She is an internationally-renowned speaker, author, entrepreneur, real estate investor, radio show host, and the founder of Rich Woman. Safe to say, Kim Kiyosaki has together with her husband Robert Kiyosaki changed the lives of many by educating them about money. Her books, talks and financial products have inspired many to equip themselves and make their dreams a reality!
We had the honor of interviewing one of the world’s most acclaimed titans in Wealth Education to find out what the real secrets behind her and her husband’s sterling success are.
Kim, looking at you now as a titan for financial education, who is a wealthy and well-rounded investor. It’s easy to think that you come from a rich background. Was this really the case?
No, I did not come from an affluent family and upbringing. My parents were solid middle class people. I had a great childhood with wonderful parents. Money was actually a subject never discussed in our family.
So growing up, did you always have a passion for all things financial and wealth related? What was the main thing that sparked your passion for financial education?
I wouldn’t say I had a passion for all things financial. I did have a passion related to not being dependent upon my parents for money. I have two older sisters. I was the only one of us to get a part-time job in high school. I worked all through college. I even arranged for an almost-free college tuition so that I didn’t have to ask my parents for money.
So my passion was to be financially independent—not depending upon my parents (and, later, upon my husband, Robert) to take care of me financially.
The other spark occurred when I was an employee. I worked in advertising agencies and in advertising sales. I absolutely hated being told what to do. It’s why I was fired—not once, but twice—from my first job out of college. It was then that I knew I wanted my own business. I wanted to be an entrepreneur. Getting fired was the best thing that could have happened to me.
Many of us that follow you know that you and your husband have a preference for real estate among other investments. Could you tell us why?
There are four asset classes: business, real estate, paper assets (like stocks, bonds, mutual funds) and commodities (like gold, silver, oil and gas). I love business. Robert and I have started several companies. The most successful being The Rich Dad Company. When it comes to investing my money, real estate makes the most sense to me because just as owning your own business, you have control over the asset. I can control the income, the expenses, and the debt. I cannot do that with stocks and bonds. I cannot call up Tim Cook, the CEO of Apple, and say, “Hey, Tim, could you cut back on your private jet expense?”
I also like real estate because it’s tangible. I can see it and touch it. In this volatile economy I want to put my money into things that are tangible like real estate, gold, and silver rather than intangible things like stocks, bonds and mutual funds.
A lot of us are at that stage where we are considering purchasing our first property investments. Could you please share with us the experience (all the highs and lows) of purchasing your first real estate investment?
First, let’s make the distinction between real estate investments for cash flow versus investments for capital gains. Many investors buy real estate with the sole intent of selling it quickly for a profit. They may buy a property that is in need of repair, fix it up, and sell it at a higher price. Your profit, when you sell, is called capital gains. This may also called flipping. We invest primarily for cash flow. We buy a property to hold and rent it. Every month we collect the rent, pay the expenses, including the mortgage, and if we’ve done a good job of managing the property, we’ll have a profit at the end of the month. It’s called positive cash flow.
My very first property was a small 2-bedroom, 1-bath house. I had no experience and just a little bit of knowledge…and I was scared to death. I was afraid I’d make a mistake that would cost me money. “What if I lose money?” “What if the tenant moves out?” “What if my calculations are wrong?” “What if, what if, what if…” I’ve since found this is very normal with first-time rental property buyers. It’s the fear of the unknown.
On top of the fear I had to come up with a down payment of $5,000, which we did not have. Long story short, we got very creative and came up with the down payment and I went through with that first property.
True learning never happens until you do something. It was after I bought that property that my education really began.
So, we’ve read that you, like most of us, came to realize shortly after graduating that securing a job and just climbing the corporate ladder was simply not enough to realize your dreams and goals, could you please just elaborate more on that for us?
As I explained earlier, I was fired from my first full-time job. I truly did hate being told what to do by my boss. (Not a quality trait for moving up the corporate ladder!) I worked in an advertising agency. What would happen was my boss would give me a task and I’d finish it. Instead of just sitting at my desk waiting for the next task I’d wander off to help in the sales department, or the production department, or the art department. Of course my boss would have to come looking for me. The difference for me was this: My boss wanted me to learn a job. I wanted to learn the business. So the day she fired me…I quit.
I then went on to advertising sales positions, where I was somewhat my own boss, but my goal was to start my own business by age 30. I had my first business up and running at 27. And I have never for a minute regretted leaving the (false) security of a paycheck for the freedom of my own business.
Please take us through the journey of what it was like starting your first business?
When I started my 1st business at 27, it’s purpose was to fund my travel, hotel, and tuition expenses for one year to attend business conferences throughout the United States so that I could learn how to build and grow a business—how to be an entrepreneur. I created a logo and embroidered it on shirts, jackets, and sweaters. I then sold my products at the conferences I attended. After one year I ended that business. Then I began my next business with Robert.
Had someone told me, “Kim, here is a picture of what you are going to go through in the next 25 years…” I probably would never have started.
As an entrepreneur, you are being tested every single day. There are no guarantees. There is no safety net. You are 100% responsible for your income, expenses, failures, and successes.
To me entrepreneurship is the fast track to your own personal development, because you are constantly facing situations, obstacles and problems that you’ve never faced before. There are a lot of unknowns. As my fitness trainer says, You have to get comfortable with being uncomfortable.I think this is why so many people who start their own business quit…or never start at all. They do not like being uncomfortable.
Going the unconventional route of investing rigorously could not have been easy initially. Did you find yourself having to sacrifice a certain lavish lifestyle that some of your peers were living in order to realize your dream of financial freedom?
