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Choose to Be Rich

Module three
Take Control of Your Cash Flow
Module Three - Take Control of Your Cash Flow

Objectives
In this lesson you will:
• Map out the necessary time frames and accomplishments that will deter-
mine when you plan to be rich.
• Create and implement a debt-reduction plan—if necessary.
• Examine the power of leverage and how to make it work for you.

Reading Assignments
To prepare for your work in this module, please read/review the following sections:
• You Can Choose To Be Rich—1-56 to 1-68, Getting Started
(Secure, Comfortable, or Rich?)
• You Can Choose To Be Rich—3-25 to 3-59, Set Your New Goals (Others Stories)
• You Can Choose To Be Rich—3-65 to 3-82, Take Control of Your Cash Flow
• CASHFLOW Quadrant—Chapter 11, It’s Time to Mind Your Own Business,
and Chapter 12, Take Control of Your Cash Flow
• Rich Dad Poor Dad—Chapter 9, Beginnings-Getting Started (Optional)

Listening Assignments
To prepare for your work in this module, please Listen/review the following sections:
• You Can Choose To Be Rich—CD (4), Secure—Comfortable—Rich:
The CASHFLOW Quadrant
• You Can Choose To Be Rich—CD (10, 1st portion), Take Control of
Your Cash Flow

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Numbers Say It All


Read the stories in Choose To Be Rich—3-27 to 3-59. Look at how the words paint
a picture, and the numbers paint one as well. Pay close attention to how creating a
plan, sticking to it, and ultimately seeing it to the end will help you achieve the free-
dom you desire.

Three little piggies


Buy three piggy banks: one for saving, one for tithing to charity, and one for investing.
Put one dollar in each piggy bank each and every day (or more if you can). Above all
else—pay yourself first. Put aside a percentage of any and all payments you receive,
whether from work or from other sources.

At the end of the month, deposit the money in the “savings” piggy bank in a secure
savings account or mutual fund. Give away the money in the “charity” piggy bank to a
qualified charity or a religious organization of your choice. Deposit the money in your
“investment” piggy bank in an investment savings account, and don’t take it out until
you’re ready to invest it some other way. Think of each dollar in your investment piggy
bank as an employee ready to work hard for you.

Reclaim your disposable income


Rich dad has often said, “There’s a good reason it’s called disposable income: most
people throw their extra money away—by buying doodads!” That’s why, in your plan to
become rich, you must eliminate all unsecured debt—also known as bad debt.

The beginning of Step Three in Section Three of Choose to Be Rich states, “Making
more money will not solve your problems if cash flow management is your problem.”
The Rich Dad philosophy is to expand your means so that you can live the lifestyle you
desire. Though this philosophy doesn’t embrace the notion, “cut up your credit cards
and live below your means,” if you’re so deeply in debt that you cannot even imagine
expanding your means, you’ll need to follow a debt-reduction plan first. Debt reduction
will get you out of the hole and on the path to financial freedom.

Your debt reduction plan will compel you to live within your means.

Secure, comfortable, and rich


Investing is a plan. Unfortunately, most people don’t have a plan to be rich. They have
a plan to be safe and secure. They may even have a plan to be comfortable—although
that’s usually their “pie in the sky” and they reserve it for daydreaming, not for some-
thing they feel is truly realistic.

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Module Three - Take Control of Your Cash Flow

If you’re going to invest, you should have three plans: one, to become safe and secure;
two, to be comfortable; and three, to become rich. Most people invest in their 401(k) to
be secure. If they’re planning to be comfortable, they may have a few investment prop-
erties or a portfolio where they pick individual stocks. But it’s rare for people to have a
plan—even if they’re high-income earners—to become rich.

Your plan has to work whether the stock market goes up or down, the housing market
falls out, the business succeeds or fails, or whether you become disabled or not. It has
to work on all three levels. It’s not about procedure. It’s not about a product. Investing
to be rich is a full plan—complete with protections and contingencies.

Only a silly game?


