“Do you want to start getting rich?” If the answer to that question is yes, then bear with me as I continue, so you can do the first step in getting rich today. I am not going to sell anything that will cost you money, what I am going to sell will cost you your attention and your time.
Why are there poor people? Is it because they don’t have a job? Or is it because they can’t afford to study and they have to work at a young age due to poverty? Or is it because their parents are poor and they were born poor? NO! People remain poor or stay in the middle class due to lack of financial literacy, while those who were educated do not act on it because of job security. We often hear of the familiar Filipino saying, “Pag ipinanganak kang mahirap, hindi mo kasalanan yun. Pero pag namatay kang mahirap pa rin, kasalanan mo na yun.” (It’s not your fault if you were born poor. But it is your fault if you remain poor until you die.)
The first item that I will sell to you is FINANCIAL LITERACY. Most parents tell their children to study hard as early as grade school. So that the children can earn a degree, get a high-paying job, and save the family from poverty. Most parents believe that concept, even until today. And I believe that someone, if not most of us in this room today, also believes the same way for their own children. Why? Because, we were not taught in school to learn financial literacy. We were taught how to become a nurse, doctor, lawyer, accountant, front desk receptionist, cook, technician, secretary, and so on. In short, we were taught how to become slaves and rely on how much our master will give us. The more you harvest for your master, the more share you will get.
Our common concept of getting rich is to get a secured and high paying job with lots of fringe benefits. We will save from our salary, put it in the bank and you can start getting rich. But your salary is not enough because you just bought the latest high-end cellular phone model. And you will say, “I will use a portion of my savings first, then I will start saving again once I get promoted next year. Anyway, I worked hard for it, so I deserve a treat.” Unfortunately, even before you were promoted and get an increase in your pay, you decided to get a brand new car on a loan though PNSLAI. And so you were added with additional monthly bills which deplete your budget. Then we tend to earn masters degree, doctorate, or even get another degree to earn a higher position or take a different high paying career. Because you exerted so much effort to earn that increase, you will say at the end of the day, “This is what I get after spending time, sweat and money for the company?” We remain unsatisfied for our salary and ask for another raise.
Every parent’s objective is have their children graduate from College, and become slaves. Employees become slaves not to the owner of the company, but slaves to monthly salary. Why did I say that? Have you seen a hamster in a cage with a little toy that looks like a wheel? The hamster will be forced to run on that wheel once it gets into it. The faster it runs, the faster the wheel will spin. Hamster keeps running in infinity until it gets out of the wheel. We are like that hamster on the wheel. The wheel is the employment, and the spinning is the salary. The harder the hamster will run, the faster the wheel spins. In our case, the more money we earn, the more things we buy. It’s because nobody in school taught us how to use the full power of money. For every thousand that we build in our savings, we can’t resist the temptation of spending it. We may not admit it, but most of us can be called “galit sa pera” (mad at money). Again, we thirst for more. It will in turn force us to ask for increase in pay, and continue that cycle until infinity – just like the hamster in the wheel.
What’s the reason? Because we try to look like we are rich, while the true rich people remains to be modest. That’s related to the second item that I am selling to you right now - LET MONEY WORK FOR YOU. It’s not bad to look up to rich people – if we know what we have to imitate from them. Unfortunately, what we emulate are their clothes, cars, houses, and luxurious lifestyle. We fail to see the things that we really need to duplicate from them – their saving and spending habit. The rich people keeps a good hold of their money and let that money work for them 24/7. Money is their most hard-working employee. The true rich people buy the things they want not from the money they spent a lot of sweat. They buy their luxury or rewards as we may say, from the sweat of their money – from the money generated by their money.
Don’t buy more than what you really need. If I show you now a picture of a man in white camiso-chino shirt, will you believe that he is rich? But if I introduce that same man as Lucio Tan, you will never doubt that he is rich. Ironically, his bodyguards dress-up even more luxurious than he does. Warren Buffet, the richest man of 2008 and the second richest today, still lives in the same small 3-bedroom house he bought after he got married 50 years ago. He drives his own car, and never travels by private jet although he owns the world’s largest private jet company.
