Unfair Advantage -The Power of Financial Education (25 page)

Due to a lack of financial education, even the highly educated workers have their wealth siphoned off by debt via the banking system, their retirement via the investment-banking system, their labor via taxes, and what is left via inflation. If they own shares of a company, they own common shares—common shares for common people.

The plantation system is alive and well, even in the Information Age.

The Plantation System

In 2011, kids still go to school, learning nothing about money.

In 2011, kids still come out of school looking for a job, anxious to get married, buy a home, and raise a family.

In 2011, the national debt is out of control, and foreclosures take homes from millions of homeowners.

In 2011, our wealth is being robbed via higher taxes to pay for this debt, debt that goes to the rich.

In 2011, kids who find jobs are only too happy to have taxes taken from their paychecks before they get paid.

In 2011, kids are only too happy to have money deducted from their paychecks with the illusion that they are investing for their retirement.

In 2011, legislation is now being passed making it legal for the government to take a larger percentage of your wealth when you die.

This is the problem of supporting a school system led by E’s and S’s, training young people to be E’s and S’s. This is the problem of having political leaders who are E’s and S’s leading a capitalist system controlled by B’s and I’s.

This is what happens when E’s and S’s do not know the difference between assets and liabilities. They spend their lives working to accumulate liabilities, believing they are assets. They go to school to find a job without knowing that a job is not an asset. They work for money, not knowing that money is no longer money. They buy a house, not knowing that a house is not an asset. They save for their retirement, not knowing that stocks and mutual funds are not really assets. When their jobs are shipped overseas, they go back to school to be retrained for a new job.

And they advise their kids to do the same thing.

A Proposal

Before this financial crisis can truly end, the school system must change.

Since the teachers’ union maintains a stranglehold on education, it is easier to start a new educational system alongside the old system rather than change the old system.

My proposal is that we start a new school system to teach young people to be capitalists. Parents who want their children to become entrepreneurs rather than employees could choose to send their kids to the school system for capitalists.

For the best and the brightest in this new school system, we create an academy, much like West Point for the Army, Annapolis for the Navy, Air Force Academy for the Air Force, New London for the Coast Guard, and Kings Point for the Merchant Marine. Rather than a military focus, this academy’s focus would be on entrepreneurship and would be named the Academy for Entrepreneurs.

Since only entrepreneurs can create real jobs, this academy would help solve the growing problem of unemployment.

To qualify to teach at the new academy, the instructors would have to be real entrepreneurs, trained to teach and willing to teach for free. If they are really entrepreneurs, they would have the time and not need the money.

In this environment of truly free enterprise, whole new industries could be born around innovative technology. Investors would be more willing to risk capital on projects that were intelligently developed.

In this environment of truly free enterprise, many of our most pressing problems, such as global warming, pollution, deforestation, and famine, could be solved. Rather than use government funds to solve problems, entrepreneurs could turn problems into profits, which is what true entrepreneurs do anyway.

Today, we have law schools for lawyers and medical schools for doctors. Why not a school system dedicated to entrepreneurship and capitalism?

Rather than students leaving school looking for a high-paying job, students would leave looking for opportunities to create high-paying jobs. Rather than students leaving school wanting to be paid more for less work, students would leave school seeking opportunities to produce more to earn more. Rather than students leaving school looking for job security or tenure, students would leave school able to create sustainable sources of revenue. Rather than leave school believing the rich are greedy, students would leave school wanting to be the rich who are generous.

An Unfair ROI

Most financial planners, insurance agents, stockbrokers, and some real estate agents will tell you to expect an eight percent to 12 percent ROI (return on investment) per year.

Their sales pitches are made by looking into the past—not gazing into the future.

The years between 2000 and 2010 have been called the “Lost Decade.” For millions of amateur stock market investors, their ROI has been less than two percent, for some even zero percent when inflation is factored in.

In real estate, millions lost everything—in some cases, more than everything if they buried themselves in debt trying to save a home that they never really owned anyway. A few professional investors also lost everything.

However, for a few professional investors in both stocks and real estate, the “Lost Decade” has been their “Best Decade.”

One unfair advantage of a financial education is the possibility of a much higher ROI on your money, with much less risk, and (in many cases, with the help of a good accountant) zero taxes.

For example, in this book you’ve seen how the rich, with financial education, earn a minimum of a 28 percent cash-on-cash return in year one, that’s guaranteed by the U.S. government.

This means that if you put $100,000 into an investment, you receive $28,000 cash back from the government, cash you can use or invest in whatever you want. Generally, I just reinvest my tax savings.

On top of that, if successful, the investment pays you a dividend every month, income that is taxed at lower rates.

Today, when someone calls me pitching an investment, if the investment he or she is proposing does not guarantee a 28 percent return the first year, cash in my pocket, I turn the investment down. Why risk my money when I can get a government-guaranteed return?

The lowest return I will consider is 28 percent. On many of my investments, even a 100 percent or 250 percent return is not enough. I want an infinite return.

An infinite return means I want all of my investment back.

For example, if I invest $100,000, I want my entire $100,000 returned within three years or less. In addition, I still want to own the asset, plus I want cash-flow income every month, and I want my income and the return of my $100,000—tax free.