Consider this story from Robert’s personal experience:
The other day a person said to me, “I played your CASHFLOW 101
game once. Now what do I do?”
I replied with, “You played CASHFLOW 101 once? Only once?”
“Only once,” he replied.
“How long did you play the game?” I asked.
“About three hours,” he replied.
“Did you get out of the rat race?” I asked.
“No, I never did. But I got the lesson,” he said.
“What was the lesson?” I asked.
“I got bored,” he answered. “I learned that being in the rat race is boring
and tiring. I learned that I hate games so I am asking you to tell me what to do
next. I don’t want to play games. I want to get rich. So tell me what to do next.”
I took out the game board and pointed to the Rat Race circle. Slowly
and deliberately I began to say, still pointing to the Rat Race circle, “So to you,
this game is only a silly game?”
Nodding, he smiled and said, “Yup. And I don’t want to play games. I want
to get rich in real life.”
“And you don’t think this game is real life?” I asked.
“Nope,” he said with a slight smirk. “That game does not apply to me.”
“That’s interesting,” I said, still pointing to the Rat Race. “To me this game
is real life. Let me ask you this. Which track are you on? The Rat Race or the
Fast Track?”
The young man gave me a blank stare in return and said nothing.
Continuing, I said, “To me this game is real life. And in real life, each and
every one of us is on one track or the other.”
I happened to have an article handy from Robert Reich, the former Secre-
tary of Labor. Taking out the article, I read a quotation from Robert Reich: “It’s
not simply a matter of having a job or even of having decent pay anymore. In

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the new economy, with unpredictable earnings…two tracks are emerging, the
fast track and the slow track and the absence of gradations between.”
“You mean the fast track really does exist?” he asked.
Nodding, I said, “It does and so does the rat race. Ninety-nine percent of
the U.S. population invests from the rat race. And those in the rat race are fall-
ing further and further behind. As Robert Reich says, ‘There is an absence of
gradation between.’ Which means you are either on one track or the other. So
which track are you investing from?”
“Well, I have a high-paying job, and I make a lot of money. Doesn’t that
mean I’m investing from the fast track?” he asked.
“I don’t think so, but I don’t really know. You have to tell me. What are you
investing in?” I asked. “Are you a millionaire and do you earn over $200,000
annually?”
“I do have $350,000 in my 401(k), and I do earn over $120,000 a year,” he
remarked. “Doesn’t that mean I qualify for the fast track?”
“I don’t think so,” I replied. “At least according to SEC regulations, you
don’t qualify to be on the fast track.”
“I don’t understand,” he said. “Would you tell me what I am missing?”
Taking a deep breath, I was relieved to have him finally open his context
(his mind) to new content (information). I have always found it difficult to teach
something to someone who thinks they know all the answers. WE all know that
it is difficult to put more water into a glass that is already full of water; it is also
difficult to teach something new to someone whose mind is closed or already
filled with other content.
Beginning slowly, I said, “I designed this game with two tracks, because to
me this game is the real game of life. In real life each of us is on one track or
the other. As Robert Reich says, ‘There is an absence of gradations.’”
“You mean, we are either in the rat race or we are on the fast track,” he
said, now with a little more interest.
“Yes,” I said. “And the lesson from the game is how you and I can get out
of the rat race. The purpose of the game is to open your mind to the possibil-
ity of you becoming rich and financially free…free from the rat race most of
us know…free from the drudgery of spending your life working for money and
living below your means. The more you play the game and the more you teach
the game to others, the more your mind becomes open to that possibility, and
the more real financial freedom becomes in your mind and in your content and
context. If your mind is not open, the chances are you will be one of the 99 out
of 100 people who spends his or her life in the rat race.”
“Even if I make a lot of money?” he asked.
“Great question,” I said loudly. “Best question you could have asked. The
answer is money alone will not get you out of the rat race and money alone will
not allow you onto the fast track. That is why my rich dad always said, ‘Money
does not make you rich.’”

