Wednesday, January 24, 2007

Riches

Ok the Robert Kiyosaki Rich Dad, Poor Dad book review that I had promised. I suppose that I am the kind of individual to get excited on the possible and those things that are fundamentally true. I read the book and was immediately excited about the book and the prospect of changing my financial future. There were many nice anecdotes in the book and some good advice. The book is a pretty simple book and not the end-all-be-all encyclopedia of how to get rich. I read two books in his series, I also read Guide to becoming rich without cutting up your credit cards. It was another good book full of helpful anecdotes and general theories.

What I will say about the books and the series is that it is not what you read when you want specifics about getting rich, it is what you read when you get motivated to get rich. In other words his tracts are books of theory and realization they are not blueprints to wealth. Just like any book that invites you to make life altering changes it has to promote excitement and create a desire to change. The book does a good job about doing that.

Unfortunately I don’t have the book with me to demonstrate or quote from so I will have to go by memory. I didn’t reread the book and write notes either so I apologize for that. So going through my memory I will retrace the important points I received from the books I read. I don’t have a chronological memory I have what my dad calls significant event memory so these facts my not return in the order that they are presented in the book.

First moment that I thought that made sense was the lesson of making money. Basically Rich Dad exploits his son and Robert by having them work in his store and miss out on the basics of life for a meager amount of cash. I think $.10 an hour or a day or something stupid. The lesson was that people will pay you what they think that you are worth and they will get away with it because of your fear of uncertainty. He mounted that restrictive fear is one of the things that keep most people back. It affects the wealthy as well because many times they become so obsessed that they are stricken from losing all that they have.

Many of us who hold jobs are often disappointed when we receive that check and then reflect on our bill situation. We reflect that so much time is wasted doing something that we don’t want to do and more importantly probably don’t like doing just so that we can pay bills and taxes. The truth of this lesson is very evident as it is an integral part of most societies. In societies where it is not a reality those societies can create the most beautifully humanly original realities in life. I know that I don’t like working, because I have to pay bills. I would much rather work doing something that I truly want to do without having a regard to whether I was making money or not. I think I would then be able to truly enjoy life as Allah intended.

The next big thing that I got out of the book in the sea of examples and anecdotes was arrange your finances so that you have passive income coming in. The earlier you can develop a positive cash flow the better off you are in the long run. In essence the only way that you can get wealthy is to have your money working for you when you aren’t working. Just like the power of multiplication. 1 x 1 can only equal 1. You can only work so hard, but the reality is that your wealth is primarily tied to yourself. There is a lesson that you must learn in life and that is how to make one dollar into two. If you can repeatedly do that then chances are you are on your way to greater financial wealth. I learned that education does not necessarily equal wealth. What it does provide is a way to gain higher income so that you can purchase the assets to provide a passive income that will allow you to attain great wealth.

The one thing that I brought away from the books is that I want to position myself and my children in a way that there is a passive income coming in that will provide a way that will allow me to enjoy life without working at least not in a traditional sense.

One thing that Robert Kiyosaki brought home in the books over and over again was if it isn’t making you money then it isn’t an asset. I can attest to this. Right now I have two houses and one of them is sitting empty and it is draining me financially, potentially to the point of screwing up my credit. I think a great book to find would be the best businesses to buy for less than $5000. You can make money doing anything the key issues to learn are how to parlay your money and how to move your concept from a smaller low cash audience to a larger low cash audience (Wal-Mart) or into a targeted high cash audience. The thing with low cash business is that these are products and services that are time intensive, especially when the business needs you to make the business work. If you stop working so does the business. A professional performer is an example of this. Those guys who sell water on the corner are also that kind of person. If you stop working then the business does also. It gets into personnel management. If you aren’t a good leader or communicator then the whole corporate asset situation becomes problematic. There are many ways that you can double your money, but to do so you must become a student of money, unfortunately this is the case in order to survive or be stuck in some stupid dead end job whether it pays $10 an hour or $150K a year. Entrepreneurship and investing is a necessity.

Hold on I got to bring it back in I’m going on a tangent. So I cheated and went to WikiSummaries and I bring you this from the book to better keep me on track.