The dollar amount is not significant. The investment can be $10,000 or $10 million. The difference depends upon your financial education.

In simple terms, an infinite return is your way of printing your own money. Every month you receive a check for nothing, free money, just like the Federal Reserve Bank.

The rock band Dire Straits had a hit song years ago, “Money for nothing, chicks for free.” I can’t guarantee free chicks, but I can guarantee money for nothing for myself. If you have a solid financial education and invest with smart, legal, and ethical people, people who also have a solid financial education, you too can earn money for nothing.

Money for nothing is your real ROI for your investment in your financial education. While there are never guarantees in the world of money, a legitimate financial education grants you access to the highest returns in the investment world, investments with the lowest risks, and very low taxes, zero taxes in some instances. The first investment is in your financial education.

It’s Too Good to Be True

You can be sure that most financial planners, stockbrokers, real estate agents, and insurance agents will say, “If it seems too good to be true, it’s probably not true.”

People who sell investments feel they have to downplay or discourage investments claiming to do better than the investments they sell, labeling them as “risky.”

And it is too good to be true for most people—people without financial education.

Investing for Dummies

I have always found it amusing that people think saving money is smart. Or that turning your money over to a financial planner who invests your money in mutual funds is smart.

It takes zero intelligence to save money. It takes zero financial education or financial intelligence to turn your money over to a financial planner.

An animal trainer can train a monkey to save money and invest in mutual funds. It’s simple: The monkey drops off its money at the bank, and the animal trainer gives the monkey a banana. Smart monkey. It’s even easier to train a monkey to invest in mutual funds. All the monkey has to do is have his investment withdrawn from his paycheck along with taxes and retirement money, money the monkey will never see.

You may notice that the only difference between the word monkey and money is the letter “k” which stands for “knowledge,” or in the case of the monkey, the
lack of knowledge.
Without knowledge, there is not much difference between a monkey with money and a monkey without money.

Today there are a lot of humans without money, yet they still deposit what they earn in the bank and have their retirement funds withdrawn from their paycheck before they get their paycheck.

I repeat: It takes no financial education to save money. Today, saving money is actually stupid, especially in an environment where the central banks are printing trillions of dollars. Saving money is like investing in “original Picassos” as they come off the printing press. We’re talking reproduction… not real.

The best way to beat the central banks is to print your own
real money
. I have been printing my own
real money
for years—legally, ethically, and morally, and with the blessing of the government.

You can do the same, but first you must invest in your financial education—because your financial education is your unfair advantage to gaining an infinite ROI.

In closing, my rich dad often said, “Your brain is your greatest asset. Your brain can also be your greatest liability.”

I wrote this book to give you the unfair advantage of turning your brain into your greatest asset.

If you fail to turn your brain into an asset, don’t worry. You can always be a monkey. As you know, monkeys do not know the difference between bananas and real money. To them, it’s all the same.

Afterword

“
I hated school – but I love learning.”

The Purpose of Education

The true purpose of education is to grant a person the power to turn information into meaning. The trouble in the Information Age is that there is an avalanche of financial information and a lack of financial education.

Without financial education, millions of people are no better than a Pavlovian dog, doing as they are trained to do. Ring the school bell, and employees find a job and turn their money over to the government, bankers, and Wall Street.

What Do I Do?

A few days ago, I went into my local health-food store. The clerk who works in the store is a wealth of knowledge. He has a master’s degree in agriculture and worked as a farmer. Unfortunately, a three-year drought and back taxes cost him his family farm. He found a job working in a health-food store specializing in organic produce. He has been a hardworking employee, managing the store for over twenty years.

As he was ringing up my purchases, he said, “Did you know the Federal Reserve Bank is not federal?”

“Yes,” I said, nodding my head.

“Do you know the Fed and the U.S. Treasury are printing trillions of dollars out of thin air?”

Again I nodded my head.

“Have you noticed the price of food going up—even though the government says there is no inflation?”

“Yes,” I said. “I have noticed the prices creeping up.”

“So how can the government say there is no inflation?”

“I’ve wondered that myself.”

Placing the food in the bags, he asked, “May I ask you a question?”

“Sure.”

“Are we in trouble?”

“Some people are,” I said.

“I don’t have anything,” he said. “I have a few dollars in savings. I’ve been a renter all my life because my credit rating is so bad. And my retirement plan was destroyed by the crash, so I pulled my money out early and was penalized for early withdrawal.”

I just shook my head silently.

“What can I do? Is it too late for me to start over? Am I too old?”

“How old are you?” I asked.

“I’m 52.”

“You have a lot of time,” I said. “Colonel Sanders started Kentucky Fried Chicken when he was 66.”

“He had to start over at 66?”

“Yes. He went broke when a new highway bypassed his single-store fried-chicken business. Once he saw how much his Social Security check was, he knew he was in trouble. So he packed his bags and began selling the rights to his special recipe to restaurants across the United States. He was turned down over 1,000 times before someone finally said yes. That led to his franchise operation. He took it public on the stock exchange, and he became a rich and famous man. Today, you can find Kentucky Fried Chicken all over the world. He has made a lot of people rich.”

“Organic food is a growing business. Do you think I could do the same thing?”

“You might.”

“Should I go back to school?”

“Education is important,” I said. “But you might want to look for a different type of school.”