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“Why?” He asked with a puzzled look. “Doesn’t it just take a lot of money to
get onto the fast track?”
“The answer is no,” I said. I was now relieved that his mind was opening to
new ideas rather than pretending to know all of the answers.
“I don’t understand,” he said, “Why does it take more than money to invest
on the fast track?”
I collected my thoughts before answering his question. “Do you remember
the advertisements in publications such as the Wall Street Journal that had a
picture of a well-dressed, affluent-looking man holding up a sign on a street
corner saying, ‘I have money to invest’?”
“Yeah, I did see those ads. I did not really understand them,” he replied.
“Ads such as those were plentiful between 1995 and 1999. The message
was that there were many individuals who had made a lot of money in the
stock market or from their jobs, and they were now looking for investments
of the rich—investments found on the fast track. The problem was that even
though they had money, they still were not allowed into the better investments
on the
fast track. Granted there are many flimsy and sometimes crooked deals on
the fast track that would have allowed him in, but the best deals are closed to
most people—even though they have money.”
“Why? I don’t understand,” he asked.
“Because money doesn’t count on the fast track,” I said. “In real-life invest-
ing, money only counts to those people stuck in the rat race.”
“Why not?” he asked.
“Because everyone on the fast track already has plenty of money,” I an-
swered. “That is why money no longer counts. In order to get into the better in-
vestments on the fast track, what counts is what you know or who you know.”
“You mean it’s what you bring to the table that counts—the expertise and
experience, not the money,” he said.
“Exactly.” I said, “Things aren’t different between the rich and the poor and
the middle class. Things are opposite. One side thinks money is important and
then once you become rich, you find out money is no longer important.”
I then showed him the different levels of exit strategies. I explained to him
that many people are able to achieve the affluent level, which is $100,000 to
$1 million of income. Yet if they achieved that level of income by working hard,
saving money, and being frugal, they may not be allowed to invest in the invest-
ments that the rich and ultra-rich invest in. They have money, but many are
not allowed to invest simply because they lack the education and experience
required for the investments on the fast track. They have money but they bring
nothing else to the table.

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“So that is why there were those ads with affluent people holding up signs
that read, ‘I have money to invest,’” said the young man whose mind was now
gaining some new context. “They had money but no one wanted their money
because they were not prepared for the fast track.”
“That’s correct,” I said.
“So what should I do?” he asked.
“Well, the first thing I would do is go back and play CASHFLOW 101 at
least a dozen more times. Play until you can get out of the Rat Race in under
an hour, regardless of your profession, your salary (high or low), and what
market conditions or setbacks you encounter in the game. Then take a look at
the words on the Fast Track and look up their definitions. Then begin to seek
investors who do invest in fast track investments. Spend time with them. Listen
to their words and begin to understand what is important to them—other than
money. The more you can understand their words, the more you will be able
to communicate with them and begin to see their world—the world of the fast
track.”
“Is that what you did?” he asked.
“No, that is what I do,” I answered. “That is what I do every single day of
my life. As I said, this game is real life. You are either in the rat race or you are
on the fast track.”
“So how did you get out of the rat race?” he asked. “I know that you
started with nothing.”
“I had a plan. I had a plan on how to get out of the rat race. The big differ-
ence was that my plan was a rich plan from the start. It was a plan that would
allow me to gain a lot of money, but more importantly, to gain the words, edu-
cation, and experience required for the fast track,” I shared.
The young man nodded. His mind was now open. “So, many people retire
but they remain in the rat   race?”
“Most do,” I replied quietly. “Their lives went according to plan. They go on
the slow train and stayon the slow train all their lives. I did not want to get on
the slow train, so I searched for a better plan—a plan that would work for me. I
hope you find a better plan.”
The young man nodded and said quietly, “I will.”

Now that you have a little more context, it’s time to revisit CASHFLOW 101 and begin
formulating your own plan to become rich.

Context and content


You have considered how people who operate on the education-rich or left side of the
quadrant approach investing. They are operating from a different context than those on
the right side of the quadrant or the financially rich side. People on the left side of the
quadrant often invest in education over several years. Then they begin working, start
saving, and finally hope their 401(k) grows, or they pay off their house just in time to

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receive Social Security payments. People on the right side may bypass a formal educa-
tion and spend their time at business workshops, seminars, and investing retreats.

One of the big differences between those who go to school (generally on the left side
of the quadrant) and those who attend seminars (those operating on the right side of
the quadrant) is the difference between context and content. Ever hear a person who
attends schools ask a person who attends seminars, “What did you get from the semi-
nar?” The person who attended the seminar is often not able to explain what he or she
took home.

The reason is, many seminars are more context-expanding than content-increasing.
A person who has just had his or her context expanded often cannot say specifically
what he or she got. A person who is school-oriented, a person who would rather re-
main an employee, often cannot understand such vagueness. A person who wants his
or her context to remain the same—and only seeks to have his or her content in-
creased—will not understand a person who is happy to have his or her reality expand-
ed. That same school-oriented person is still waiting for the new content to appear.

People wanting only content often become very upset if they have their context
messed with. That is why they seek content versus an expansion of context. The good
news is that both can get ahead, regardless of what they seek. Yet the people getting
ahead the fastest are those who seek both to expand their context and to increase
their content.

