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Rich brother poor_brother_national_convention_
Rich brother poor_brother_national_convention_
Rich brother poor_brother_national_convention_
Rich brother poor_brother_national_convention_
Rich brother poor_brother_national_convention_
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An introduction to

An introduction to

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    • 1. Rich Brother, Poor Brother Lessons on How to Learn, Grow and Give Back Nick Wolff Region VI Volunteer and Investor
    • 2. Disclaimer The information provided in this presentation discusses general themes of investing, financial planning and taxation and should be seen as informational only. Consult appropriate professionals about your specific circumstances.
    • 3. Disclaimer Some of you will find some topics unsettling if not upsetting. The purpose is to expand your Context —to grow your concept of what money is and what money could be .
    • 4. “ Money is the root of all evil.” ~1 Timothy 6:10
    • 5. Why is it difficult to discuss wealth?
    • 6. Difficulty studying wealth?
        • Emotional topic
        • Puritan work ethic
        • Not taught in schools
        • Some are more risk averse
        • Many people providing bad advice
        • Bad stigma (Rich are cheap, crooks)
        • We are environmentally conditioned
        • The rat race
    • 7. Why is it important we do so?
    • 8. Why do we do it?
        • We want to retire someday
        • Everyone should anticipate a layoff
        • You cannot depend on your employer or government to care for you
        • Good people should have more free time
        • How can we expand our limits to give?
    • 9. What are ways to become wealthy?
    • 10. Popularly believed ways to become wealthy
        • Get out of debt
        • Save every penny you can
        • Be frugal
        • Work hard in your job
        • Buy “wealthy looking stuff”
        • Win lottery
        • Born into it
        • Max out 401(k)
        • Know someone who has money
        • Steal it
    • 11. The Financial Life of the Average American
        • Meet Joe
          • Grows up in a working class home
          • Good grades, goes to college
        • Gets Degree - Finances with Student Loans
        • Opens credit card accounts – Lives it up
        • Buy a truck – 5 year note
        • Buy a house – 97% Financed
        • Live with fiancée – Woohoo two Incomes!
        • Gets married – Pays for wedding on credit cards
        • Has kids – Buy food and clothes on credit
    • 12. The Financial Life of the Average American
        • Has never been taught about money
        • Starts in a hole of debt
        • Is highly encouraged to keep digging
        • Spends more than he/she earns
        • Is less than 3 months away from financial disaster
        • Trapped in their jobs – The Rat Race
    • 13. I want you to learn to avoid the trap
    • 14. What are your opinions about money?
    • 15. How much is a lot of money?
    • 16. How Much is a Lot of Money?
        • $2 – When I was 8
    • 17. How Much is a Lot of Money?
        • $2 – When I was 8
        • $20 – When I was in college
    • 18. How Much is a Lot of Money?
        • $2 – When I was 8
        • $20 – When I was in college
        • $200 – When I graduated
    • 19. How Much is a Lot of Money?
        • $2 – When I was 8
        • $20 – When I was in college
        • $200 – When I graduated
        • $2,000 – 2 years ago
    • 20. How Much is a Lot of Money?
        • $2 – When I was 8
        • $20 – When I was in college
        • $200 – When I graduated
        • $2,000 – 2 years ago
        • $20,000 – This is a decent chunk
    • 21. How Much is a Lot of Money?
        • $2 – When I was 8
        • $20 – When I was in college
        • $200 – When I graduated
        • $2,000 – 2 years ago
        • $20,000 – This is a decent chunk
        • $200,000 – This a lot for me
    • 22. How Much is a Lot of Money?
        • $2 – When I was 8
        • $20 – When I was in college
        • $200 – When I graduated
        • $2,000 – 2 years ago
        • $20,000 – This is a decent chunk
        • $200,000 – This a lot for me
        • $2,000,000 – Pocket change for Trump
    • 23. What does that mean?
