Misinterpretations of Rich Dad Poor Dad Books

I picked up Robert Kiyosaki's first book at the age of 18. That book changed my viewpoint of life almost instantly. I have read most of the Rich Dad's series, and have almost the whole collection of his books. So basically, I am in the right position to state my viewpoints.

Robert's books are MISLEADING.

Most people are misinterpreting his books, especially those who are still studying.

Here are some of his philosophies:

1. Schools don't train us to be rich, they train us to be employees. And we cannot be rich by simply being employees.
2. We have to create our own path, our own business in order to create our own wealth. We must not be afraid of failures.
3. The government tax us for what we've earned. Why giving them our hard-earned money?
4. Why use your own money to build a business? We can always seek financial aid if our business idea is good enough. We can obtain money from banks (governments are always supporting SMEs', so there's always a fund allocated for that) or even people we know who simply have money but do not know what to do with them.
5. NEVER invest in FDs, insurance, mutual funds and all those financial instruments because they do not generate returns good enough.
6. Never be afraid to work for free. Find a mentor to help you.

There are many more but I am just listing a few. If you're a student or a fresh graduate, you have to read this. Just as any excited young individual, the passion and fire is wild and fierce, I headed to Rich Dad's Advice. As I explained the following points above, I will also include my personal experience.

Schools don't train us to be rich, they train us to be employees. And we cannot be rich by simply being employees. There is a certain level of truth in that. But you have to bear in mind that, (if you know MBTI) there are many different types of people out there. Some are meant to lead, some are meant to follow and some are meant to create. What does the above sentence tells you? To not place too much importance or emphasize on your studies? To start a new business immediately? Do not listen to your parents or teachers, because if they are so good, they would be rich. True enough that our education system do not provide us financial education and we must go out there, test the waters, be practical and embark on your journey of entrepreneurship.

As mentioned, I was 18 when I read the book. The idea that I interpreted is that I need to learn as much as possible. So I picked up property books, forex books, stock books, whatever financial books I can get my hands on out there.

I skipped class because I have to work. I earned more than sufficient income from my home tutoring, more than a fresh graduate's salary. But I wanted more. So I worked on weekends and whichever projects that my company gave me. (I was working as a promoter, due to good relationships with my supervisor, I was able to get higher paying jobs than other promoters, from Rm100-RM150 per day)

I completed my foundation course in May 2009, with CGPA of 3.09.

"Not bad," I thought, despite skipping classes and studying last minute.

In late 2009, I was offered a job as a loan consultant. My job basically requires me to get customer to sign up for Standard Chartered Bank's loan packages, whether it is a commercial property or a residential property. The commission scheme was attractive.

From there, that's when my real journey started.

I learned that there are certain requirements for loans to be approved. And no doubt, out of the 10 loans I submitted, only 2 gets approved.

With the little money I obtained, although I was being discouraged by my friends and family that I was wasting my time, I continued working. Because rich dad said that you must learn to work for free for long-term benefits. I was learning sales and financing. I thought I was on the right track. I took up another job as an insurance agent, to learn about more about personal financial education.

Over the one year and half, my grades were between 2.8-3.0. I didn't care because my studies will not interfere with my future plans. My plan is to earn as much money and learn as much as I can so I can start investing in properties and start my own business and be a millionaire by 25. I skipped class so often and I hardly touched my tutorials. I was amused and amazed with myself, being able to manage so many things.

Until last year September results were out. My GPA was 1.9, below par. My PTPTN loan was pulled back by the government and I had to pay for my own fees on the next semester. With the addition of the subject I failed, the bill amounted to RM5250. The money I earned from the property project I was working on was used to fund that semester's bill.

Not only my CGPA has dropped to 2.4, so was my confidence. During internship application, I could not get accepted to investment banks such as OSK and CIMB. Even MAS wouldn't accept me.

That's when I stopped and start to wonder.

Have my thirst and hunger for success have defeated me instead of putting me ahead of others?

Will a university education really able to get me that far?

I watched my friends, those on their entrepreneur journey, having failures after failures.

End of the day, not only they lost money and time, they lost trusts and friendships.

During my course of work with the bank, I have an edge over other bankers because I was able to write better proposals with the simple addition of financial ratios which manage to get loans approved. Of course, I was also helped by my manager. I was selling investment-linked funds and was able to sell because of my knowledge and understanding of the equity market.

The point here is, with the knowledge you obtain from your course, if you know how to use it, it will be extremely valuable. Why do people that when they graduate, they tend to switch fields?

