The Problem with Accounting

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The Problem with Accounting

  1. 1. The Problem with Accounting- Verrado Business Networking- Ron Nawrocki- June 13, 2013
  2. 2. June 13, 2013The Problem with Accounting …Motivation …Few business owners had formal trainingin AccountingAccountants & CPA’s prepare FinancialStatements in “Standard Format”Few (if any) Accountants know the Five(5) Parts of a Balance SheetAccounting Courses do NOT cover this !Even Kiyosaki & Lechter got this wrong…
  3. 3. June 13, 2013Outline …Rich Dad – Poor Dad5 Parts to any Balance SheetPaying-off your Mortgage – Genesis?5 Great Sources of OPMWho should Pay-off all their Debt?Managing the Risk of Debt
  4. 4. June 13, 2013Rich Dad – Poor DadRobert Kiyosaki & Sharon Lechter said … Debt and ALL Liabilities are Bad (they areexpenses) - Partially FALSE J.O.B. = working hard for money (taxed ongross income) - TRUE Passive Income = your money working foryou - TRUE Form a Corp. [or LLC] for all your businessactivity (taxed on net income) - TRUE Some Assets are actually Liabilities - ?
  5. 5. June 13, 20135 Parts to any Balance Sheet … You will NOT find this in anyAccounting textbook Your CPA will not tell you (guess why) I also had a disadvantage as a FinanceGuy Kiyosaki & Lechter’s “Rich Dad-PoorDad” confused me … BUT helped meconnect the dots
  6. 6. June 13, 2013Basic Balance Sheet …ASSETS LIABILITIESAssets are GOODLiabilities are BAD$ XYZ $ XYZToo Simplistic
  7. 7. June 13, 2013BETTER Balance Sheet …ASSETS LIABILITIESKiyosaki: “Some Assetsare actually Liabilities”EQUITY / NET WORTHNW = Assets - Liabilities$ XYZ $ XYZToo Simplistic
  8. 8. June 13, 2013BEST Balance Sheet … 5 PartsASSETS LIABILITIESIGA’s = Income Good LiabilitiesGenerating AssetsBad LiabilitiesToxic Assets EQUITY / NET WORTHNW = Assets - Liabilities$ XYZ $ XYZ
  9. 9. June 13, 2013Examples of Assets …IGA’s:Stocks, Bonds, Commodities …Investment properties, Notes on propertiesOther Alternative InvestmentsEtc.Toxic Assets:Personal Home, CarsFurniture, Clothes, other expensesBanks: OREO, Non-performing Loans
  10. 10. June 13, 2013Bad Balance Sheet
  11. 11. June 13, 2013Examples of Liabilities …Bad: High Interest Credit card debt (paying-off isbest risk-free investment) Debt with interest above your investment ROI Loans / Leases on “toys”Depends: Car loansGood: Mortgages on investment properties Debt with interest below your investment ROI
  12. 12. June 13, 2013Good Balance Sheet
  13. 13. June 13, 2013Outline …Rich Dad – Poor Dad5 Parts to any Balance SheetPaying-off your Mortgage – Genesis?5 Great Sources of OPMWho should Pay-off all their Debt?Managing the Risk of Debt
  14. 14. June 13, 2013Paying-off your Mortgage – GenesisTurkey Story – “Why cut off the tail?”“Pay-off your Mortgage” – Genesis?Great DepressionWhy did most people lose their homes?Why didn’t Hilton’s lose their hotels?Prior to 1932 Mortgages could becalled !Check your mortgage – Can it becalled?
  15. 15. June 13, 20135 Great Sources of OPM …1. 0% Credit Cards – esp.Company2. Mortgages/HELOC’s3. Car Loans?4. Insurance Policies5. Margin Accounts
  16. 16. June 13, 2013… Why stop at 5 Sources?1. 0% Credit Cards – esp. Company2. Mortgages / HELOC’s3. Car Loans?4. Insurance Policies5. Margin Accounts6. Friends & Family (BUT …)7. Home Sellers8. Crowdfunding?
  17. 17. June 13, 2013FACTS: OPMOPM = Other People’s Money“People” includes any money source, evenbankers !NOTE: Most Wealthy people do NOT usemuch leverage – Dr. Thomas Stanley … Why?A loan is paid-off if you either pay it off OR youhave the money available to pay it off –Douglas AndrewTake & Invest: Any loan with interest belowyour Investment ROI, for as long as possible
  18. 18. June 13, 2013Outline …Rich Dad – Poor Dad5 Parts to any Balance SheetPaying-off your Mortgage – Genesis?5 Great Sources of OPMWho should Pay-off all their Debt?Managing the Risk of Debt
  19. 19. June 13, 2013Paying-off Debt …You should pay off your debt IF:Your Net Worth is negativeYou do not have good financial discipline(Good analogy: weight control)You’re paying rates above yourinvestment ROIYour Wealth DNA is more like “Poorpeople” than “Wealthy people”
  20. 20. June 13, 2013Managing the Risk of Debt … Having Debt does have risk Payments on Debt need to be paid even if yourinvestments decline NOTE: Most Wealthy people do NOT use muchleverage – Dr. Thomas Stanley Develop a Portfolio (Balance Sheet) Trackingspreadsheet & Update every 6 mo. “You can’t manage what you can’t measure” Work with advisors/experts that keep you out ofinvestments beyond your risk tolerance Best: Maintain cash reserves/liquid investments(can be Money Markets, CD’s, MP3’s)
  21. 21. June 13, 2013The Problem with Accounting …References … “Rich Dad – Poor Dad” – Robert Kiyosaki &Sharon Lechter “Missed Fortune” – Douglas R. Andrew “Secrets of the Millionaire Mind” – T. Harv Eker “The Millionaire Mind” – Thomas J. Stanley, PhD “The Millionaire Next Door” – Thomas J. Stanley,PhD & William D. Danko, PhD www.WealthDNA.us – OPM, Direct Investmentin Real Estate, Crowdfunding, etc.
  22. 22. June 13, 2013Quick Test of Wealthy DNA ? …“Rich people have small TVsand big libraries,and poor people have smalllibraries and big TVs”.- Zig Ziglar
  23. 23. June 13, 2013ContactRon Nawrocki (aka The Ronald)B.I.Solutions Corp.VerradoTel: 1-623-249-4792Ron@WealthDNA.usRon@EarnAHigherReturn.usRon@TheRonald.usProven, Profitable, and Positioned for Growth

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