Many people plan on becoming poor. They enter the workforce planning on working all
of their lives and then retiring on much less than they were earning during their work-
ing years. By learning to think the way people on the right side of the quadrant think,
people on the left side can understand what drives and motivates the rich to make the
decisions they make. In order to truly think like them, you must expand your context.

Rich dad would say, “There is plenty of money in the world. If you want to be rich,
you need to first expand your reality (context) in order to hold onto your share of that
abundance.” In seminars, Robert often uses a simple graphic example to explain the
relationships among content, context, and capacity. He begins by pouring water in a
one-ounce jigger, then a small water glass, and then a larger water glass. It is a simple
demonstration to illustrate the differences in capacity to hold onto money between the
poor, middle class, and rich.

Leverage your context


Rich dad often told Robert, “Never say ‘I can’t afford it.’ Instead, ask yourself, ‘How
can I afford it?’ What you think is real is your reality.” Work to expand your context,
and leverage the powerful things in your life you control. When Robert’s rich dad came
across an expensive piece of oceanfront property—which he couldn’t afford—he
refused to say, ‘I can’t afford it, even though he didn’t have the money at that time.

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Instead he spent months coming up with a plan on how he could afford it. He worked
hard at taking what was outside his reality and making it a part of his reality. It was not
money that made rich dad richer. It was his ability to leverage his context that ultimately
made him richer. This was the first of many lessons rich dad taught on the subject of
leverage.

Leverage your time


Similarly, leverage of time means using the hours available to you to acquire more
assets—or using other people’s time (OPT) to build your financial empire. For instance,
say it takes you one hour to clean and dry a shirt and another hour to starch and press
it. A cleaner in your neighborhood can do it in a fraction of the time for the low cost
of $1.50. Chances are that you can make a lot more than $.75 an hour—or enjoy the
valuable free time. So leveraging time means discovering efficiencies in time. People on
the right side of the CASHFLOW Quadrant are always leveraging time.

Leverage your rich dreams


Rich dad always said, “Your future is created by what you do today, not tomorrow.”
Remember: Investing is a plan—not a product or procedure. That plan starts today and
serves as a bridge to your dreams. By making your plan real, your dreams will follow.
You leverage your rich dreams to fuel your success. You believe in them, plan for them,
stick to the plan, and you create your future.

The leverage of fairy tales


Some of the most powerful lessons come from simple children’s stories—Aesop’s
fables and traditional fairy tales. Rich dad often said the reason many people never
went past the middle-class level of life was because they did not believe in fairy tales.
Since they did not believe in fairy tales, they failed to learn the lessons from the stories.
Rich dad loved the story of “The Tortoise and the Hare.” He said, “Many times in life,
you will meet people who are smarter, faster, richer, more powerful, and more gifted
than you. Just because they have a head start does not mean you cannot win the race.
If you keep the faith in yourself, do the things that most people do not want to do, and
keep making progress on a daily basis, the race of life will be yours.”

Leverage of integrity
Remember at the same time to be true to yourself. Rich dad said, “People who do
not keep their small agreements are people who cannot be trusted. If you cannot be
trusted with small agreements, people will not help you make your big dreams come
true.” Be sure your words and actions are one. Know the meanings of words mentally,
emotionally, and physically—particularly those that apply to becoming rich.

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Leverage of generosity
It’s often said, or at least implied, that people in business are in business simply be-
cause they are greedy. Rich dad had a different point of view. He often said, “All of us
are greedy to some extent. It’s only natural to desire basic survival, a better life, and
enough life support to live well once we stop working. But just because someone is in
business or is rich does not necessarily mean they are any greedier than anyone else.
In fact, it could be just the opposite. The reason most people are not rich is simply be-
cause they are not generous enough.” The richest people in the world have been very
generous in one way or another. Providing affordable housing, affordable cars, or af-
fordable services is just as philanthropic. The rich understand that networks provide the
most profitability—especially when networks link together. Rich dad said, “Networks
are people, businesses, or organizations that you are generous with because you sup-
port them and they support you. Networks are powerful forms of leverage. If you want
to be rich, build a network and network with other networks.”

