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The Problem with Accounting
- Verrado Business Networking
- Ron Nawrocki
- June 13, 2013
June 13, 2013
The Problem with Accounting …
Motivation …
Few business owners had formal training
in Accounting
Accountants & CPA’s prepare Financial
Statements 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…
June 13, 2013
Outline …
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
June 13, 2013
Rich Dad – Poor Dad
Robert Kiyosaki & Sharon Lechter said …
 Debt and ALL Liabilities are Bad (they are
expenses) - Partially FALSE
 J.O.B. = working hard for money (taxed on
gross income) - TRUE
 Passive Income = your money working for
you - TRUE
 Form a Corp. [or LLC] for all your business
activity (taxed on net income) - TRUE
 Some Assets are actually Liabilities - ?
June 13, 2013
5 Parts to any Balance Sheet …
 You will NOT find this in any
Accounting textbook
 Your CPA will not tell you (guess why)
 I also had a disadvantage as a Finance
Guy
 Kiyosaki & Lechter’s “Rich Dad-Poor
Dad” confused me … BUT helped me
connect the dots
June 13, 2013
Basic Balance Sheet …
ASSETS LIABILITIES
Assets are GOOD
Liabilities are BAD
$ XYZ $ XYZ
Too Simplistic
June 13, 2013
BETTER Balance Sheet …
ASSETS LIABILITIES
Kiyosaki: “Some Assets
are actually Liabilities”
EQUITY / NET WORTH
NW = Assets - Liabilities
$ XYZ $ XYZ
Too Simplistic
June 13, 2013
BEST Balance Sheet … 5 Parts
ASSETS LIABILITIES
IGA’s = Income Good Liabilities
Generating Assets
Bad Liabilities
Toxic Assets EQUITY / NET WORTH
NW = Assets - Liabilities
$ XYZ $ XYZ
June 13, 2013
Examples 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
June 13, 2013
Bad Balance Sheet
June 13, 2013
Examples of Liabilities …
Bad:
 High Interest Credit card debt (paying-off is
best risk-free investment)
 Debt with interest above your investment ROI
 Loans / Leases on “toys”
Depends:
 Car loans
Good:
 Mortgages on investment properties
 Debt with interest below your investment ROI
June 13, 2013
Good Balance Sheet
June 13, 2013
Outline …
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
June 13, 2013
Paying-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 be
called !
Check your mortgage – Can it be
called?
June 13, 2013
5 Great Sources of OPM …
1. 0% Credit Cards – esp.
Company
2. Mortgages/HELOC’s
3. Car Loans?
4. Insurance Policies
5. Margin Accounts
June 13, 2013
… Why stop at 5 Sources?
1. 0% Credit Cards – esp. Company
2. Mortgages / HELOC’s
3. Car Loans?
4. Insurance Policies
5. Margin Accounts
6. Friends & Family (BUT …)
7. Home Sellers
8. Crowdfunding?
June 13, 2013
FACTS: OPM
OPM = Other People’s Money
“People” includes any money source, even
bankers !
NOTE: Most Wealthy people do NOT use
much leverage – Dr. Thomas Stanley … Why?
A loan is paid-off if you either pay it off OR you
have the money available to pay it off –
Douglas Andrew
Take & Invest: Any loan with interest below
your Investment ROI, for as long as possible
June 13, 2013
Outline …
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
June 13, 2013
Paying-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 your
investment ROI
Your Wealth DNA is more like “Poor
people” than “Wealthy people”
June 13, 2013
Managing the Risk of Debt …
 Having Debt does have risk
 Payments on Debt need to be paid even if your
investments decline
 NOTE: Most Wealthy people do NOT use much
leverage – Dr. Thomas Stanley
 Develop a Portfolio (Balance Sheet) Tracking
spreadsheet & Update every 6 mo.
 “You can’t manage what you can’t measure”
 Work with advisors/experts that keep you out of
investments beyond your risk tolerance
 Best: Maintain cash reserves/liquid investments
(can be Money Markets, CD’s, MP3’s)
June 13, 2013
The 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 Investment
in Real Estate, Crowdfunding, etc.
June 13, 2013
Quick Test of Wealthy DNA ? …
“Rich people have small TVs
and big libraries,
and poor people have small
libraries and big TVs”.
- Zig Ziglar
June 13, 2013
Contact
Ron Nawrocki (aka The Ronald)
B.I.Solutions Corp.
