Unfair Advantage -The Power of Financial Education (33 page)

Short Answer

An unfair advantage.

Explanation

There are two unfair advantages:

1. You won’t be a financial victim.
   

2. You can be part of the solution.
   

The financial crisis that began in 2007 is not over. We are in the eye of the storm and I believe that the heart of this crisis is still coming.

Don’t Be a Victim

In
Rich Dad’s Prophecy,
published in 2002, I stated that a perfect storm is brewing. Unfortunately, in 2011 as I write this book, the storm is getting bigger and much more powerful. The storm grows bigger because our leaders in government, the banking industry, and Wall Street are not solving the problem. They are making the problem worse.

Rather than solve the problem, our leaders continue to play games with money: printing trillions of dollars, dropping interest rates to near zero in the hope that more people will borrow more money, increasing national debt rather than increasing production, propping up the stock market and housing markets, and lying to the naïve, the financially uneducated, and the gullible.

In 1963, while I was in high school, Bob Dylan sang the song, “The Times They Are A-Changin’.”

As a kid, I did not know what was changing, but in my gut I knew something was, and the lyrics rang true.

Unfortunately, most people want things to go back to “normal.” They expect the clouds to clear, the sun to break through, and the birds to sing… with jobs and pay raises bouncing back and the economy growing at 10 percent a year. Most people are hoping their political leaders, the government, our schools, and financial institutions will solve our problems. Millions of American seem to believe that throwing the bums out of Washington will solve their problems.

I am not as optimistic. It’s not that our leaders, new or old, are necessarily bad people. It’s just that the financial problem has grown too big, beyond the control of our government and our leaders. How much power does the President really have when we owe the world so much money? How does the United States tell China what to do when they have so much of our money? How does the United States influence the world when the world has lost faith in the dollar?

To make matters worse, this global loss of confidence in America comes at a time when our internal financial problems are about to explode.

In 2010, baby boomers began collecting Social Security, and Social Security is broke. Medicare, an even bigger sinkhole in the U.S. budget, is expected to “go broke” by 2019. In spite of Social Security and Medicare insolvency, our President signed a healthcare reform bill into law, adding further stress to social and financial problems.

And the United States continues to fight two wars on two fronts, wars we cannot win. We cannot win because we do not fight industrialized nations as we did in World War II. All we have to do is replace the words “Iraq” and “Afghanistan” with “Vietnam,” a war in which I fought, and people would understand the insanity of these two wars.

Definition of Crisis

One of the definitions of the word “crisis” is: “A crucial stage or turning point in the course of something.” In a medical context: “After the crisis, the patient either dies or gets better.”

You and I are at a turning point in world history. The question is: Will we die or get better?

There are many people who ask, “Is the economy coming back?” My reply is, “The economy has moved on.”

Without financial education, most people cannot move on.

Rather than move on, they live in the past, clinging to financial values that are obsolete. Many parents still tell their children to “Go to school to get a good job” at a time when jobs are fluid, moving to the lowest-labor-cost countries. They continue to advise their kids to “Save money” at a time when central banks are printing trillions. And many continue to stuff money into their retirement plans at the exact moment in history when millions of baby boomers begin withdrawing their money from their retirement plans.

As I predicted in
Rich Dad’s Prophecy,
the perfect financial storm is still coming.

Rather than be a victim, you can take the initiative to improve your financial education–a move that gives you the unfair advantage of training your mind to see this time of economic crisis and turmoil as an opportunity to get further ahead, rather than fall behind and have your wealth ripped from you.

You Can Change the Future

Your second unfair advantage is that you can be part of the solution to the challenges that our world faces.

The financial crisis of 2007 actually began a long time ago. It started in 1913 when the Federal Reserve Bank was created. In 1913, the Internal Revenue Service was also created when the Sixteenth Amendment to the U.S. Constitution was ratified. Both acts violated the spirit of the Constitution of the United States.

Was this a coincidence? I doubt it.

In 2011, money is no longer money. Money stopped being money in 1971. Today, money is debt.

Today, for every dollar printed, the IRS must tax the taxpayer to pay for the principal and the interest on that printed dollar. This was the plan in 1913. Print money, and tax the taxpayer for every dollar printed.

Today, the taxpayer pays two taxes: One is direct taxes, and the other is inflation. And taxes and inflation are increasing.

This is why financial planners always advise, “Live below your means.” You will have to live below your means just to pay your taxes and compensate for inflation.

This is also why there is no financial education in schools.

The government and the rich need people to pay the taxes and pay for inflation.

Be a Part of the Solution

Many Americans continue to believe that electing new political officials will solve the problems the United States faces. This is why we’ve seen a second “Tea Party” in America. In 1773, the first Tea Party was in Boston, a protest against the British government’s taxation (without representation) in America. In 2010, a new Tea Party movement protested America’s taxation of Americans.

In 2010, the British government announced that 500,000 government workers would lose their jobs. Those on welfare will also see their benefits cut.

