(upbeat tempo)
- So welcome back its Robert Kiyosaki
with my dear friends' daughter here Alexa.
And we're talking about Millenials and money,
and we gone through some lessons.
I don't know how many more,
but let's continue on with another lesson here.
And so we were talking about you know
assets and liabilities, right?
- Yes.
And when you read Rich Dad Poor Dad
I said your house is not an asset what did you think?
- Well, I think that's a conception
that many people believe,
but as you demonstrated the last seminar
that we went to in Argentina.
My mom had her properties and she
converted them into assets.
Correct.
- I think it just depends on what you do with it
and it would be great if you could show us
how to turn your house into an asset.
It's very its really fundamentals.
If I could go back I probably covered it earlier,
(marker rattling)
but it's a crucial question and this is what
financial education and financial literacy really is.
Again it starts with the financial statement and I would say
probably 95 percent of all college graduates don't know what
a financial statement is.
You took an accounting course right?
- Yeah, I did.
I know you go through parts of this,
but I say to young people like you there's six basic words
to financial literacy and financial education.
And the six words again are income,
expense, asset, liability.
See I don't really care about my FICO score
a fico score just basically registers
are you trustworthy with borrowing money,
but a bank will never sel.
I borrow in the hundreds of millions of dollars.
(chuckling)
A fico score not gonna get me there okay.
It's so it's kind of a ruse I mean I don't its,
it's important but not for me.
So these are the four words income, expense,
asset, liability.
Then the last two words are the words cash flow.
And that's, why the game is called cash flow
(marker squeaking)
and the secret to being rich is not a college education,
but can you control cash flow.
And this is what cash flow in looks like.
So this here you need this
income, expense, asset, liability.
(marker squeaking)
Again this is you get a job and this is my poor dad,
go to school, get a job, get your PHD.
And so this here is cash flow so income comes in
and it goes out this way.
First line of expense is tax,
but this is a poor persons cash flow pattern.
It's not how much money you make most people
you know they.
I don't care if you what you have a Ph.D.
or no school at all.
They can't control the cash flowing out
through their expenses so that's,
why people like Susie or men say
cut up your credit cards, live below your means
cause you're a spend-a-holic.
So that's a poor person.
This is a middle-class persons cash flow patterns
and this is where the house comes in.
They, first thing you know most kids do
when they get pay raise and all that
they buy themselves a bigger house,
now my house is an asset.
Who tells you that?
Your real estate agent of course!
- Yeah.
(Alexandra giggling)
Right cause they they want to give you
this false sense of security while you're getting screwed.
- Exactly.
Ya know but when you look at what happens with the house
a personal.
I mean a personal residence that I live in
the money comes in it goes out and this is middle class,
but also goes out through a mortgage.
Mortgage payments, oh but I don't have a mortgage.
You still have taxes you still you know.
Hawaii just raised the property taxes on me.
Which is probably why I'm gonna sell.
I'm gonna get out of Hawaii,
but you have taxes and you have upkeep
so monies always flowing out.
So that's why your house is not an asset it's because
its taking money from your pocket.
So very simply said assets put money in my pocket,
liabilities take money from my pocket.
And then this here is,
so I'm not saying don't buy a house
but here is a house that.
And I started when I was 25 bought my first house
it was an apartment with an investment property.
I didn't live in it, I rented it out
and it put money in my pocket.
So very simple the definition of asset and liability
is not the house or this, its cash flow.
Where is the cash flowing?
So as a young person
(Robert coughing)
and to all millennials or if you're old
financial intelligence is the ability to control cash flow.
And that's what they don't teach you at school.
They tell you to go to school,
get a job.
First thing is tax you know,
you'll pay most of your money will go out through taxes,
in your lifetime.
Then they tell you to buy a house, a car.
Cars an asset, no cars a liability.
You got insurance, gas, upkeep, and all this.
Now if you buy a, a taxi car it could be an asset,
its cash flow.
And that's very simply it,
so this is a poor person.
Money goes out there's a lot we,
we just interviewed some national football league players
who make millions of dollars in their 20s.
And most of them are broke in two years
because they can't control cash flow.
Intelligence IQ is can you control cash flow
not your college degree.
College degrees are important,
but they're not gonna teach you this.
So the cash flow game,
trains you over and over and over again
to get your money in here to get the cash flow this way.
So I started with this, cost me 18,000 dollars.
I paid for the credit card and I put 25 dollars in my pocket
okay.
It's an infinite return because the cash flow paid
for the mortgage, it paid the expenses, pays the operating
costs and I still made 25 dollars.
Kim's first year was the same,
hers wasn't 18,000
it was 50,000, 45,000 and it put 25 dollars in her pocket,
but Kim now owns 6,500 rental properties.
And she pays no tax because the income comes from here.
- Mm-hmm
If you have a job you pay tax,
but income the rich get richer
because when you have asset income
taxes are less.
You can get it down to zero if you want.
But that's financial intelligence,
but can you control cash flow.
Okay, so say that again.
Assets what?
