28 Aug Robert Kiyosaki vs Dave Ramsey
Sharing my personal view on 2 great financial gurus, Robert Kiyosaki the popular author of Rich Dad Poor Dad & the person my coaching is mostly base on, Dave Ramsey. I guess same goes to everything, there are pros & cons to everything.
I would summarize Robert’s overall system into the following category:
1) Being an investor or business owner but NEVER become an employee or self employed said Robert Kiyosaki. Although I’m an employee myself, I guess this is true if you want to be financially free and this is also my direction on where 1 will be heading.
2) CASHFLOW. Another frequent word being used when you read Robert Kiyosaki books. This is where I’m slightly uncomfortable with where he talks about as long as the investment gives us the positive cashflow, it is indeed a good investment and we will need to use the power of leverage to achieve that.
3) Robert Kiyosaki does not believe in mutual funds. He believes financial literacy is something each individual needs to learn about and not solely dependent on fund managers. 1 main disadvantage of buying mutual funds is the commission we need to give regardless our funds are making money or not. Instead, investing in stock market ourselves gives us full control but course we need to have the knowledge first.
Next, lets talk about Dave Ramsey’s system. As shared in in my website, Dave is certainly not very famous in the Asia region but that being said, what he teaches is interesting, logically and safer and that makes me want to take up his coaching program. Just to give some insights on his teaching:
1) Debt is a definite no no. And hence leverage does not work with Dave which is totally opposite of what Robert teaches. Just some background, he was a property investor in his 20s and because of highly using leverage he was a bankrupt a couple of years later. He slowly came out and have worked towards his financial goals.
2) Budgeting is something not discussed by Robert. Instead to Robert this is the key to your success. The idea here is to tell where your money go each money. In fact not only Dave, I have read a lot other authors which talks a lot about budgeting and that makes me start budgeting too.
3) He also encourages investing in unit trust funds which is the opposite of Robert. I have elaborate more on my take in the next item below.
Summarizing some main points I got from both of the authors.
The purpose of this is not to evaluate who is the better adviser but rather what I have learned from the 2 gurus. So below are my top 5 learnings:
1) All the while before I started as a financial coach, I knew budget is important. But somehow, I feel it very tedious task (maybe guys don’t go into details especially the small amounts) but finally still think this is important and I DID IT. Especially using templates provided by Dave, it is not so difficult after all and now is my habit to keep track of my daily expenses. I wouldn’t say 100% accurate but most of the time I’m doing it. So a tick to budgeting.
2) Mutual funds or self invest. Personally I do invest in mutual funds but “somehow” it is not doing as well as I expected it to be. Meanwhile, I also do invest myself in both Malaysia market & US markets and in fact what I’m doing is better than my mutual funds. I will elaborate more about my personal experience in my next post by for now. No to mutual funds
3) No Debts or leverage. I’m a safe person and just looking at positive cashflow is not good enough for me as I mentioned earlier. So example if you were to ask me to invest in 10 properties all with leverage but yet giving me positive cashflow I wouldn’t do it. So I will be sitting on the fence for this item. Leverage but do not over do it. Know your limits but if there is a worst case scenario, you can still able to cope them
4) Becoming investor & not an employee. Totally agree with Robert on this. Being an employee is just working to make someone on top of the hierarchy richer. However, as easy as it may sound we still need to start somewhere. Hence I would say if you are “forced” to become an employee like me, utilize your salary properly. Do not spend unnecessarily and start investing. Slowly, you will realize you are an employee but yet large amount of your income are coming from your investment instead.
5) Credit cards. I am still using credit cards even though I’m a coach using Dave’s framework. However, everytime I use a credit card I will ensure I will pay them of by month end and ensure I do not carry forward any balance. Reason, its hard for me to get a return ~10% consistently but credit card interest are 15%. So why work for the bank.