investments as you can with negitive amortization loans.
We slapped one on our house right away, thinking if it didn't sell, we could at least rent it out. Then we purchased our second home with a neg am loan too.
Now we're bleeding out the back end of both loans to the tune of 1,500 a month--it's eating away at our equity because we can't sell.
The tenant we got, well, you've read my "Landlord Hell" posts, right?
Our tenant will be evicted on the 29th and I'll be standing in the driveway waving at her with a shark's grin on my face.
"Thanks for making my life a living hell for three months you leech."
The light at the end of the tunnel is that Dan and I found a new loan guy and he has a very cool alternative loan progam.
Wanna look into it?
Purpose Funding and Real Estate
"Larry Goddard"
They are based in Sacramento, Ca
I swear, it's a good deal. We had my best friend's mom take a look at the good faith estimate for the refinance and she couldn't find anything wrong with it.
It's basically a way to work the lenders--you refinance every three months and Larry gives you a percentage of his rebate checks that he gets from the lenders in order to make the payments more affordable. Once you pay down your mortgage to a reasonable number, using this system, Larry locks you into a nice fixed rate loan.
No more bleeding out the back end of our loans. Now we just have to get rid of our "investment".

3/15/2007 7:57 AM  
Blogger Bridget Jones said...

Hi sweetie, oh so don't sweat it. Very sorry it didn't work out. You're one of the best and deserve to have things work well for you. Agree with Lime and Tshsmom. Have a story similar to Lime's...ends with dad at the end of life finally waking up to the reality he'd created. No not my dad but still.

You're way too great for that. Stay smart--you are, you know.

3/17/2007 1:02 PM  
Blogger something said...

That Rich Dad guy is a dbag - sorry it turned out for you that way.

I've learned there is not get rich 'thing to do' because if there was a 'thing to do' then everyone would do it. My line of work services a lot of wealthy people and I continue to be amazed at the way they make money. Very creative and hard working people. The people who just get rich quick are ones who are usually giant d-bags and they usually get what is coming to them in the end - and trust me, it isn't pretty.

Nothing beats honest hard work and some common sense.

3/17/2007 6:18 PM  
Blogger Jason said...

ZS and Sadie, I think you both got in when the Real Estate wave was already peaking. I briefly had a NegAm loan on my house but paid at least the interest amount and some principal each month guessing that my appreciation rate wasn't going to outpace the deferred interest.

The Rich Dad stuff always bothered me for the exact reasons cited in that John Reed article. I'm OK with creating an allegory to prove a point, a la Who Moved My Cheese?, but Kiyosaki crosses into James Frey territory.

I feel for both you guys. I've been on the edge of broke at times in the last year or so I know how it goes. Keep the faith!

3/20/2007 1:59 PM  
Blogger The Zombieslayer said...

Tweety - Yikes! There's probably some version of Holy Water that works on Amway people. I love how they always trick you to go to their meetings. I've been to two, tricked both times. I thought I was going to go to a party both times.

Lime - The son's a lucky man to have a good wife, one who can tell him to shutup and appreciate what he's got.

As for his father, yeah, those people usually end up in prison or worse. What goes around comes around.

Moni - Thanks, but it's actually alright now. It's just a set back.

Exmi - True words. The thing is, they keep saying how easy it is and give us no detail about what you really have to deal with.

Tshsmom - Do we want to fill this furniture with cash and jewels, or do we want to fill it with family photo albums, music we enjoy, and books we want to read?

Definitely family photo albums, music, and books. I currently own zero jewels, not even a watch. I just don't see the need for personal items, besides of course guitars, cds, my amplifier, a laptop, a notebook to write on, and drawing pads and good quality pencils. You'd be surprised how barren we live. I'd rather enjoy my time outdoors.

Notta - Good luck with the down payment. Those are hard to come by where you live. Most folks are priced out of that area. But yeah, being a single earning family is tough, so I imagine a single parent is even tougher.

Bsoholic - Yikes. I'd probably hate the human race if I worked for a property management company.

SME - Yeah, it should have tipped me off that the person that gave me the book is from that new Amway, quick something or other.

Bo - Maine is definitely safe from zombies. Send me an email at zombieslayer@pretentiouscritics.com when you'll be in town.

Sadie - I remember those posts. Scary stuff. We'll be down to one house by the end of next month, and our goal is to pay it off so we won't be refinancing.

I'm sure that guy made a fortune from the seminars. It was probably a sales pitch for him too.

Neg Am loans are scary. My landlord used them successfully, but it requires perfect timing of the market. Time it wrong and some folks who have them are looking at bankruptcy.

Bridget - Thanks, but we're actually doing fine. We learned our lesson that the way to make money is the old fashioned way - earn it.

Joe - Well said. Yeah, one of my landlord's friends makes $250k a year, works 70 hours a week, and is miserable. I make considerably less and have time to spend with my family. Wife and I go on dates at least once a week, and I'm working on my son's sports skills to get him ready for high school. Time to me is more important than money.

Jason - Kiyosaki is the James Frey of investing.

3/20/2007 9:23 PM  
Blogger S.M. Elliott said...

"Quixtar". Don't even get me started. I did one or two posts on Amway ages ago and I STILL get snarky anon messages from Quixtar IBOs. I think I called Amway "the part-time job that steals your soul", or something along those lines.

3/21/2007 2:29 AM  
Blogger tweetey30 said...

We went to one meeting and then set one up in our home but no one showed up and then we finally told the lady we just didnt have enough people to support us so we quit. Scams are all on the lot of this. I hate when people do that. But we are happy now. We will be able to refinance our house in July and get a lower house payment out of this. Hopefully. LOL.

3/21/2007 6:55 PM  
Blogger The Zombieslayer said...

SME - Quixtar. That's it. I knew it was Quick something. Friends do not let friends join Quixtar.

Tweety - Good luck with the refi. I've done one once and cancelled another. Make sure you run the numbers.

3/24/2007 4:21 PM  

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