    • 24. If we know the rules, we can win the game!
    • 25. Rich Dad, Poor Dad by: Robert Kiyosaki
        • Discusses what rich people teach their kids vs. poor/middle class people
        • Emphasizes financial literacy
        • Opens up one’s mind to a new paradigm when thinking about money
    • 26. Completely Different Opinions
        • Poor Dad
          • I work for money
          • A house is an asset
          • I can’t afford it
          • I’m not interested in money
          • Pay myself last
          • Acquires bad debt
        • Rich Dad
          • Money works for me
          • A house is a liability
          • How can I afford it?
          • Money is empowering
          • Pay myself first
          • Acquires good debt
    • 27. Completely Different Opinions
        • Poor Dad
          • Investing is risky
          • Believed more money would solve his problems
          • Believed the company you work for or government should take care of you
        • Rich Dad
          • Learn to manage risk
          • It’s not how much you make—but keep
          • Believed in personal responsibility and self reliance
    • 28. What is Money?
        • Poor Dad
          • Money is valuable
          • Work hard for it
          • Money is the root of all evil
          • I don’t need money
          • Money is hard to get
          • Money doesn’t buy happiness
        • Rich Dad
          • Money is a medium
          • Money is my servant
          • Lack of money is root of all evil
          • Money is power
          • Money is easy to get
          • Money helps
    • 29. 1 st Key of Wealth: Cash Flow Management
    • 30. Cash Flow
        • Cash Flow : Monthly Income – Monthly Expenses
        • More money will not solve the problem if the problem is cash flow management
        • Use a system. (Excel, Quicken®, Money®)
        • Be Honest. Don’t leave anything out
        • Allowance for unusual expenses
        • Cash Flow should be at least 10% positive to get started. (Cash Flow/Income > 10%)
        • Don’t spend it! Invest that 10%!
    • 31. A Basic Cash Flow Statement
    • 32. Cash Flow
        • You can make modest reductions in expenses (Generally 2 to 8%)
        • Hurts to cut back
        • Your income is not a hard limit
        • Income gains (if invested) grow exponentially
        • It is possible to replace your salary with passive income
    • 33. Cash Flow
        • You can make modest reductions in expenses (Generally 2 to 8%)
        • Hurts to cut back
        • Your income is not a hard limit
        • Income gains (if invested) grow exponentially
        • It is possible to replace your salary with passive income = Early Retirement
    • 34. How do you spend your money?
    • 35. How do you spend your money?
        • Investment: Something that more than pays for itself
        • Doodad: Something that rapidly loses value
        • Asset: Something that puts money in my pocket every month if I work or not
        • Liability: Something that pulls money from my pocket whether I work or not
    • 36. What is your biggest asset?
    • 37. Assets and Liabilities
        • The rich buy assets which pay for their liabilities and doodads
        • The poor and middle class buy liabilities that pay for their doodads , including ones that they have been told are assets
        • Let’s talk about Choices
    • 38. Financial Statement
    • 39. Financial Statement of a Poor Person
    • 40. Financial Statement of a Middle Class Person
    • 41. Financial Statement of a Rich Person
    • 42. 2 nd Key of Wealth: Understand the Rules of the Game - Taxes
    • 43. Who pays the taxes in the United States?
    • 44. Taxes
        • You’re taxed when you earn.
    • 45. Taxes
        • You’re taxed when you earn.
        • You’re taxed when you spend.
    • 46. Taxes
        • You’re taxed when you earn.
        • You’re taxed when you spend.
        • You’re taxed where you live.
    • 47. Taxes
        • You’re taxed when you earn.
        • You’re taxed when you spend.
        • You’re taxed where you live.
        • You’re taxed when you die.
    • 48. Taxes
        • The top 1% of wage earners pay approximately 29% of income tax in the U.S.
        • The top 5% of wage earners pay 50% of income tax in the U.S.