- Assets put money into your pocket,
liabilities take money out of your pocket.
And so as a young person you just focus on that
so when you buying a new house,
you're gonna say is this gonna take money or put money?
You buy an apartment house is it gonna take money
or put money that's it, its cash flow.
Six most important words for financial intelligence and IQ
is income, expense, asset, liability,
but its really cash flow.
Now if I could bring up a more horrible subject is,
do you think people can be assets or liabilities?
- I think they could be both, to be honest.
So for most young people they fall in love,
they get married, they have kids.
Is a child an asset or liability?
- A child is definitely a liability.
I'm not saying don't have kids,
but you gotta think the kid is expensive
and they don't get cheaper.
They get more expensive every year,
you know then they go to college
and then it gets even more expensive.
So a human being now this sounds horrible to all those
socialists and communists out there,
but the fact is kids cost money.
But as an old guy, I want you to think about this
as I get older as people get older
family members become liabilities.
So I have a friend whose mother thank god she had
long term I don't know what they call it,
but they just canceled it on her.
She can go to a old age home and I think
the price is 18,000 a month.
Most so that as a young person as your parents get older
the question is can I afford to spend 20,000 dollars a month
on my mom or my dads' long term healthcare, yes or no?
- No, not right now.
No so.
- No.
And this is gonna happen to my generation
many people don't realize,
but there brothers or sisters or sisters kids
and all this become liabilities to them.
So as a person whose fairly well off,
I'm and Kim and my friends are thinking about
two legged liabilities.
So I know today that if my sisters become ill
I'm the one with the money and it's my responsibility
to pay for them.
Same as my brothers and their kids.
So these are things that people don't think about a lot of
times is what happens not only as they grow up,
but what happens as they age.
Statistics show the average person in my generation
lets say have a million dollars.
80 percent of that million dollars
will be gone the last two years of life.
Because medical expenses go through the roof and today
insurance companies are canceling.
I forgot the name of it,
but my friends' mother it was just canceled.
So he doesn't have 18,000 a month
so he had to bring his mother into his house
and you know create another room and all this.
Well, I love her which he does but shes a big liability
and all he had was savings.
So the savings are being depleted going out this way, okay?
So with your question about houses and people,
but people are also assets and liabilities.
For most people with our favorite subject,
a 401K is it asset or liability?
- From what I've learned from you
its definitely a liability.
Or an IRA or a pension cause it's always going out this way.
There's no guarantee it'll be there.
So this is the basic of financial intelligence,
financial literacy stuff like this.
Another thing about people is you have a bad advisor,
like a bad financial planner, or a crook,
or a business partner that's a crook,
a wife that's a crook and all of that.
They can be human liabilities.
I have two friends right now who just joined
a million-dollar club.
They married beautiful women, got divorced
and the women is now costing a million dollars a year
in alimony.
So their beautiful wife and the child support it's a million
dollars going and she's only 40 years old.
So she has a whole pile of boyfriends,
but it's costing him a million dollars a year
for her boyfriends.
I said I wanna be her boyfriend.
(both laughing)
not really you know.
That make sense to you?
- Yeah, it makes sense.
Financial IQ is can you control cash flow.
IQ means how big a problem can you solve
so if like my friend whose mother is now costing him 18,000
dollars a month. Well, thank God he has about 100,000 in
savings but in one year its gone.
- Yeah.
That's not high IQ,
but for myself 18,000 dollars a month
I ain't gonna make that much cash flow pretty easily.
- yeah.
okay. So when you're like in your 20s per,
well how am I going to make.
Let's say by the time probably a 100,000 a month
to take care of my parents,
because like it or not its cash flow
and they become liabilities.
And the problem is getting worse or because the bond markets
are not providing income.
So many insurance companies have to renege on their promises
to provide the cash flow to take care of our loved ones
the same as medical.
- Wow.
And so that's why when people say I'm gonna go out on my own
and do all these things they're kinda doing what they love.
Which is good, but they've really gotta think about
how many liabilities do they have.
It's not just your rent you know,
it's your family and so for me
(marker tapping)
and for Kim.
We have family members,
but they're liabilities so that's why we stay over here.
Hopefully, nothing will go wrong,
but if one of my sisters got ill
and she needs 100,000 a month at least can provide it.
- Yeah.
otherwise she they go they go indigent
whatever they call it kay.
- Yeah.
Any other comments or questions?
- No thank you for sharing so much about
this content and all this information.
That's gonna be super valuable for all my friends
and all the Millenials out there just like me.
So I have two friends that are in the million-dollar
a year club, it doesn't mean they're making a million
dollars it's their wives are taking a million dollars
a year out of their pockets and their kids and all this.
And I go you should of thought about that 20 years ago.
- Yeah.
But you don't cause your in love and you're gonna have kids
and gonna make it together.
- mm-hmm.
But your parents offer great role models.
So once again the six words you have to know
and be masters at income, expense, asset,
liability, cash flow.
You can control cash flow that's financial intelligence,
financial IQ and financial literacy, okay?
- Okay.
Thank you.