‘Leverage’ is the Magic Word
Do you want to accelerate your path to financial freedom? If so, you need to know about the power of leverage and how it applies to investing. Leverage is amplifying the power of your money, time and knowledge.
To illustrate this, let’s make a comparison between investing in the sharemarket using no leverage, and investing in positive cash flow real estate using leverage.
The difference is because the banks won’t normally lend to invest in the sharemarket, but will often lend 80% or more to enable you to purchase real estate.
Sharemarket: $100,000 invested is $100.000 of your own money in shares.
Returns- if the return is 5% your return is just that; 5% on your own money
Property: $100,000 invested, but $80,000 (80%) is borrowed and you put in only $20,000 of your own money.
Returns- 5% return on $100,000 invested = $5000. As only $20,000 of your own money was invested this is a 25% return on your own money.
Using the above figures, the return on your money invested in property (using leverage), is five times greater than the return on your money invested in the sharemarket (no leverage)!
Caution: with any leveraged/geared investment your gains can be increased, but so can your losses. Ensure your property is cash flow positive i.e creates you a profit before tax when all expenses, including borrowings, are included.
There are other types of leverage you might want to utilise. You can leverge your time by getting a good property manager and you can leverage your knowledge by using people who have already done it.
Read Robert Kiyosaki’s book “Retire Young, Retire Rich.” It’s all about leverage.
Disclaimer: this is not intended to be financial advice and is for guidance only. If you are interested in using leverage please consult a professional.
All Thanks to Rich Dad!
Have you thought about retirement?
Do you have a nice retirement nest egg? Will you struggle on superannuation? Maybe, you’ll end up living with your relatives. There is another choice… financial freedom. That’s when your passive income (i.e money you don’t have to work for) exceeds your outgoings, so your money works for you when you can no longer work for it.
If this sounds good I suggest you go to a book shop or local library and get a copy of “Rich Dad Poor Dad” by Robert Kiyosaki. When you’ve finished that read “Cashflow Quadrant” and then “Retire Young Retire Rich”. You will learn that it is possible to be financially free and out of the ‘rat race’ of life if you follow Rich Dad’s philosphies.
For those of you who’ve been in outer space for the last ten years or so this is the story: Robert had two dads (Rich Dad was the father of his best friend)) who had opposing views about money. One dad would say “I can’t afford it” and the other dad would say “How can I afford it?” He decided to listen to Rich Dad.
The “Rich Dad” book series focuses on Cash Flow and Leverage. It’s about building your asset column so the money keeps coming in even if you’re not working. An example of this is a rental property where the rent covers all the outgoings and gives you some cash to put in your pocket as well.
As well as books, Robert devised an educational game called “CashFlow.” See my previous post here. It is well worth investing in if you are serious about becoming financially free.
As you probably know I’m a great fan of the ‘Power of the Mind”. This is what Robert has to say about our thoughts shaping our lives:
The power of our thoughts may never be measured or appreciated, but it became obvious to me as a young boy that there was value and power in being aware of my thoughts and how I expressed myself. I noticed that my poor dad was poor not because of the amount of money he earned – which was significant – but because of his thoughts and actions. As a young boy, having two fathers, I became acutely aware of being careful in deciding which thoughts I chose to adopt as my own and to whom should I listen – my rich dad or my poor dad? At the age of nine I decided to listen to and learn from my rich dad about money. In doing so, I chose not to listen to my poor dad – my real dad – even though he was the one with all the college degrees.Being a product of two strong dads allowed me the luxury of observing the effects that different thoughts have on one’s life. I noticed that people really do shape their lives through their thoughts.
I’ve been lucky enough to meet several people lately who became financially free by following Rich Dad’s teachings. Actually, they’re more than financially free…they’re rich.
I’d like to say a huge thank you to Robert Kiyosaki for writing these books. Rich Dad’s wisdom has helped a lot of people.
To everyone else; this is a strategy which works. Read these books; get financially educated. Start as young as you can. Good Luck!
I Wanna Go Back To Work!
Retirement isn’t necessarily easy…
We thought it would be easy to retire. If someone questionned us …”what will you do?”…we would laugh at them and say “where do we begin?” We had a list of things a mile long.Robert Kiyosaki of ‘Rich Dad’ fame, was advised to take a year off after he had sold his businesses. It took him six months before he was even ready to start the year off! Until that time he bumped around the house; hung out in the kitchen (his friends were at work) trying hard to do nothing…
Most people must go through this when they stop working. It’s difficult to do nothing after a lifetime of work. You need a purpose..
Now is the time to pick up Tim Ferris’ book “The Four Hour Work Week“. Tim says on the back cover of his book; “Warning: Do Not Read This Book Unless You Want To Quit Your Job”! Amongst other subject he talks about “Filling the Void”; -Adding Life after Subtracting Work.
While you’re reading, pick up William Bridges book “Transitions; Making Sense of Life’s Changes.” My husband found this book especially helpful as it explained how transitions are a normal part of life. Don’t fight them. Expect a period of turbulence with any major change, and realise that it won’t last forever.
Photo by ted.sali
The Power of Leverage
In my opinion Robert Kiyosaki’s best book is:
“Retire Young, Retire Rich” – How to Get Rich Quickly and Stay Rich Forever.
- The Leverage of Your Mind; expand your reality, or context.
- The Leverage of Your Plan; how most people ride on the ‘slow train’ of life
- The Leverage of Your Actions; what to do to become rich.
For Kiwis’ Eyes Only
At last there is a decent New Zealand on-line bookstore; it’s called Fishpond You may have heard of it already..it was established in 2004.
So, does this mean cheaper prices for us antipodeans??
To give you some idea of how it stacks up against the giant Amazon, I thought I’d compare the price of one of my favourite books from Robert Kiyosaki…”Retire Young Retire Rich”.
Amazon first: A new copy of RYRR was selling for NZD$18.51; standard shipping cost a huge NZD$15.12 which gives a grand total of NZD$33.63. If you spend NZD$12.79 more you get free standard shipping.
Fishpond: A new copy will cost you more @NZD$32.33 but shipping is only NZD$5.99 giving a total of NZD$38.32. Fishpond also has free shipping if you spend over NZD$50.00..
There’s a lot of difference in delivery time; 18 – 32 days for Amazon standard shipping (I recently ordered a book from Amazon and it would’ve taken all of that and more), whereas Fishpond you only have to wait 6 – 10 days. Your package doesn’t go via the North Pole like I’m sure my one did. 
This comparison wasn’t very scientific and my maths aren’t that great! Prices change so it’s worth looking at both.
Happy reading!
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