Verrado
Tel: 1-623-249-4792
Ron@WealthDNA.us
Ron@EarnAHigherReturn.us
Ron@TheRonald.us
Proven, Profitable, and Positioned for Growth

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The Problem with Accounting

  • 1. The Problem with Accounting - Verrado Business Networking - Ron Nawrocki - June 13, 2013
  • 2. June 13, 2013 The Problem with Accounting … Motivation … Few business owners had formal training in Accounting Accountants & CPA’s prepare Financial Statements 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. June 13, 2013 Outline … 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. June 13, 2013 Rich Dad – Poor Dad Robert Kiyosaki & Sharon Lechter said …  Debt and ALL Liabilities are Bad (they are expenses) - Partially FALSE  J.O.B. = working hard for money (taxed on gross income) - TRUE  Passive Income = your money working for you - TRUE  Form a Corp. [or LLC] for all your business activity (taxed on net income) - TRUE  Some Assets are actually Liabilities - ?
  • 5. June 13, 2013 5 Parts to any Balance Sheet …  You will NOT find this in any Accounting textbook  Your CPA will not tell you (guess why)  I also had a disadvantage as a Finance Guy  Kiyosaki & Lechter’s “Rich Dad-Poor Dad” confused me … BUT helped me connect the dots
  • 6. June 13, 2013 Basic Balance Sheet … ASSETS LIABILITIES Assets are GOOD Liabilities are BAD $ XYZ $ XYZ Too Simplistic
  • 7. June 13, 2013 BETTER Balance Sheet … ASSETS LIABILITIES Kiyosaki: “Some Assets are actually Liabilities” EQUITY / NET WORTH NW = Assets - Liabilities $ XYZ $ XYZ Too Simplistic
  • 8. June 13, 2013 BEST Balance Sheet … 5 Parts ASSETS LIABILITIES IGA’s = Income Good Liabilities Generating Assets Bad Liabilities Toxic Assets EQUITY / NET WORTH NW = Assets - Liabilities $ XYZ $ XYZ
  • 9. June 13, 2013 Examples 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. June 13, 2013 Bad Balance Sheet
  • 11. June 13, 2013 Examples of Liabilities … Bad:  High Interest Credit card debt (paying-off is best risk-free investment)  Debt with interest above your investment ROI  Loans / Leases on “toys” Depends:  Car loans Good:  Mortgages on investment properties  Debt with interest below your investment ROI
  • 12. June 13, 2013 Good Balance Sheet
  • 13. June 13, 2013 Outline … 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. June 13, 2013 Paying-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 be called ! Check your mortgage – Can it be called?
  • 15. June 13, 2013 5 Great Sources of OPM … 1. 0% Credit Cards – esp. Company 2. Mortgages/HELOC’s 3. Car Loans? 4. Insurance Policies 5. Margin Accounts
  • 16. June 13, 2013 … Why stop at 5 Sources? 1. 0% Credit Cards – esp. Company 2. Mortgages / HELOC’s 3. Car Loans? 4. Insurance Policies 5. Margin Accounts 6. Friends & Family (BUT …) 7. Home Sellers 8. Crowdfunding?
  • 17. June 13, 2013 FACTS: OPM OPM = Other People’s Money “People” includes any money source, even bankers ! NOTE: Most Wealthy people do NOT use much leverage – Dr. Thomas Stanley … Why? A loan is paid-off if you either pay it off OR you have the money available to pay it off – Douglas Andrew Take & Invest: Any loan with interest below your Investment ROI, for as long as possible
  • 18. June 13, 2013 Outline … 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. June 13, 2013 Paying-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 your investment ROI Your Wealth DNA is more like “Poor people” than “Wealthy people”
  • 20. June 13, 2013 Managing the Risk of Debt …  Having Debt does have risk  Payments on Debt need to be paid even if your investments decline  NOTE: Most Wealthy people do NOT use much leverage – Dr. Thomas Stanley  Develop a Portfolio (Balance Sheet) Tracking spreadsheet & Update every 6 mo.  “You can’t manage what you can’t measure”  Work with advisors/experts that keep you out of investments beyond your risk tolerance  Best: Maintain cash reserves/liquid investments (can be Money Markets, CD’s, MP3’s)
  • 21. June 13, 2013 The 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 Investment in Real Estate, Crowdfunding, etc.
  • 22. June 13, 2013 Quick Test of Wealthy DNA ? … “Rich people have small TVs and big libraries, and poor people have small libraries and big TVs”. - Zig Ziglar
  • 23. June 13, 2013 Contact Ron Nawrocki (aka The Ronald) B.I.Solutions Corp. Verrado Tel: 1-623-249-4792 Ron@WealthDNA.us Ron@EarnAHigherReturn.us Ron@TheRonald.us Proven, Profitable, and Positioned for Growth