Very good article, It can help you to think twice if you maximized your loan in property investment. That the set back I think of when I want to buy a property. WHAT if no tenant? Can I sustain?
I am thinking of starting a business.
What should I do?
Will share more If I have concrete Idea.
Money & You by YAP MING HUI
A FEW months ago, I was having breakfast with a friend when he told me about the seminar he was going to attend in May to hear Robert Kiyosaki speak.
In the past year, he had read all the author's books and had already taken out two maximum loans to buy properties to rent out. I was curious to know more. We barely finished drinking our coffee when he insisted he had to leave. He was going to the bank to apply for another loan to invest in more properties. There was little I could say or do to stop him from leaving.
As the day progressed, I could not shake off an uneasy feeling that something was not right. I worried that my friend might be setting himself up for financial ruin. As I edited the opening pages of my new book, I recalled my introduction to Kiyosaki's work and understanding of his principles.
More than 10 years ago, at about the same time when I made the decision to pursue a career as an independent financial advisor, Kiyosaki published his seminal work, Rich Dad, Poor Dad. In it, Kiyosaki challenged the preconceived notions the middle class had about their inability to achieve financial freedom.
In highlighting the need for financial literacy, the advantages of becoming a business owner and investor, and overcoming obstacles with a positive attitude, he underlined two fundamental concepts of financial freedom: a “can-do” attitude and fearless entrepreneurship. I have no doubt that Rich Dad, Poor Dad had a positive impact on millions of people all over the world. Indeed, reading it certainly inspired me to work towards becoming rich and doing this fast.
However, as time passed, I observed that many Malaysians who adopted Kiyosaki's approach became trapped in the “rat race” with no way out. This outcome was the exact opposite of what Kiyosaki envisaged in Rich Dad, Poor Dad. I wondered why this was so and decided to read Kiyosaki's books again.
It was clear that Kiyosaki's other books built on Rich Dad, Poor Dad and helped to crystallise some important theories about personal finance. For instance, you should not spend more money than you earn. It is important to invest in assets rather than liabilities to build a passive income from your investments. This is how to make your money work for you so that you become rich and wealthy.
Nevertheless, with the benefit of experience and knowledge as an independent financial advisor, it was not long before I became uncomfortable with what Kiyosaki was saying. In the book he co-authored with Donald Trump,Why We Want You to Be Rich: Two Men, One Message, he made statements which implied that the only way out of the “rat race” for the middle class was to become rich.
Also, all the suggestions Kiyosaki made were about “what to do”; he never gave concrete advice on “how to do it.” For example, you must take on “good debt” to become wealthy. This meant taking on more risk by acquiring loans to invest in properties. However, he didn't show you how to manage this risk or the investments you made.
I feel that the approach Kiyosaki advocated is muddled and has the potential to be both dangerous and misleading. The closest analogy I can give to illustrate my point is this: you're put in a Formula 1 race car and told not to be scared as there's nothing to stop you from driving at the same speed as other Formula 1 drivers. Only, you have never learned the special skills needed to control a race car.
The fact of the matter is that taking on more risks does not guarantee financial success. Fraught with uncertainties, it might get you rich quick, but it can also ruin you. For instance, I know a 45-year-old bank manager who, inspired by Kiyosaki's work, quit his well-paying job to start a business.
Two years later, his business is heading nowhere, he is on the verge of eviction, his wife has taken the children to live with her parents and the hire-purchase company repossessed his car.
Then, like my friend with whom I had breakfast, many have taken out maximum loans with a view to getting rental income and capital gain. However, they cannot find tenants or buyers and struggle to make the instalment payments to the bank.
To be fair, let me state that I am in favour of what Kiyosaki proposes; in fact, we share a common purpose: both of us want to help people to get out of the “rat race.” However, I feel that, on the whole, Rich Dad, Poor Dad and other books by Kiyosaki are no more than successful tools to motivate people to think about how to manage their personal finances. It is unwise for Malaysians to use Kiyosaki's work as the only guide to acquiring wealth. In other words, getting rich is not the only way to get out of the “rat race.”
I am confident enough to say this because I have discovered a more plausible and less risky solution to becoming wealthy. Instead of jumping straight into taking on more risks and acquiring debt, take a metaphorical step back and start by optimising your existing financial resources.
The aim of doing this is to help you work towards becoming financially free. The by-product of this exercise is that you will acquire knowledge and experience about how to manage financial risks and investments. When you have become financially free, your position is secure.
Only at this point is it wise to start applying Kiyosaki's concepts and ideas to increase your financial risks and acquire more wealth.
When you adopt this approach, rest assured you will enjoy peace of mind and have the ability to focus wholeheartedly on creating more wealth regardless of the outcome. This is because you will know that you are financially secure. By far, this is a more certain, safer and better approach to becoming wealthy.
http://biz.thestar.com.my/news/story.asp?file=/2012/8/4/business/11785165&sec=business