So what do you have to do? Begin acquiring assets. Assets not in the context of Accountancy – but in the context described in Robert Kiyosaki’s book “Rich Dad, Poor Dad.” Assets according to Kiyosaki are those which generate money such as businesses, stocks, bonds, mutual funds, income-generating real estate, notes, royalties from intellectual property, and anything that has value, produces income or appreciates and has a ready market. You can build your assets while keeping your daytime job and strive or remain as a great hard-working employee.
Buffett made his first investment in stock market at the age of 11 and yet he regret because he started too late investing. He bought a farm at age 14 with his earnings in delivering newspaper. And we often hear people saying they don’t have money to start an investment. What do you say? Investing is difficult and stock market is risky. You can’t afford to loose your hard-earned money. We fear losing that we’d rather play it safe than take the risk – ironically, that risk is getting rich. Who among us here learned how to ride a bike without falling to the ground or without getting a scratch? You know that risk, even the risk of getting hit by another vehicle, yet you tried learning to ride a bike. Why do you want to ride a bike anyway? Is it just for the sake of riding it? I believe not. It is because we want to go places, further, faster, with lesser effort. That bike is like money, it can bring you to different places, further, faster, with lesser effort. But you have to take the risk of learning how to ride that bike, even though you know that you might fall and get a scratch. But until you persist and ride that bike again after the fall, you will never learn. Don’t regret if you fail, at least you are making headway. For it is in failure that we learn our lessons. This is just like a game, sometimes you win and sometimes you learn. Most people never learn because they are more afraid of losing. (Rich Dad, Poor Dad by Robert Kiyosaki,1998 )
The next item I’m sharing particularly about a business is also based on that book. Do not run a business - LET A BUSINESS RUN. Have a business that does not require your physical presence. Own a business which is managed by other people. If you are personally running that business – it’s no longer a business, it becomes your job. You have to pay hardworking, honest, and smart people, even people more intelligent than you are. In this way, you will be assured that your business is run by professionals and experts- those taught by the school to do exactly as you say. Hire and pay excellent accountants, lawyers, brokers, skilled-workers, and managers.
And so you insist – “I don’t have money to invest!” Sure! Why not? Never mind riding a bicycle, but you have to start walking early in the morning to reach your destination – because it will take you a lot of time. “I do not have a capital to start a business either.” Well, you have something that you always use but you often neglect. We are all blessed with a gift, something that makes us different from the rest. It was used by Bill Gates, Alexander Grahambell, and a lot more inventors who became rich. But Grahambell was rejected by the big company whom he offered to sell his invention. Because of that, AT&T Company was born together with the emergence of a multi-million dollar industry. I did not say you make your own new inventions to make money. Shorten the process and start INVENTING MONEY. Use what is called the one true asset – your mind. Your mind can generate money, if you improve your financial IQ.
Five years ago, I was able to start an internet company while I was still studying website development. How did I do that? I do not have the money to start one! My salary is not enough to sustain that. Taking the advice of Marlo Sanchez in his book, “A Smart & Practical Guide for New Entrepreneurs,” I became an industrial partner to my wife’s aunt who has the money to finance the business. We became partners and our business still runs today. It gives me additional income as well as employment for my wife so that she no longer has to leave our house to work for somebody else. She is now working for me as the manager, and she watches over our two little kids as they grow up. Google sends us check for advertisement in my websites and blogs almost every month. In this way, I invented money by investing in my mind.
However, Bill Gates studied computer programming as Grahambell mastered physics. Then, you have to devote your time increasing your knowledge on your invention – the money. Improve your Financial IQ by taking time to study money, attend seminars, read books, or listen to people with success stories. But don’t neglect listening to their failure stories too. Marlo Sanchez in his book Pinoy Entrepreneur for instance gives a step by step instruction on how to start a business. It’s not a perfect recipe but you can start with that. He has his own failures too- in fact so many of them. But that’s the lesson of life that is not usually taught in schools. Kiyosaki said Financial IQ is the synergy of many skills and talents, a combination of four technical skills: markets, accounting, investing, and law – or MAIL. M is for understanding markets, which is about supply and demand. A stands for Accounting which is what Kiyosaki called a vital skill - financial literacy. The more money you are responsible for, the more accuracy is required. It is the ability to read and understand financial statements which allows you to identify the strengths and weaknesses of any business you are eyeing to join. I is for Investing, which involves strategies and formulas. The science of money making money as mentioned earlier. And the fourth, your skills about the Law. Here you must gain knowledge in taking advantage of reducing or exempting you from paying the taxes, in a legal manner. And becoming knowledgeable of the law will protect you from lawsuits.