In 2010, there were riots in the streets of Paris as the French protested increasing the retirement age from 60 to 62.

In 2010, Japan, a nation with a great education system that produces hardworking people who save a large percentage of their money, is the biggest debtor nation in the world, with their debt at 200 percent of GDP.

In 2010, China and Russia, once our mortal enemies, traded with each other, not in U.S. dollars, but in their respective currencies, the yuan and the ruble. This is no different than a banker refusing to lend money to a person with a poor credit score.

What does this all mean? It means the party is over. Santa’s sleigh ride has ended.

It means capitalism is spreading to third-world nations.

This is good news if you are a capitalist. This is horrible news if you are a socialist, someone who expects the government to take care of you.

If you are a capitalist, you can be a part of the solution. If you are a socialist, you are the problem.

If you expect the government to solve your problems, you have a problem. The problem is that the governments of the world are broke.

Rather than be the problem, become part of the solution: Become a true capitalist, focusing on giving more to receive more. The days of expecting to be paid more for doing less are over.

Don’t get me wrong. There is nothing wrong with having socialist ideals. We need people who care about others. But when you believe in a “free lunch,” socialism turns to greed. And, as you know, the world is filled with greedy people, both socialists and capitalists.

Your true unfair advantage is to become financially educated so that you can become part of the solution rather than contribute to the problem.

Remember, a true capitalist focuses on doing more with less. That means better products at better prices. In a true environment of capitalism, prices come down as productivity goes up.

A Broken System

In my opinion, one of the bigger problems we face is our educational system. It is a system that still promotes earning more money for less work. Most teachers focus on job security and tenure, instead of how to teach more students with less of an investment.

Already, the best teachers are becoming rich because they are, first, better teachers and, second, using technology to teach more students.

The Chinese have arrived in the global marketplace and they know they must produce a better product at a better price, or unemployment will skyrocket as it has in the West. If the Western countries are to survive, we must get back to true capitalist values, the philosophy of doing more for less.

Unfortunately, the leaders in the West are primarily smart students who did well in school. The problem is that most smart students are trained in a socialist environment. Since most have limited financial or true business training, they leave school unprepared to lead in the real world.

Rather than promote prosperity, they promote austerity. Rather than promote production, they raise taxes, taxes that kill production.

The biggest problem with having leaders who are weak in terms of financial education is that it promotes corruption and greed.

Most of our brightest students are trained in a socialist environment, an environment that advocates taking from the rich to give to the poor. The problem is that the more we take from the rich and give to the poor, the more poor people we create. This pervasive attitude of wanting to be paid more for doing less must change.

So, going back to the original question…

FAQ

What is the greatest benefit from Rich Dad’s financial education?

Short Answer

You can become a part of the solution.

Explanation

Your true unfair advantage is to use your financial education to be generous. Use your financial education to solve your own financial challenges and the financial challenges of others.

Remember:
Teaching
people to fish—rather than giving people fish— can create real change.

Unfortunately, rather than teach people to fish, our schools bring in people who sell fish. They bring in bankers and financial planners who sell fish rather than teach people to fish.

It disturbs me to hear financial planners, stockbrokers, real estate brokers, and insurance sales people dishing out sales pitches disguised as financial education. They are selling fish, a “selfish” approach to making money under the guise of education.

Rather than be selfish, and
sell fish
to naïve people, use your financial education to be generous.

Rather than use your unfair advantage to cheat and deceive the uneducated, use your financial education to teach, enlighten, and set people free.

Rather than use your unfair advantage to make only yourself richer, use your unfair financial education to enrich the lives of others.

One of our biggest problems is an antiquated education system that hangs on to the past and cannot see the future. It’s an obsolete system that insists on preparing students for a world that is dead and dying.

In 2010, millions of people lost their jobs. Millions of people have lost their homes. Millions of people have lost their retirement savings. Millions of people lost because they were financially uneducated and relied on others to secure their financial futures.

Rather than allow this crisis to be a bad thing, use it as a motivator for something good. Teach yourself and teach others to think for themselves, rather than wait to be told what to do.

We truly are on the edge of a brave new world and a new world economy. This crisis is simply the end of an era. It is also the birth of a new era, a new economy.

The good news is that we are entering a new era of humanity, an era of unlimited abundance and opportunity. Advances in technology increase intelligence and reduce the cost of that intelligence. Technology decreases financial risk, reduces prices, brings wages down, and opens up worldwide markets. The good news is: Technology make it easier to be entrepreneurs.

The bad news is: Technology makes life harder for employees. That’s why we’re seeing rising unemployment as technology replaces workers, just as the automobile replaced horses. Rather than going back to school only to focus on a higher-paying job, focus on looking for new ways to educate yourself. For the financially educated, it is a borderless world of abundance and opportunity.

Those who follow socialist and fascist dogma will continue to live in a world of scarcity… a world of lower wages, higher taxes and inflation, allowing their wealth to be stolen via fees and expenses by the very people to whom they entrust their wealth.