Entrepreneurship is no different to investing. You make money, you lose money, you make mistakes, and the successful investors keep learning every day.
While building our businesses almost every dollar of profit either went back into the business or towards investing, primarily in rental real estate. While many of our friends, leading successful careers, were busy buying their big houses and fancy cars, we lived in the small house with the small mortgage payment. About seven years later one of our entrepreneur friends was visiting us at our new home and said, “You finally splurged and bought the big house and the fancy sports cars.” “Yes we did,” I replied. “Except it is the cash flow from our investments making the monthly payments—not us.”
We live by the rules of Rich Dad; our assets buy our liabilities, not us. If we want a liability, like a Lamborghini, then we have to buy or create the asset that will pay for it.
During this time, whilst beginning to work towards financial freedom and being penniless at certain times, how did you remain focused and not get distracted by what others had to say/thought of you? Did you ever think of giving up on this dream and just living the life that others were living?
When things get really tough it’s only natural to think of walking away from all the headaches and just live a simpler life. The difference lies in those who give up and those who persevere. There is a study of centenarians, people who live to be 100 years old and beyond. They set out to discover the common denominators all these people had. The top three were:
1) A sense of Purpose.
3) Resiliency – how well you come back from a setback
You can apply these same three factors to what determines a successful entrepreneur and investor. They are all critically important, yet I think resiliency is key. How well you respond to a failure, rejection or a major difficulty. Do you quit? Or do you learn from it and move ahead, smarter
I think resiliency is key. How well you respond to a failure, rejection or a major difficulty. Do you quit? Or do you learn from it and move ahead, smarter
From my experience, the person who makes the most mistakes the fastest, and learns from them, is the winner.
How critical would you say financial education in this day and age for millennials?
Financial education has always been important. Unfortunately, for many, it’s not a priority. It only becomes a priority after a personal financial crisis.
Today, especially for millennials , financial education is more important than ever. Why? Because the rules around money have changed. “Save money” was good advice in the past when your savings was earning 8% or more in interest. Today it earns close to 0.
Blindly turning your hard-earned money over to a financial planner, financial advisor, or stockbroker to manage is horrible advice.
No one cares more about your money than you do. If you give anyone your money to invest you had better know what it is being invested in, how that investment works, and what return you are getting on your money.
“Work hard” is still good advice. I don’t know of any highly successful person who hasn’t worked hard, but you also have to know how to have your money work hard as well. Otherwise, you will be working hard until the day you die.
There is a notion that most millennials know what the right thing is theoretically when it comes to money. However, they just do not do the right thing when it comes to applying that theory practically. Do you agree with this statement as one whose business is focused on financial education, and why?
First, we would need to define what is the “right thing” to do when it comes to money.
Many people might say that the “right thing” to do is to 1) save money, 2) invest for the long term in the stock market, and 3) depend upon your retirement or pension fund when you stop working. I don’t think that is the right thing to do with your money.
If a person wants to be financially secure or financially free I recommend they learn about the investments that will give them cash flow.
Decide which investments are most interesting to them, and then get started.
How do you start? Here are some steps:
1) Learn the language of money. Learn the language of the specific investment vehicle you’re most attracted to. For example, if it’s real estate, then what is a return on investment? What’s the difference between a cash-on-cash return and an internal rate of return? What is price-per-square-foot and why is it important? What is a CAP rate? Paper assets have their own vocabulary, as do business and commodities.
2) Learn from someone who is successfully doing what it is you want to do. You may want to work for them for free. Or put together your own study group with a few other like-minded people who want to be financially smart and are willing to do what it takes.
3) After doing some homework, and armed with a little education, then start small. Take baby steps. Put a little money into an investment. It will force you to learn more and to pay close attention to what you’re investing in.
You will also make mistakes and you want to make mistakes with a little bit of money, not a lot. And with every mistake you make (and you will make them!) learn from those mistakes.
Now I will ask you something similar to what I’ve read that you and your husband commonly get asked: If I am a young professional who has saved $1000 today, how would you advise me to invest it?
One simple exercise I suggest is to go out a buy one or more one-ounce silver coins. Today it will cost you approximately US$16.00 per coin. The reason for doing this is by putting just a little money down, you now own a commodity—silver. I guarantee that your interest in silver will now come alive. Watch the price of silver every day. Is it up? Is it down? You’ll spot articles and videos on silver and in a very short time you will learn more about this commodity than most people on the planet. That is the beauty on putting a little money into an investment.
Lastly, what is the best piece of financial advice that you have ever received, and what is the best piece of financial advice that you can give to any young investor?
The best piece of advice I have received is the same advice I would give to young investors. “Trust your gut.”
What does this have to do with money? Plenty. The biggest mistakes I have made in business and in investing were when I did not trust myself. For example, when looking at an investment that appears to be a fantastic deal it’s easy to overlook those little red warning flags that pop up. It may be an ethical issue you overlook in a partner. Or you follow the attorney’s (poor or flawed) advice because you think he knows more than you. Maybe you don’t ask the question you know needs to be asked because it may turn your great deal into a mediocre one.
When a bit of greed sets in, because, “It’s such a great deal!” then emotions, not logic, take over. Our saying is, “When emotions go up, intelligence goes down.”
The times I did not trust my gut I ended up with a bad partner, I lost a very good deal, and ended up paying dearly for a flawed business project.
Good business sense is a combination of knowledge, experience, and trusting your gut.