The growing size of this problem, now in the trillions of dollars, is daunting. Merely pushing it forward, on to the next generation, just makes the problem bigger and more complex.
Everyone has money problems. If you want to make yourself rich, solve problems. Identifying a problem creates the opportunity for creating a solution.
– Robert T. Kiyosaki
The bigger and more complex the financial problems become, the higher the financial IQ is required to handle the problems. We’re going to need all the brainpower we can get to solve this problem.
Worst of all, repeating the cover headline of TIME magazine, October 31, 2005:
“The Great Retirement Ripoff”
Millions of Americans who think they will retire with benefits are in for a NASTY SURPRISE.
How corporations are picking people’s pockets with the help of Congress.”
The lack of financial education in our schools makes it easy for unscrupulous people, even elected officials from both parties, to legally steal from the unsuspecting. So the problem compounds itself.
Tell Me About It
Donald and I hope we are wrong, but we sincerely believe America is in trouble…and if America is in trouble, the world is in trouble.
One of the bigger problems in the world today is the rising price of oil. Oil is the blood of the world’s economy. If the price of oil gets too high, and we do not find a better alternative to oil soon, the world economy will begin to die. As Donald said to me one day, “If gasoline costs $5 a gallon at the pump, it does not affect you and me that much. But if you’re earning $10 an hour, then $5 a gallon will take food from your family.” He went on to say, “Oil affects everything in our economy, and the problem is, we’re running low. Prices will only go higher. You and I will be OK, but millions of people will be hurt by it.”
If oil goes to over $100 a barrel, and I believe it will sometime in the near future, the economy will suffer—but you do not have to. You can face the problem now and be part of the solution.
When I talk to people about some of the financial challenges ahead, I get different responses. One common response is, “Don’t tell me about it.” Another response I get is, “We need to think positively. All this negativity is bad,” or “God will solve the problem.”
These responses are from people with low financial IQs. Rather than facing the problems head-on and asking, “How can I profit from these problems?” they would rather stick their head in the sand. And this is why millions, possibly billions, of people will be hurt in the coming years. Instead of looking at the problem as an opportunity, they choose to put their blinders on.
My rich dad taught me, soon after the first oil crisis in 1973-74 that oil and wealth were directly related. He would often say, “Wealth = Energy.” Since I was an apprentice at Standard Oil, on their tankers, beginning in 1966, I had an interest in oil. Rich dad’s explanation was a simple one. He said, “When the price of energy goes down, our wealth goes up.” The equation looks like this:
And for most people, when the price of energy goes up, our wealth goes down.
The year 1974, the same year I started my business career as a brand new Xerox sales rep, proved my rich dad’s theory correct. In 1974, high oil prices had caused the economy to contract. People were not renting Xerox copiers. Instead, they were canceling their rental contracts. My first sale as a new rep found me on my knees in front of the customer—begging, not selling. I was begging the customer not to cancel his rental agreement. I remember one customer saying to me, “Why should I keep the copier? My business is gone.” This is just a small example of what happens when the price of energy goes up.
Instead of making money the first two years, I owed Xerox money. I owed the company money because every time a customer cancelled a machine, the commission that was paid to the sales rep who sold the machine was charged back to the sales rep who lost the machine. I was not selling, I was starving, and I was nearly fired several times during those two years.
Bad Times Can Make You Rich
The good news was, the challenge of a contracting economy actually made me a better salesman. Even though I did not make much money back then, my sales training still pays off today. My businesses are successful because I can sell–and because I understand the importance of sales and marketing. In tough economic times, that can give you an edge. As Donald Trump and I often say, “If you are in business, you need to learn how to sell.”
Increasing My Financial IQ
Since oil was in short supply, my rich dad suggested I learn more about the oil industry. I had been with Standard Oil from 1966 to 1969 as an apprentice and a ship’s officer, a third mate on their oil tankers. Since I had an interest in oil, I found it easy to learn more about it.
Once I began to win as a sales rep for Xerox, in order to learn more about oil, I took a part-time position with an oil company out of Oklahoma that was selling oil and gas tax shelters. Back in those days, an investor could invest $100,000 and receive a 4-to-1 tax break on his or her investment. In this example, a $100,000 investment was worth $400,000 in tax write-offs. So the investor made more money from the oil production and paid much less in taxes—one reason why the rich got richer.
Selling these leveraged oil and gas tax shelters during this period of high oil prices taught me some important lessons. Lesson number one was that not all businesses were hurting because of the oil crisis. My eyes were opened to the reality that many people were getting richer and richer while others were getting poorer. With that realization, my financial IQ went up—I saw another world. After my experience selling Xerox copiers to businesses and then selling tax shelters to the rich in my spare time, I decided I wanted to be rich.
The Lesson
Take a look at the equation…
The harsh reality is, as energy prices go up, the wealth of the nation goes down, except for those with the financial IQ to invest wisely. Yet, if you are rich, your equation can look like this:
The choice is yours. You can choose which “wealth = energy” equation you want.
I became a partner in oil exploration ventures because I wanted to be on the side of the rich. Today, I continue to invest in oil and gas partnerships…just as I was doing back in the 1970s and 1980s.
Today, the tax breaks (while not as good as they were in the past) are still enticing. For the $100,000 I invest today, while not receiving a 4-to-1 write-off like I did in the past, can still receive a 70 percent write-off plus a 15 percent depletion allowance. That means I receive a $70,000 tax break when I invest, and for every dollar of income, I also get a 15 percent tax break, which means I earn more and pay less in taxes. Try getting that with savings, stocks, bonds or mutual funds. Knowing