Not everybody is blessed being able to know what they want to do, what interests and is suitable for them at early age.

Let me make this a little more clear for you. No doubt Robert's books have really good concepts, that can be applied but you have to know that the market will always change.

Our parents asked us to study hard and get a job because they were from the industrial and post-war age where stability matters most.

Since we are on the information age now, that advice do not apply. And since there are so many people with a degree nowadays and the job market is extremely competitive, being an entrepreneur is the way to go, since many are looking for jobs nowadays.

At first I thought entrepreneur youths are rare and admired them greatly, but when I widen my horizon a little bit, there are many of them, most of them struggling and failing to see something obvious. They refused to see that being an entrepreneur is more than having balls and taking

risk. They do not recognize risks and fail to manage them, making the same mistake over and over again, failing again and again. Starting a new business again and again, thinking the previous fail because the idea weren't good enough. I mean sure, Robert asked us to never give up and never be afraid of failures. But there's one thing you are missing out; you forgotten and do not know what is your true value, since you diversify so much.

Few years ago, I attended this seminar organized by MoneyMastery. They called it a wealth coaching programme. I attended it because I thought it would be Robert Kiyosaki giving a talk, but it happened to be his student, Mr. K.C. See. His speech is alright with the quotes he got from the book. He was trying to promote a course, a wealth mentoring course at a price of RM10k +. In this course, you will be put into a group, brainstorm a business idea then bring it out. They will promise to mentor you with the various expertise but for the first rm10 000 you earn, you must contribute it to MoneyMastery.

Sounds like a good deal right, if they are able to help you to achieve wealth?

Think about this. You are being placed in the group. As a student or a fresh graduate, you may think your youth and creative ideas will be an asset to the group. In that group, there may be uncles or aunties with money(if they have money, then why are they there?), maybe some professional accountant or some legal assistant, engineer...they may all have something to offer.

What do you have to offer?

If you say your brilliant creative ideas would be your best contribution, then these people in the group would not want you. Because ideas are just ideas, unless you patent it. Forget about patenting, you wouldn't want to spend money on that intellectual property yet to claim its yours. Easily these people in the group, who would be your partners, can kick you out.

They do not rely on your expertise.

Or your capital.

To get the business going.

If you say school is useless, then you are just no different from any other uneducated lost people on the street.

School is where we get to sharpen and to be an expert at a certain field.

Then later, after being a master at our field, we form a business to generate more wealth for us.

Why is Bill Gates rich?

He was an expert at computers.

Why is Warren Buffet rich?

He was an expert at investing.

Why is Donald Trump rich?

He was an expert at real estates.

In order to be successful, we must be focused.

Especially if you wish to be an entrepreneur.

From one of Robert's books, "Before you quit your job"

He said there is 5 major segments of a business.

1. Product

2. Finance.

3. System

4. Legal

5. Communication.

Which would you choose to specialize?

(This post will be continued in the future.....)

*Don't give me the crap of Bill Gates didn't complete his education at Harvard so even the best school may not help you to generate wealth. Bill Gates was a genius in computer, what about you?

*Warren has no professional investing qualifications but he has the passion in investment. What is your passion? -Besides, with the complication of financial instruments nowadays, higher education is getting more important. During his time, he invested in good stocks which carried the value until now, which explains his wealth.

*Donald Trump was very proud that his son did well academically.

Additional Costs for Property Purchase

For all property buyers or future ones. ;)

How to calculate Legal fees and Stamp duty when buying property in Malaysia?

1) Stamp Duty == 1% – 3% (By Buyer)
2) Lawyer/Legal Fees == 0.4% – 1% (By Buyer)
3) Other Fees == RM180 (By Buyer)
4) Real Estate Agent’s Fees == 2% – 2.75% (By Seller)

Explanation as follow:

1) Stamp Duty (Value Of Property in RM — Rate)
First 100,000 — 1%
Next 400,000 — 2%
Next 1.5 million — 3%
Above 2.0 million – 4%

2) Lawyer/Solicitor’s Fee (Value Of Property in RM — Rate)
First 150,000 — 1% (subject to a minimum fee of RM300)
Next 850,000 — 0.7%
Next 2,000,000 — 0.6%
Next 2,000,000 — 0.5%
Next 2,500,000 — 0.4%

* where the consideration or adjudicated value is in excess of RM7,500,000 then it’s negotiable but shall not exceed 0.4% of such excess

3) Other Fees (RM)
Stamping Fee (per document) — RM10
Adjudication Fee — RM10
Title Search Fee — RM60
Registration Fee — RM100

4) Real Estate Agent’s Fee
Agent’s Fees are regulated by the Board of Valuers, Appraisers and Estate Agents Malaysia (LLPEH). Commission is paid either by buyer or seller, subject to a maximum discount of 30% but a minimum fee of RM1,000 per case. The scale is not applicable to sale of foreign properties in Malaysia.