The author presents six major lessons which he discusses throughout the book:
The rich don’t work for money
The importance of financial literacy
Minding Your own business
Taxes and corporations
The rich invent money
The need to work to learn and not to work for money
In the Rich don’t work for money he explains that there are three types of income the most important of which is passive income. The rich arrange their finances so that their Assets pay for and pays off their luxuries. If you have assets paying for stuff then you can afford to buy the things you actually want instead of buying a lot of junk because you can. In the importance of financial literacy he talks about the importance of being financially literate and knowing what to do with your money and having discipline about money. The best thing that you can teach your children and yourself is the power of restraint in order to achieve and have more. I think that I should have gotten married much later in life. Saving myself for my Queen would have been good. Then I would have had the opportunity to invest smartly and build a nice portfolio so that I would be able to retire like 5 years ago. Then I would be able to spend the time that I really want to with my family. I think that I should have chosen my duty stations based on financial opportunity, but I let myself get discouraged by moving to high cost areas early in my military career and being completely daunted by the cost of getting into the field of my choice real estate investing.
There are no excuses now, I’ve got to bring it all together. Five years from now I’d like to be sitting on 4 more properties. Probably should make that six years from now because I’ll be gone for a year. Ten years from now I’d like to have created enough passive income to quit working completely.
In Minding your own business he states that McDonalds isn’t in the business of selling burgers it is in the business of Real estate. This makes a lot of sense because if you own the building and if burgers don’t sell then you know that rent is always due on that real estate.
In taxes and corporations he states that Corporations allow one to pay taxes last. Now this makes sense because if I am the corporation it pays to know that if I report no earnings I pay little to no taxes. In contrast if I get a salary or am a sole proprietary I pay taxes first or at least quarterly. Corporations and corporate law is mostly pretty confusing stuff, definitely a Corporations for Dummies subject.
The other two chapters The Rich Invent Money and The Need to work to learn and not to work for money I remember less even though I read them last. In the first chapter he addresses self-doubt and the playing it safe mentality. This is repeated in Guide to becoming rich without cutting up your credit cards where he discusses the effects of living frugally. I disagree with him where if it is your nature to live frugally then there is no problem but if you are a binger then living frugally isn’t going to work for you for the reality that you will go buckwild when you get your first chance and spend all that you have worked up for. In the last chapter he expresses the need for management and communication and the power of giving away. The more you give the more comes back to you.
So I was happy with my new found knowledge and then I ran upon John T. Reed’s massive analysis of Kiyosaki’s work. The detail that he went through to degrade and exploit Kiyosaki’s books was tediously back-breaking. It was incredibly extensive and I feel totally missed the point, because he goes into incredible specifics that overshadows the reason you take things into your mind in the first place, can I benefit from this? If the answer is yes then necessarily the book is a benefit. I think that his excessive tearing down of Kiyosaki is a personal front and regret that his books aren’t as successful. He has good stuff on his website and stuff but I feel that this was overboard and not necessary. Amazingly Robert Kiyosaki left a rebuttal here which I thought made some good points. His position didn’t sway me from what I took away from the books. What I got from the books was concept and I know that I need to read something else to get some technique. I possibly would have gotten it from John T. Reed but he is undermined by many of the things that he accuses Kiyosaki of and more that reflect on him personally.
Now of course as a Muslim you have to weigh everything with Islam and so there are some things that I want to say that buttress the argument of becoming wealthy. The first is that Allah would rather you be stronger than weaker. Primarily we should be stronger in Scholarship, then in financial wealth, and then in physical strength. The evidence of this is within the Quran and the Sunnah of the Prophet (SAAW).
For the sake of brevity I will skip the two other subjects and focus on wealth. The Quran states:
9:92 Nor [shall blame attach] to those who, when they came unto thee [O Prophet, with the request] that thou provide them with mounts, were told by thee, "I cannot find anything whereon to mount you" - [whereupon] they turned away, their eyes overflowing with tears out of sorrow that they had no means to spend [on their equipment].

In this verse we obviously see the importance of having a strong financial base in the community and the necessity for each Muslim to be financially fit. One only has to wait for a conference or an Eid to roll around to see the massive need of the community. Whether it is helping the earthquake victims of Pakistan or aiding the Legal defense Fund of Islamic Pioneers. Wealth is a necessity required by the Muslims. Allah also states:

16:76 And God propounds [to you] the parable of two [other] men -one of them dumb,
Asad(16,86)
[86] unable to do anything of his own accord, and a sheer burden on his master: to whichever task the latter directs him,
Asad(16,87)
[87] he accomplishes no good. Can such a one be considered the equal of [a wise man] who enjoins the doing of what is right and himself follows a straight way?
Asad(16,88)
[88]

Where Allah speaks about knowledge and capacity to carry out affairs, but also wealth for if we are not able to sustain ourselves we are as this man. Looking at it deeper it describes the state of the Muslim global state whereas we are directed by the wealthy and our enemies and whenever we are placed in charge of something it shows that we are unable to be successful of our own accord. Or at least that is the way it is made to seem.

Wealth is necessary and a study of a healthy Islamic position of wealth is also necessary. Even the Prophet promoted the management and investment of wealth. I took this from a Malaysian site:

i. Savings and Investment
Through the imposition and collection of Zakat, idle private savings above an individual's level of nisab (the minimum exemption level) will be reduced, if not completely eliminated. The Zakat levied will eat away their net savings unless they channel them into productive investments which earn income. This punitive nature of Zakat, although at a low rate of 2.5% of one's wealth, would encourage one to invest. Thus, by imposing a penalty for keeping resources idle, the zakat helps push resources into productive sectors which earn income for individuals and his community.
According to a study, by virtue of the fact that the amount of nisab is small, one who does not utilize his wealth in production and keeps it idle will lose one-fourth of his wealth in less than twelve years. The Prophet realized this consequence and had urged those responsible for the management of wealth belonging to orphans to invest that money so that it would not suffer gradual erosion. This request of the Prophet teaches the Muslims to make Zakat payments form the earnings generated form one's wealth rather than from idle wealth itself.
In the absence of usury-yielding assets in an Islamic system, the effect of Zakat could be lower than the expectation of returns compared to investment. The reduced profit expectations are likely to induce the deployment of private capital in areas where currently only the public sector is obliged to venture. This will result in the expansion of private participation into the economic activities monopolized by the public sector; thereby promoting greater public-private sector cooperation in the development of the country.


The Muslim in the west often struggles with the desire of getting ahead and the reality of seemingly inevitable Riba. Some choose to do nothing others succumb and embrace it vying to one day be free of it Insha Allah. If we as American Muslims attack the problem straight on and invest and funnel our dollars into target markets we can overcome this hurdle and build the types of investment packages that will help us all get from under the far reaching umbrella of Riba.

I know that I’ve talked your ear off on this post, and there is much more to be said. I will dissect this wealth issue and address it periodically in mini-posts by themselves.

Thank you for reading.

1 comment:

  1. I was just discussing riba and lots of this (about investing, owning businesses, and credit) today with a sister. I need to "chew the fat" of your post a bit, and Insha'Allah I will have more input later.

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