        • Bottom 50% of wage earns pay <2%
              • Congressional Budget Office Statistics, 2005
    • 49. Did you know…
        • The US government will give you a tax deduction for interest on your home mortgage, but will charge you tax on interest in a savings account?
        • Why do you think that is?
    • 50. How do tax laws work?
        • Government encourages people to do things for the public good that it can’t do itself well
          • Create jobs
          • Build affordable and quality housing
          • Provide for technical innovation
        • Tax laws are written to encourage the creation of businesses (owners) and those who help build them (investors)
    • 51. The US Government encourages you to:
        • Pay interest to banks
        • Spend your money
    • 52. Types of Income
        • Earned income - You are paid for working
          • 50% money
          • Most time consuming – Earned by employees
          • Highest and quickest taxed
        • Portfolio income - Stocks, bonds, mutual funds
          • 30% money
          • Lower tax and often tax deferred - Investors
        • Passive income – Mostly real estate
          • Often no tax - Investors
        • No income – Business Owners
          • Most of one’s lifestyle is untaxed
    • 53. Taxes: Individuals vs. Businesses
    • 54. Who pays the taxes in the United States?
    • 55. Who pays the taxes in the United States? Highly Educated, Upper Income Employees
    • 56. Who pays the taxes in the United States? Highly Educated, Upper Income Employees Also known as US!!!
    • 57. If we know the rules, we can win the game!
    • 58. New Service: Helping Kids Read Personal Business Computer* $1,500 $1,500 Software $ 100 $ 100 Children’s Books $ 600 $ 600 Gas (1000 miles) $ 150 $ 150 Marketing $ 150 $ 150 Training $ 500 $ 500 Legal $1,000 $1,300 Total Out-Of-Pocket $4,000 $4,300 *Also for personal use
    • 59. Tax Incentives Expenses (Minus Gas) $3,850 $4,150 Personal Expenses - $1,500 $ 0 “ Phantom Expenses” House Depreciation $ 0 $1,100 Utilities $ 0 $ 600 Mileage Deduction $ 140 $ 330 Total Deduction $1,490 $6,180
    • 60. Compare
      • Personal Effort - $4,000 out of pocket
        • $1,490 is an itemized deduction
        • Doesn’t help if you don’t itemize
      • Business Entity - $4,300 out of pocket
        • $6,180 is an “above the line” deduction
          • Lowers your AGI
        • $1,700 in “phantom” deduction
        • Larger mileage deduction
        • You can still use standard deduction
    • 61. 3 rd Key to Wealth: Debt and Decisions We Make
    • 62. If I have a credit card balance of $25,000, what should I do?
    • 63. Why I Love Debt
        • Debt can be good
        • Use leverage
        • It’s easier to borrow $1 Million than earn it
        • DON’T USE CREDIT TO BUY DOODADS !
        • Buy an ASSET now with OPM
      • If you borrow wisely, what you borrow today will be what you are worth in the future!
    • 64. What are great investments?
    • 65. What’s a good rate of return?
    • 66. Typical Rates of Return (Long Term)
        • Lottery Tickets ~-100%
        • Casinos -20 to -50%
        • Savings account – 1 to 3%
        • Money Markets – 3 to 5%
        • US Bonds – 5 to 7%
        • Corporate Bonds – 6 to 15%
        • Stocks – 7 to 25%
        • Stocks on Margin – 7 to 50%
        • Options – 30% to 100%
        • Real Estate – 30% to Infinity
        • New Businesses – 100% to Infinity
    • 67. There is no free lunch: Big returns require big efforts
    • 68. Investing Considerations
        • Investor “experts” assume you are unsophisticated
        • “ Get out of debt, diversify, invest for long term” is a slow and uncertain way to get rich.
        • Most investors are lemmings. If everyone’s doing it, GET OUT!!! Find deals elsewhere.
        • Be aware of your emotions (Fear and Desire).
        • If you’re buying from a broker, find out HOW THEY GET PAID!