Agent’s Fee (Value Of Property in RM — Rate)
First 500,000 — 2.75%
Remainder — 2%
Property Buying Procedure(Simplified):

The first step to purchasing property in Malaysia is to hire a real estate lawyer to assist in the transaction. Once property is selected, a Letter of Offer/Acceptance(also known as booking receipt) is signed, and a 3% deposit is expected from the buyer.

Within 14 days, the Sale and Purchase Agreement is signed. The buyer must pay another 7% deposit. From the date of the signing, the buyer has a maximum of three months to accomplish full payment. Sometimes, the buyer will be allowed one more month to pay the remaining amount, thus it will be 3+1. Penalty of around 7-8% interest per annum of the property value will be imposed for late payment.

The Sale and Purchase Agreement must be stamped at the Stamp Office. After the examination on the property of the valuation department, Stamp Duty is paid to the Stamp Office. The transfer must be registered at the Land Office Registry.

Be cautious when buying new property in unfinished condominium projects. Buyers may not be fully protected against default, an issue vigorously raised by the Malaysian House Buyers’ Association, which has pointed to flaws in The Housing Development (Control & Licensing) Act 2002, and the Strata Titles Act. Those buying unfinished property from developers should ensure that the developer has a valid Developer’s License and a valid Sales & Advertising permit.

Disclaimer : This article is written to give you a basic idea of how property buying cost and procedure in Malaysia works in a nutshell. Furthermore, I WILL not be liable for any inaccuracies or loss suffered based on the information given. Change of policies or new regulations or new pricing may be imposed in the future. I shall try to keep updated as possible while you can consult your real estate agent, banker and lawyer for more information. You can contact me too at my email or my mobile number if you require any further clarification.

(The article was initially written by a real estate agent and some additional information has been included from a banker's point of knowledge)

Personal Finance (August 2010)

I think it is only fair if I share some of my knowledge in this area, in which even older adults, our parents or lecturers, have little knowledge of. You may ask them about this topic, and they may tell you what they know.....few years ago. Banks are just like any other businesses, with the main objective of maximizing profit. Therefore, their policies and regulations are always changing, being influenced by economic, competition and political factors. We, bankers, who are in this industry is always up-to-date with the latest information. I have only been working for one year in the bank, yet the bank has changed its policies for about 3 times already. And they are going to change again next month too.

WARNING: DO NOT READ THIS, IF YOU'RE EXPECTING MILD ENTERTAINMENT AND DO NOT WISH TO PLAN FOR THE FUTURE YET.

There are two basic factors in which the bank consider and evaluate before approving your loan.

1) Your capability to pay

This refers to your income. If you are a :

a) Salary-earner : Salary earners refer to employees working under an organization/company with a fixed amount of income every month. You need to have at least 3 months payslips with your salary being credited the exact amount in your bank statements. If you have EPF, make sure it's being shown consistently in your EPF statements. The banker will check the amount on your payslips, bank statements and EPF statements to see if the amount tallies. You may also include your income tax statements (also known as Borang B/Borang BE/Borang EA) with payment receipts to prove that your earnings are legal and genuine. ( as you have declared to the government)

b)Self-employed/Commission Earner/ Having own business : Self employed can be referred to freelancers such as freelance writer, consultants, tutors, insurance agents, direct sales agents or having some kind of business. As your income is inconsistent and your are unable to provide payslips as proof of income, your most important document is income tax statements. It is important that you declare tax, or else you will find difficulty in obtaining bank loans because you cannot prove that you are actually earning. Let's say for starters, fresh graduates, perhaps you can declare RM3000 per month? Which is about RM36 000 a year. We will only have to pay tax if our income exceed RM3000 per month. And of course, if you declare higher, it means that you have higher capability to pay, thus can obtain higher loan.

Debt-income ratio (DIR)

• Your total debt must not exceed 70% of your total income. For example, if you earn RM3000 a month, you must not have debts (car, property, personal, credit card loans) exceeding RM2100. However, for the bank I am working for, they actually allowed DIR of not more than 80%.

