In the third grade, I learned how to play Hot Cross Buns on the recorder.
Everyone did. It was mandatory.
To this day, the wretched sound of 30 kids honking out this lethargic symphony is burned into the back of my brain.
B A G B A G
G G G G A A A A
The school curriculum is filled with plenty of useless micro skills like these.
How to build a Styrofoam solar system. How to do math with an abacus. How to spell “antidisestablishmentarianism.”
But in 13 years of formal education, I never learned a single thing about one of the most important life skills you can learn while young: how to handle your money.
I’m not exaggerating here. When I left college in my early 20s, I knew more about Lynyrd Skynyrd’s feud with Neil Young than my own personal finances.
For some reason, there is a presumption that financial knowledge is something you pick up outside of school or inherit from your parents. But my parents were too busy worrying about their own finances to teach me anything.
And the same is unfortunately true for the vast majority of Americans. Over two thirds of U.S. adults cannot pass even the most basic financial literacy test.
This is why many folks don’t realize just how terrible their financial situation is until it’s too late. And it’s why so many people were caught off guard during the 2008 financial crisis.
In today’s issue of Money & Crisis, I sat down with financial author Robert Kiyosaki to discuss the 2008 housing crisis and the importance of tending to your “financial garden.”
For decades, Robert has challenged the way people across the globe think about money. He wrote the #1 personal finance book of all time, Rich Dad Poor Dad. And he’s even penned a couple of books with now-President Donald Trump.
All the best,
Editor, Money & Crisis
P.S. If you need to sure up your finances fast, check out Robert’s free Weekly Cash Flow Summit. In it, Robert and his team will show you a brand-new way to collect $1,000s every week with a click of a mouse. Click here to save your spot.
Most Americans Don’t Understand This Problem… Here’s Why You Should
My rich dad used to enjoy working in his garden.
Though he was wealthy and didn’t need to, he said he liked the work because it reminded him that no matter how rich you are, you’re never too good to get your hands dirty.
He also liked gardening because it was a metaphor for how he saw the world.
“Building something beautiful takes much toil and patience,” he said. “You cannot rush gardening. You must plant well, understand what you’re doing, and pull all weeds up by their root.
“Many people want to quickly identify problems in their life and then cut them down. The problem is that, like a weed, they never dig up the root. So, later the same problem comes up. In life and in money, you must understand the root of your problems.”
Several years ago, I read a great article by Barbara Kiviat entitled “The Case Against Home Ownership,” published in TIME magazine.
In that article, Ms. Kiviat rightly identifies, in so many words, that the myth of your house being an asset has contributed greatly to our current financial crisis.
But the dark side of homeownership is now all too apparent: foreclosures and walkaways, neighborhoods plagued by abandoned properties and plummeting home values, a nation in which families have $6 trillion less in housing wealth than they did just three years ago.
Indeed, easy lending stimulated by the cult of homeownership may have triggered the financial crisis and led directly to its biggest bailout, that of Fannie Mae and Freddie Mac… For the better part of a century, politics, industry and culture aligned to create a fetish of the idea of buying a house.
I was reminded of that article today, because the current climate in home ownership has shifted a lot since then. The market is booming again.
Back in the years following the real estate bubble burst, I wrote a lot about the sorry state of the residential real estate market, and I revisited some of the basic principles that are the foundation of the Rich Dad message.
To sum up the housing numbers in the years surrounding the 2008 Crisis:
- Almost $6 trillion in housing wealth was lost between 2005 and 2010
- Home values dropped 30%
- Existing home sales dropped 27%
- Housing inventories stood at 12.5 months, over twice what’s considered healthy
With numbers like these, I can see why people such as Ms. Kiviat are realizing that the American dream of becoming wealthy through homeownership is one of the biggest lies ever perpetrated on the U.S. public.
Unfortunately for many, hindsight is 20/20. And I fear what the future holds for people buying up houses at rapid rates once again.
Thankfully, the Rich Dad community has known for years that your house is not an asset.
The Real Problem
There’s no denying that the residential housing market has been and always will be a problem.
But even though housing is a problem, it’s not the real problem.
The real problem is the fundamental lack of financial education in America. People don’t understand the difference between an asset and a liability.
I find it hard to believe that a financially educated population that understood your house is not an asset but rather a liability would have participated in the real estate frenzy that occurred in the early 2000’s.
Taking the lessons my rich dad taught me from his garden, the fundamental problem, the root problem, is that people don’t understand how money works.
Digging Up the Root
I’m afraid that until we address the root of our financial problems, we’ll continue to see huge booms and busts.
Until we see comprehensive financial education in our schools, we’ll continue to see a population of people who think their house or any other host of liabilities are assets.
While it’s important to identify byproducts of the problem, like economic busts that will pop up from now until the end of time, it’s much more important to identify why those byproducts grow up in our financial soil — and to pull that root up mercilessly.
The path to wealth is one of constant learning and toil.
The Rich Dad message is one of continual financial education and of acquiring cash flowing assets over the course of your entire life.
Security does not come from hoping prices go up, but from being financially intelligent enough to search for, find, and acquire solid assets that provide income every month for a lifetime.
That is not easy. It is not quick. And it is not something the ordinary person can do if they rely on the education they received in school.
Tend Your Garden
Today, you have a choice to do surface work on your garden or to instead get down on your hands and knees, roll up your sleeves, and begin the hard work of tending your financial garden well.
While it will be hard work, it will be work that will pay off for the rest of your life.
By pulling up the roots of your financial problems, you’ll assure they won’t come back in areas and times you least expect.
America’s #1 Personal Finance Author
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