Why Retire Young? The Next Big Crisis
Pensions going bust.
Pension plans are almost universally toast. Most of the time, politicians just ignore the problem and try to kick the can down the road to the next administration.
Moody’s Investors Service estimates state and local pensions have unfunded liabilities of about $4 trillion, roughly equal to the economy of Germany, the world’s fourth-largest economy.
A 2018 study by the Schwartz Center for Economic Policy Analysis at the New School has concluded that 40 percent of the American middle class will slide into poverty as they enter their retirement. Tomorrow’s poor have jobs today, but no retirement for tomorrow.
In 1974, the author's goal was $120,000 a year in passive income. Then he could “retire young.” In 1994, Kim (spouse of the author) and Robert (the author) reached that goal. Kim was 37 and he was 47. Again, it took him 20 years. It took Kim only 10. Once we achieved $120,000 a year, their next goal was $1.2 million a year. Once $1.2 million was achieved, their next goal was $12 million per year. It was their personal challenge. First is to retire young, then to retire rich. The math is not difficult. First it was $10,000 a month, then $100,000 a month, then $1 million a month. Making money on the Business and Investor side of the quadrant is only a game.
The important question is this: Are you passionate about your game? Do what God wants done. What does God want done?
Transitioning into the Business and Investor quadrant is a tough journey. There are many doors to financial heaven. There are even more doors to financial hell. As you know, most entrepreneurs go through hell before achieving success in the Business and Investor quadrants. Many people take the door to financial hell and never come back. Our education system is a system without a soul. Everyone uses money every day.
Why not teach money in school?
All financial planners are selling basically the same products: stocks, bonds, mutual funds, ETFs, savings, and insurance.
The Name of the Game:
Magic does not happen because the name of the game financial planning company’s play is not “Make our clients rich.” The game financial planning companies play is “assets under management,” or AUM.
Rich Dad’s Plan:
Rich dad taught his son and the author that there are four basic asset classes.
2. Real Estate
3. Paper Assets (stocks, bonds, mutual funds, ETFs, and savings)
4. Commodities (gold, silver, oil, food, water.) Most financial planners and CFPs sold only paper assets and insurance for commissions.
Invest in what you love.
Paper assets are best for the average investor, a person without much financial education.
All paper assets are a form of derivatives. They are not real assets. They are fake assets.
Business and Real Estate
The problem with a business and real estate is they are illiquid. If you make a mistake, you become the skipper of the Titanic. I recommend taking real estate courses before investing in real estate, then start small, follow the Higher Levels of Teacher, and practice, practice, practice. Follow the McDonald’s formula for great wealth. What business is McDonalds in? Not Hamburgers, McDonald’s business is real estate.
The McDonald’s formula looks like this:
The Power of Words
If a person wants to become rich, they must learn to control the words they think and speak. Most people think and speak words that make them poor and keep them poor.
1. Poor people say, “I can’t afford it.”
Rich people ask, “How can I afford it?”
2. Poor people say, “I’m not interested in money.”
Rich people say, “If you are not interested in money, money is not interested in you.”
3. Poor people say, “I’ll never be rich.”
Rich people say, “I must be rich.”
Assets vs. Liabilities:
Rich dad’s definition of assets: “Assets put money in your pocket.” Rich dad’s definition of liabilities: “Liabilities take money from your pocket.” A house could be either an asset or liability, depending upon which direction the cash flows.
Fake Assets Are Real Liabilities
Billions of people invest in fake assets. A 401(k) is a fake asset because cash keeps flowing out of your pocket for years. An Individual Retirement Account, or IRA, is a fake asset because it takes money out of your pocket for years. A government pension is a fake asset because it is taking money out of your pocket for years. A mutual fund is a fake asset. So are stocks, bonds, ETFs, and savings. They are all derivatives. Mutual funds are loaded with fees, fees that make the rich richer, and you poorer. Insiders know, mutual fund investors put up 100 percent of the money, take 100 percent of the risk, and yet gain less than 20 percent of the profits.