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Leave the rats, race for riches

By Neasa MacErlean
THE OBSERVER, LONDON
Saturday, Sep 13, 2003, Page 9

ILLUSTRATION: MOUNTAIN PEOPLE

The most dangerous advice you can give a child is: "Go to school, do well and look for a safe, secure job." So says an American multi-millionaire who was in London last week to tell the British how to get rich.

If Robert Kiyosaki is right, we need to know. Otherwise, why are we obsessed about getting our children into decent schools? And is Tony Blair fooling us all with his plans for 50 percent university education by 2010?

Kiyosaki, a 57-year-old Vietnam veteran and former photocopier salesman, has spelled out his secrets for success in his books, starting with Rich Dad, Poor Dad, Rich Dad's Prophecy and Retire Young, Retire Rich.

His message is that, if you follow the traditional path, your good school results and degree will propel you into a job, a mortgage, a pay rise, then a bigger mortgage, then children.

Such people become "trapped in the rat race for the rest of their working days," forever dependent on the whims of their employers.

"Fear keeps most people working at a job," he says. "The fear of not paying their bills. The fear of being fired. Most people become a slave to money and then get angry at their boss."

"The main cause of poverty or financial struggle is fear and ignorance, not the economy or the government or the rich."

Robert Kiyosaki, multi-millionaire

Kiyosaki quotes poet Robert Frost and advocates the path "less traveled by." This road can lead to riches but it is more about reducing dependence on a boss, swapping debt for assets and gaining freedom.

Kiyosaki and his wife, Kim, have lived in this way themselves, although it hasn't always been easy. They once hit a low patch in which they had to spend three weeks sleeping in their car.

His financial self-help books make wage slaves question their assumptions. At one stage his Rich Dad character says: "I've met so many people who say: `Oh, I'm not interested in money.' Yet they'll work at a job for eight hours a day. That's a denial of truth. If they weren't interested in money, then why are they working?"

Ensconced in the suitably opulent Connaught Hotel in the best part of central London, Kiyosaki outlines key points of his philosophy.

"The main cause of poverty or financial struggle is fear and ignorance, not the economy or the government or the rich," the author says.

"Money won't make you rich. Mike Tyson has been declared bankrupt," he says.

Instead, you will become wealthy by learning, throughout your life, how to be imaginative and sensible financially. "A job is really a short-term solution to a long-term problem," he says.

The long-term problem is how to keep afloat financially, how to prosper and become independent.

He advises people to concentrate on buying "income-generating assets" that produce returns for you even when you are asleep. These assets are business ventures, property that you can rent out or realize a return on and shares.

He warns that your home is not really an asset. It is not generating income and, while you have a mortgage on it, it is a liability.

Kiyosaki advises students graduating with US$15,000 or so of debt to pay it off as soon as possible.

But for those who really apply themselves to his ideas, he suggests following his example: "I took real estate courses and found ways that my real estate investing could pay off my debt."

So where has he put all his money now?

"Today I'd be in cash," he says. "The market hasn't given a clear indication yet which way it is running. If you don't know which way it is running, it's best to have no opinion."

He believes the next big thing to invest in over the next decade is commodities -- iron, other metals, oil and food, for instance.

South Africa and Australia "are going to do well because of their commodity resources."

The price of oil is going to go through the roof "as China and India come on board [in becoming developed consumer markets]," he predicts.

According to Kiyosaki there will be a stock market crash around 2015 as the baby boomers come to withdraw their pension fund assets en masse.

There could even be one before, however. Such crashes occur, on average, every 20 years, and are followed by a 10-year boom in commodities.

There is a disaster every five years, such as 9-11, which has a huge effect on financial markets.

Robert Kiyosaki's tips for surviving and prospering
■ Start investing early.
■ Recognize that taxes are usually your biggest expense if you are middle-class. The rich are better at avoiding them, through trusts and companies.
■ If you keep using your brain, it will show you ways to make money. As a child, Kiyosaki set up a comic library and charged other children for using it.
■ Be aware that "money is an illusion. It's only out of fear and greed that the illusion is held together by billions of people thinking it is real."
■ Become sophisticated -- the best deals usually go to sophisticated investors.
■ Expect to make some mistakes, says Kim Kiyosaki, Robert's business partner in the Rich Dad empire and a fellow property investor.
■ Encourage your children to understand wealth creation. See www.richkidsmartkid.com for a free game for schools, Cashflow for Kids.
■ The author's message for those starting out is: "Start small," take the usual precautions of diversifying, and keep on learning.
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