About three years ago, a bank is selling a foreclosed townhouse in Taytay, Rizal with a lot area of fifty-six square meters for Five Hundred Fifty Thousand Pesos. The bank requires Ten Thousand Pesos non-refundable reservation fee, and at least twenty percent (20%) initial payment from interested buyers of that two-storey and two-bedroom property. Weeks before the find, I’ve noticed that SM Development Corporation is placing construction fences about five hundred meters away from the subdivision. I thought of it as an opportunity and must not let go of the chance. I must decide quickly because it was a Friday afternoon and there will be no business transaction the following day. The bank will be posting the property in classified ads that immediate weekend and it will be swarmed by a lot of potential buyers. But how could I buy it since I do not even have Php 100,000.00 to pay for the down-payment? After convincing my lifetime partner – my wife, I filled-out the reservation form and sent it to the bank in Makati City via fax. That same day after inspecting the property, I made a check amounting to Php 10,000.00 as reservation fee and gave it to the broker in exchange of an acknowledgement receipt. Following Monday, I was in Makati City paying the bank with Php 100,000.00 I loaned from a financial institution. I managed to pay the remaining balance through in-house loan, which costs me Php 4,400 every month. After making a few improvements, we are now living today on that property right beside a shopping mall in Taytay. We have sent out signals that we intend to sell the property at the right price. Somebody is bidding 1.4 Million Pesos, but I said I will sell it if he can give me 1.7 Million Pesos and a down-payment of Php 400,000.00. If someone will buy, I’m going to use his down-payment to pay in full my mortgage in the bank. I would have then invented more than One Million Pesos which I can use to buy another property. Opportunities come constantly but we fail to recognize its potential. You will never know it unless you gained Financial IQ and grab the opportunities hanging right in front of our face.
Do not think of your job as a source of income, WORK TO LEARN – NOT TO EARN. Because you gained financial literacy, you can perform your job at the same time acquiring your assets. We have a lot of learning opportunities in the service. But do not rely on it, think out of the box. Invest in learning by paying even costly trainings. Warren Buffet never invested in IT companies during the early 1990’s simply because he can not understand it. Improve your vocabulary, your public speaking ability, your selling skills, bargaining techniques – learn from every opportunity. You can even join multi-level marketing or networking business, not just to earn but to learn.
So you ask me, what is the first step in getting rich that you can start now? Well, if you bought those ideas that I just shared – then you are done with the first step. It’s up to you to follow-through with the second step, and the third, until you reach that point of becoming rich. We have been discussing about it since the start – START GETTING RICH TODAY by acquiring financial literacy. How many stories have you heard about lottery winners who won millions of pesos, but end up more miserable than their previous financial condition? Have you heard about uneducated people who became rich? It’s not about their highest educational attainment – it’s about money management.
And the first thing you have to do to manage your finances is to pay yourself first before paying your bills. But paying yourself first does not mean to spend it for you for anything that you desire. It means, setting aside a portion of your monthly income, say at least 10 percent and make it also earn for itself. If the rest of your money is not enough, it gives you motivation to create more money. I did not say don’t spend your money. You need to buy your basic services and commodities such as food, electricity, telephone, etc. What I mean is for you to think first before spending anything. Every peso is your employee. Think before letting go of that very hard-working employee. Consider it every time you spend as another hard-working employee leaving your empire of richness.
Let me give you an insight on how are you going to measure the wealth of a person, or how will you measure your wealth. Is it by the amount of money you have in your savings account? No. Wealth can be measured by determining how long you will survive after loosing your job, business or other sources of income. That’s how rich you are. Again, it boils down to one thing – your income less your average expenses is your measure of wealth. So, the basic guideline is: increase your income generating activities, and reduce your monthly recurring expenses.