2)Your credit risk

• You must at least have a credit card if you want to apply for property, personal or business loan. And once you have a credit card, make sure you use it and pay consistently every month. This is important because the bank would not want to lend to people who do not have experience in handling debt. Most people would think, "Oh no, I don't want to have a credit card, later I simply spend". If you pay within the month itself, you will not be charged interest, only annual fee. Interest per annum is around 12%-15%, which means around 1%+ a month.
• Your credit history, this will be shown in CCRIS report. CCRIS report shows how well you handle your debts, if you default more than twice in the last six months, it is most unlikely your loan will be approved. If you're blacklisted, your name will appear in CTOS. Don't even think about applying loans, you have to clear your debts and get a letter from Bank Negara Malaysia and show good credit payment for the next six months.

Alright, I shall stop boring you with the excess details in eligibility in obtaining loans. This is a brief information for the type of loans out there.

Personal loan:

• Interest rate is around 8%-13% per annum, depending on your credit risk. Maximum loan payment period is 5 years. Usually approval in about a week. It can be straight-line or reducing balance calculation.
• You can borrow five times of your monthly income or if you have a credit card, take the limit of your credit card, divide it by 3, then multiply by 5. The credit card calculation actually enables you to borrow more.
• To be honest, I don't quite see why we, fresh graduates need to get a personal loan. Down payment for a car? Marriage? Vacation? Further studies? Lol?

Property loan:

• This gotta be the cheapest rate of all types of loans. Because it is known as secured lending. In any case of default, the bank can take back the property.
• Interest Rate: Depends on the bank, usually it's BLR-1.5% up to BLR-2.4%, depending on the loan amount. (*Current BLR=6.3%, just use this amount to minus. Eg, BLR-2%; which means 6.3%-2%=4.3%, 4.3% is the interest rate charged.)
• Loan margin: 90% of your property purchase price. Which means you have to bear the minimum of 10% yourself.
• Loan tenure : Maximum 30 years, up to 70 years old.
• The "quality" the property is measured by MF (Marketability Factor). The minimum MF must be at least 6-6.5/10. Banks will not finance properties which are not marketable.
• The property market is booming recently. There a bubble predicted to be happening. Properties are selling like hot cakes now, and their prices are shooting up very high. Would be the perfect moment and sell at this time. Investors are speculating the future property market, which looks promising by the speed of property units being snapped up and the greater appreciation value.

Car loan:

• I am most uninterested to talk about this. Car value depreciates about 20% a year, the foreign cars in our country is overpriced (not only foreign, local also. Even proton cars sell cheaper in UK than in Malaysia) and it affects our DIR. If you have recalled, if you buy a car and get a car loan, it will increase your debt, thus increase your DIR, which reduces your chances of getting loan for potentially high-return properties.
• Anyway, we silly naive youngsters would still love to show off with cars and all. Here you go, with the information.:

1. Up to 90% for new purchase or less than 5 years old car. For 6 to 10 years, you can borrow up to 85%. For more than 10 years, buy with cash lah.
2. Interest rate : 2% to 4% per annum. The longer your loan period, the higher the interest you pay. But then again, if the shorter your loan period, the lower the interest paid, the higher installment you have to pay a month. :D
3. Maximum 108 months, (9 years). Finance students, bring out your financial calculator to compute the monthly payments.
4. You only need photocopy I/C, 3 latest months payslips with latest 3 months bank statements and the receipt for the down payment of your car.

Business Loans

• This is the hardest loan to obtain. Minimum 3 years in operation. Minimum at least RM1million sales turnover for the last 2 years. For start-ups, very difficult to get unless you charged your collateral with your loan or bear higher interest. Repayment period is 5 years. Very risky to take this loan if you ask me, unless your business is well-established.
• Interest rate : Similar to personal loan, depending on your credit risk. You can obtain as low as 6% per annum if the government suddenly launch some economy stimulation package plan or being supported by CGC. (Corporate Guarantee Corporation) Otherwise, the usual rate is above 9.9% above.
• If you are truly interested in getting the best deal for business loan, email me or leave a message.
• For young people who are inspired to start a business or plan to expand their business, consider getting personal loan or refinancing your property as another option.

So, my dear friends, you can start planning for your first car or property. If you want a car, save at least 10% of the purchase price and work for at least 3 months. If you want a property, start declaring your income tax for the 2 years and have a credit card. Best wishes to the visionaries who actually read this whole thing. Cheers.