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I Still Love Kiyosaki. But He's Wrong About This...
Robert Kiyosaki has been a mentor of mine for years, and I look up to him in so many ways. But there's one piece of his advice I've completely changed my mind about.
Robert's whole game is cash flow. Buy assets that pay you every month until that income covers your expenses, and you're out of the rat race.
I played that game for years. (Literally, I play the Cash Flow board game with my daughters. I always pick the lowest paid job and I still win, but that's another story...)
After 2008, after I got my butt kicked, I told myself (and my wife) that would never happen to us again. I was determined to do whatever it took.
So I bought a little bit of cash flow, then a little more, and I watched it grow until it covered my living expenses.
I taught it, too. I had a whole report and a guide and a calculator for it.
And I'll be honest with you...
I just don't think that's the right way to do it anymore.
I was talking with the CEO of a digital credit company recently. They have a product that pays double-digit yields. And he doesn't own any of it himself.
It's for the same reason I don't either.
I don't need any cash flow. My income already covers my expenses with enough left over to invest more every month.
A cash flow asset, by nature, is not a growth asset. If my goal is to go from $2 million to $4 million, I need an asset that can double my money. Cash flow assets aren't designed to do that.
It's important to realize, we don't actually want money. We want the goods and services money buys us.
Cash flow is an enabler. It's not a destination.
What it actually costs you
Here's the way I think about it: cash flow that you don't need is a tax on your future net worth.
If Bitcoin goes up 50% and STRC pays 12%, I'm giving up 38%/yr.
I'd rather keep my money in the higher appreciating asset for as long as I still have an income. Then down the road when (if?) I slow down and I need the income, I can move it into a cashflowing asset.
Most people do the opposite. They think they should buy cashflowing assets until they cover their expenses, then they can retire.
That's backwards.
Work and invest and keep your assets appreciating until you can buy as much cash flow as you need.
A real world example
One of our members had $300k in Bitcoin. He wanted $100k/yr to live on.
If he starts pulling income today, he can only take out about $40k/yr. And it will take him until 2040 to reach the full $100k.
But if he waits and lets Bitcoin keep compounding, he'll be able to pull out $100k/yr by 2029.
By waiting just 3 years, he gets to his goal 11 years sooner.
The two question filter
Before you buy your next dividend stock or STRC or rental, ask 3 questions...
Do I really need cash flow?
And if I do, how much of it do I need?
And what do I need it for?
If your income covers your life, you should invest for growth.
But if you're 73 years old, sitting on assets with no income, and volatility keeps you up at night, you need the cash flow. And that's perfectly fine.
Most people are somewhere in between.
For me, I'm growing first, and I convert when I need to.
I kind of have 2030 in my head as a finish line. But whether you do it in 1 year, 5 years, or today, it doesn't change the strategy. It just changes the timing.
If the honest answer to question one is no, you're not being conservative. You're paying a tax on your future.
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