        • The most successful investors assemble investments for others in which to invest.
    • 69. Let’s compare 3 investments over 1 year
    • 70. Leverage: Three Investments 1 year
      • Buy a $100,000 Bond
        • Cash Outlay: $100,000
        • Interest rate: 7% compounded monthly
        • Interest earned: 7,229.01
        • Rate of return: 7.23%
    • 71. Leverage: Three Investments 1 year
      • Buy a $100,000 rental house
        • Cash Outlay: $10,000
        • Cash Flow $50/month ($600 annually)
        • Rate of Return: 6%
        • Mortgage balance reduction: $750
        • Appreciation rate: 5%
        • Home value: $105,000
        • Net earnings: $6,350
        • Total Rate of Return: 63.5%
    • 72. Leverage: Three Investments 1 year
      • Private Lending – Be the Bank!
        • Borrow $25,000 on credit card
          • (incentive 2% for 12 months)
        • Total Cost: Bank fee $75
        • Lend it at 12%
        • Interest rate spread: 10%
        • Net interest earned: $2,500
        • Rate of return: 3,333%
    • 73. When will I pay off the $25,000?
    • 74. When Will I Pay Off $25,000? Not Any Time Soon!!!
        • Gymnasium with long term tenant
        • Partners Pay Cost-of-funds + Income
        • Triple Net Lease – No Maintenance/Little Risk
        • 2% stake in $1.4 Million Property
        • All on money that is not mine!
    • 75. Leverage: Bonus – With Education and Friendships
      • Deal Specifics
        • Group of Friends buying Gym for $900,000; Valued at $1,400,000
        • Borrow $25,000 on credit card (incentive 8% for life of balance)
        • Total Cost: Bank fee $199
    • 76. Leverage: Bonus – With Education and Friendships
      • Deal Benefits
        • Cost of Funds plus 2% of Income = $36,000 X 2% = $720
        • Net dividends earned: $720+ $10,000 Equity Share
        • Refi out to 80% = $220,000 in cash more deals to do this again
        • Rate of return: 5,387%
    • 77. Compare Returns
        • Stock market – 8% historic rate of return
          • High Variability
        • Bond – 7.23% ROI - 0.9 Years Stock Market equivalent
        • Rental House – 63.5% - 6.4 Years SM
        • Private Loan – 3,333% - 46 Years SM
        • Gym Project – 5,387% - 52 Years SM
              • And we are ready to enter another deal!
    • 78. If we know the rules, we can win the game!
    • 79. Why Do The Rich Get Richer?
        • Rich become more proficient at using financial leverage on a daily basis
        • Rich have invested the time in knowing the rules of the financial game
        • Financial education is the best investment you can make
    • 80. The 4 th Key to Wealth: The Only Lasting Investment You Can Make
    • 81. Learn, Grow and Give Back
    • 82. Wealth Carries with it Responsibility
        • We live in the best country on earth
        • The cost of living here - is giving back
        • As your wealth grows, give a portion of it back
        • Teach others how to be successful
        • What the world needs are Servant Leaders with More Free Time!!!
    • 83. Suggested ways to get started
        • Know your cash flow. Use a budget and stick to it
        • Diligently invest at least 10% of what you earn
        • Avoid buying doodads
        • Contribute to your 401(k) up to your match
        • Find people you trust that will help you invest
        • Learn, learn, learn and learn more!
        • Earn value on your savings (Get good returns)
        • Grow your credit lines and invest them
        • Learn to guard principal from loss – Due diligence
        • Own a home (that you can afford)
      • Adapted from The Richest Man in Babylon – George Classen
    • 84. References
        • Rich Dad, Poor Dad – Robert Kiyosaki
          • How has your perspective changed?
        • Richest Man in Babylon – George Classen
          • What do you plan to do?
    • 85. Thank you for your ongoing service to Alpha Phi Omega!

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