How to Get out Of Bad Debt with Robert  And Kim Kiyosaki

How to Get out Of Bad Debt with Robert  And Kim Kiyosaki

“Stick with the Formula” 
This is the formula that Robert and I followed to pay off our debt. You’ll find that if you follow this formula you will be out of debt much quicker than you imagined. Most people find themselves “bad” debt-free within 5 to 7 years. The key is to stick with the formula. You will not get ahead if you say, “I’ll just skip this one month,” and then two, and then three. If you stick with the formula it then becomes a habit you follow for a lifetime." Kim Kiyosaki

Robert and Kim Kiyosaki discuss how they were able to go from broke and homeless to being rich and wealthy entrepreneurs.

These are the key notes that stood out to me while listening to their Rich Dad Radio Show & Podcast.

When you are down and out as an entrepreneur, the hit that your self-esteem and confidence takes can push you towards seeking employment. 

If your vision and understanding of self says to push and take the risk of extreme situations that will impact your confidence, then understand also that you can rise out of the debt to wealth with persistence where most fold and head back to corporate America.

There’s good debt and bad debt.

Bad is is debt that doesn’t make you rich and you have to pay back.
A car, jewelry, shoes, mortgage.

Good debt is debt other people pay for you.
rental property, businesses.

You can use good debt to invest if you have no bad debt.

High financial intelligence is realize there is good debt. Just saying to get out of debt is not enough.

 It’s still ignorant to the fact that there is good debt you should be leveraging to get richer quicker. But you have to know a good investment as active investor.

Mutual funds are too risky and banks or creditors will not lend you  money to invest in 401k, mutual funds etc., because they are so risky.

Lenders will loan you money (good debt) to invest in real estate.

Stop accumulating the bad debt. Often starts with a sacrifice as an entrepreneur. 

Robert and Kim talk about living off of two bucks to make it through a weekend. They ate tacos and quesadillas that they’d get for a dollar and eat one taco a day to stretch a dollar.

Living frugally till your business has proven it’s concept and gained it’s footing, then you can get more control over your money and financial situation.

Make a list of all debt that you owe.

Being honest with yourself about who you owe and how much you owe them is paramount in gaining complete control of your finances. 

Facing the music of how much debt you truly have as an entrepreneur is stressed by both Robert and Kim when they describe what it takes to get out of debt as an entrepreneur.

Remember that the mindset to success when in an entrepreneurship is to have self-awareness and honesty in order to build a financial foundation that isn’t vulnerable moving forward.

Robert stresses this is the first real committment that is needed within your team. 

You Need An Accountant or Bookkeeper.
Rich people have bookkeeper poor people don’t.

A bookkeeper is the most important person within your team. It’s one of the most important steps

never say you cannot afford something because poor people always tell themselves they cannot afford something. An accountant will keep you from ever having to say you cannot afford something. 

This is an important mindset to understand. Having an accountant and bookkeeper who will hold you to the fire of paying your bills and making sure your cashflow and wealth grow in ways that are accurately archived and prepared for taxes.

Kim talks about their philosophy to pay yourself first using three piggy banks. 

If you want to be Rich, you have to pay  yourself first!

  • 10% to a Savings Account
  • 10% to an Savings Account specifically for Investing
  • 10% to a Charity or Tithing Account
  • Example: $1,000 = $300

Build the habit of putting money away daily to these three accounts.

It’s not money that makes you rich, it’s the habit attached to money that makes you wealthy.

Even if you’re broke, you always pay yourself first. With every dollar bill that comes into your business or pocket, pay yourself 30% first.

Never let an accountant tell you to pay your bills first. You will never be wealthy and you will remain poor.

Poor and Middle Class people pay themselves last. (After they’ve paid everyone else.)

Even if it’s a small amount, building the habit at small amounts will be easier when you grow and scale to larger amounts. Kim talks about how fast that money adds up when you don’t touch it. This money provided the capital they used to finance their first purchase.

  • 30% is conservative.
  • You can save 40% which Grant Cardone recommends.
  • All the way up to 80%, which is what the Kiyosaki’s pay themselves first, now.

Mostly discipline and determination in the initial stages. Being persistent and understanding the emotional toll you’ll have to endure is important.

Determine the order for paying of your debts. Start with the smallest debt amount owed. That’s the first debt you pay off first.

This does not take into account the interest rate on the debt. Do you want to get rid of the highest interest rate first? No. We want to build momentum by seeing the formula works and it empowers you to take further action in similar fashion with other debts.

It’s not about the interest payment.
It’s about how fast we can pay off a debt in total.

This takes effort:
Come up with an extra $100 or $200 per months. You do this buy starting a side hustle. An afterwork gig. Robert and Kim Kiyosaki help small seminars that they advertised. People showed up and they saved the money they made to pay off the extra debt.

You can sell things on Ebay or Amazon to raise money.
Get a part time job.

Whatever it takes to add an extra $100 to $200 paying off your debt.

On all other debts, you pay the minimum balance, while you focus on your target debt initially.

Celebrate these victories.

You do not have to be debt free to invest.

Follow the formula to get out of debt while raising capital to actively invest.