Mission Improbable Part 5: Education, Schmeducation

Robert Kiyosaki defines an Asset as something that is a “source” of Cash. He distinguishes it from Liabilities, which are a source of Expenses (and thus a “use” of Cash). So a rental property that produces rent income every month is an Asset, but a family home, which requires upkeep but produces no Cash is a Liability. Yes, your family home, often considered the bedrock of one’s financial future, is a Liability!

One needs to look no further than the current real estate crisis to understand why. It is true that if the value of one’s family home is appreciating, it can be sold for a profit and generates Cash. This would appear to make it an Asset. But across the country the “equity” value of this perceived Asset has been mortgaged and re-mortgaged to a fair-thee-well in the last few years, and the resulting glut of new mortgages, often granted to households that were unable even to make the first payment, is what triggered the downfall of the financial giants you are reading about in the news. If the family home were an Asset, it would have been reliably generating Cash rather than requiring Cash to sustain it. The “bedrock” of many people’s financial future turned out to be sandstone.

Rental property is only one kind of Asset, one that’s easy to wrap the brain around – it’s easy to understand how rental properties generate Cash. A business is another such Asset - a service or product sold for a profit provides Cash, and the business is as such an Asset.

But Kiyosaki states that the most valuable asset one can obtain is financial education. Education an Asset? But doesn’t Education cost money, making it a Liability? Yes, at first glance. But a sound financial education can position a person to recognize financial opportunities. Taking advantage of such opportunities can generate income for decades, far exceeding the initial Cash outlay for the education that made it possible. Education is an Asset, if it is geared to recognizing financial opportunities.

As an accountant, you’d think that I’d had more than enough financial education to be a success. I can read a Balance Sheet and an Income Statement. I understand the Accounting Equation: Assets minus Liabilities equals Owner's Equity! I know how to spot financial problems and figure out the sources of those problems so that they can be corrected before profit is impacted.

But my Accounting education taught me how to monitor and evaluate Wealth – NOT how to attain it. This is a key quality that distinguishes an Entrepreneur from his or her financial Controller – the ability to spot financial opportunities and boldly seize them. And it was a key ingredient missing from my education and career.

So I left my job back in February, and was soon aware that I’d never be able to return to the grueling, stressful career that I had tended and nurtured for nearly thirty years. And where had it gotten me? I had some cash in the bank, but no real understanding of investments, no way to use that cash in ways that would build wealth and allow me to escape the career that had been destroying my health. So I decided to embark on a program of real, financial education.

Most schools teach people how to be employees. Think about it: An MBA – that cherished prize of people who want to embark on a profitable career in business, often prepares its recipient for nothing more than a cubicle farm.

Even doctors in our age, once considered the epitome of financial success, have succumbed to employee mentality, often working for hospitals and HMOs in overworked, underpaid, and horrendously stressful conditions. Combine that with a right-out-of-college debt well in excess of $100,000, and it makes for a pretty miserable career choice for all but a few select specialties.

There is nothing wrong with being an employee. But I’ve decided the whole financial paradigm of employment is wrong, and will not provide sustainable income in the current global economy.

The trouble with employment? You work once and get paid once. It is LINEAR income. Reasonable pay for an honest day’s work. What’s wrong with that, you ask? Well, linear income will pay the bills, but only the highest linear income (think CEOs) can provide a truly secure financial framework. Look at the news: CEOs get paid generous, contractual bonuses for destroying companies these days! When was the last time an employee besides a top manager got such a parachute?

But here’s what’s even more alarming about my situation right now: What’s a guy with training in Accounting and a successful twenty-five year background as a financial analyst and Controller, with not even a CPA or MBA, supposed to do in an environment where CPAs and MBAs are now a dime a dozen? In my city, that would mean preparing myself for an extended period of unemployment, likely followed by an extended period of underemployment.

What’s a guy to do? In my case, I began educating myself about opportunities. I had to turn off the risk-aversive accountant inside of me, ignore the advice of my CPA and the tsk-tsking of my attorney, and start looking at new earning paradigms.

I’ve heard it said: Profits are better than Wages. The meaning: Owning your own business is preferable to employment. That’s great. But I’m no Entrepreneur – I’ve only been trained to keep an eye on other people’s money. What kind of business would work for me?

I started desperately trolling the Internet for investment and business opportunities. This was the period of terror I described in an earlier post. Fueled by the image of that child in Kiyosaki’s Rich Dad Poor Dad who observed his environment and spotted opportunities to earn money, I began watching – god help me – infomercials and ordering materials about possible Internet businesses. I took advantage of coaching opportunities offered by some of these programs. I learned a great deal about the kinds of businesses and investments that are available out there.

Let me be blunt: I do not recommend that ANYONE do what I have done here. My fear-based foray into “financial education” was scattered and random - like a shotgun - and pretty expensive. I am ashamed to say that I fell prey on occasion to the unholy Nemesis of Reason: Advertising Copywriters! Curious about any and all wealth-building programs that purported to “work,” I invested in a few dogs. And not cute, fluffy ones – mean, snarling dogs that would have chewed my throat out if I’d let go of the leash for a second.

But it gave me an eye to the opportunities that are everywhere. And I began to affirm that I deserved to benefit from one of the good ones. Practicing this affirmation, I just kept looking and learning until I found some things that fit. In retrospect, I don’t think I would have done anything differently (except for picking the "dogs" a little more carefully!), and I’m positioned now for an entirely different life. More about that in the next post!