Leverage good financial habits


If you are serious about becoming rich, you must learn to leverage good financial
habits. These are things you do over and over again for the rest of your life. You must
hire a bookkeeper. You must create a winning team. You must constantly expand your
context and content. You must keep growing. You must be willing to fail. And you must
listen to yourself.

Leverage your money


Leveraging your money means making it work for you—at greater and greater ratios of
profitability. You have to be careful because all assets can turn into liabilities. The cash
flow you receive from investments should drive those investments exponentially faster.
To be rich, you want to increase the velocity of money—not park it.

The Rule of 72 measures the interest of annual percentage growth of something. For
example, if you receive 10 percent interest on your savings, your money will double in
7.2 years. If your stock is appreciating in value by 5 percent per year, that means it will
take 14.4 years to double your money.

When looking for places to move your money, remember not to settle for average
returns. The idea of “investing for the long term by buying only blue chip stocks” is ob-
solete. In this age of faster moving technology, a company may rise and fall in just a few
years. This speed of change then requires all of us to be more vigilant and to focus on
keeping our money moving, rather than just leaving it parked, waiting for the market to
rise and rise forever. The buy, hold, and pray strategy is okay for the average investor,
but it is not a great strategy for anyone who wants to retire young and rich.

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Exercises
Credit Review Exercise
Obtain your credit report and do a “credit cleanup.” If you haven’t obtained a copy in
more than a year, you can go to www.myfico.com or www.annualcreditreport.com to
obtain your credit report.
• Review your credit rating. Consider anything that seems out of place. If you
have questions or need clarification, speak with your Coach.

Debt Control Exercise


• Complete the Debt Quiz (Choose To Be Rich—3-67).
• Complete the Waste-Watchers Diet (Choose To Be Rich—3-72).
• Map out a debt-reduction plan (if needed)

Cash-Flow Goals Exercise


Using the online financial statement, determine your cash flow goals for one year and
five years (refer to CASHFLOW Quadrant, page 201).

Secure/Comfortable/Rich Exercise
• What is Secure? What is Comfortable? What is Rich?
- Complete the Financial Goals worksheet (Choose To Be Rich—1-58).

Think Rich Exercise


• Complete the Don’t Want-Want worksheet (Choose To Be Rich—1-62).
• Complete the Personal Hero-Lessons Learned worksheet
(Choose To Be Rich—1-64).
• Start your own three piggy banks: one for savings, one for charity, and one for
investing.
• Set aside a portion of your income to pay yourself first!

Personal Success Action Plan


• Continue to work on your goals, plan, and timeline by using the SMART goals
criteria.

Daily Activity Report


• Complete Preparing for Your Session and the Daily Activity Report forms.

Elective Reading Assignment


Rich Dad Poor Dad—Chapter 9, Beginnings-Getting Started

Elective Assignment
• Evaluate your credit card debts. Compare the interest rates on each line of
credit. Consider consolidating all of your debts to one credit line.
• Game Strategies (The Diary of a Rich You)
- Based on your cash flow, play CASHFLOW 101 using your current
financial statement and remove the Big Deals from the board. Keep close
count of how many paychecks/months it takes for you to get:
° Secure.

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° Comfortable.
° Rich (out of the rat race).
- Play with the asset class you most think is within your reach—
real estate, stocks, or business. (Note: if playing with stocks,
remove the $1 stock cards from the game and change the
remaining stock-card numbers to reflect smaller stock values:
$5=$0.50, $20=$2, $50=$5. You don’t have to write on the
cards—simply remember that you’ve reassigned their values.
This will better align the deals to your current situation.)
• Before you meet with your Coach, brainstorm at least one way you personally
could leverage each of the following:
- Your mind.
- Time.
- Seeing a rich future.
- Integrity.
- Fairy tales.
- Generosity.
- Habits.
- Your money.
- Real estate.
- Paper assets.
- A-B quadrant business.

Choose To Be Rich Plan Binder Components:
Add the following completed exercises from this module to your Choose To Be Rich
Plan Binder.
• Credit report.
• Debt-reduction plan.
• CASHFLOW Goals
• Financial goals (one-year plan).
- Investment vehicles.
• Financial goals (five-year plan).
- Investment vehicles.

Journal Reminder
Take a few minutes to record the “Aha” moments—moments when you have realized
this week how your context has changed—moments when you have realized how your
previous way of thinking has possibly kept you from achieving your dreams. Then state
how you have come to think differently in the present and how this change will help you
on your path to becoming rich.

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