5 Secrets to Jump Start Your Cash Flow
Whether you have been investing for years or are just starting your journey out of the Rat
Race, every investor needs direction and motivation. Understood and followed for years
by the rich, there are key secrets that will help every investor from the active day trader to
the budding entrepreneur to the seasoned real estate investor get better, gain leverage,
and invest wisely.
As you read Rich Dad Coaching’s “5 Secrets to Jump Start Your Cash Flow” seek to understand how each one applies in your investing pursuits and do not be quick to dismiss
one as beneath you or too advanced. Hold yourself accountable to actually putting each
one into practice. These secrets are tried and true. Learn to apply them and you will accomplish more than you would have otherwise.
With that being said, let us begin.
Secret #1 – Know Your Game Plan and Outcome.
There is a difference between those who know “how” to invest and those who know
“why” to invest. And by “why,” we do not mean some esoteric higher-purpose—even
though a greater goal is important. No, we mean, “why did you invest $50,000 in option
A instead of option B?”
There are two kinds of investors. You can be an educated investor or a successful investor. An educated investor is someone who either through study or street smarts knows
“how” to do deals. Whether it is from diligence in educational pursuits, executing numerous deals, or a combination of both, the educated investor understands the in’s and
out’s of a deal. We all need to be educated, but the educated investor stops with the
Successful investors understand “why” to do a deal.
Successful investors are also educated and continue to educate themselves. The difference is the successful investor not only knows how to “do the deal,” but how each
investment contributes a critical piece to their overall investment plan and strategy.
Without a plan in place, you are relegating yourself to a career of simply being an investor who knows what to do. You will move from deal to deal building a long and varied
portfolio, but never go anywhere. Imagine going to the grocery store without a list or a
menu. You would go up and down the aisles finding bargain prices and “great deals” on
item after item; but because you lacked a list or plan, you would leave the store with only
some tubes of toothpaste, a couple cases of soda pop, and an assortment of buy-one-get-one-free snacks. While you may have saved 70% on your grocery bill, you have left
without anything for dinner tonight If you do not know why you are making a deal or investment, then it does not matter how
great it is or how flawlessly you execute it. Education is important; but if you are aimlessly
pursuing opportunities without thought for the bigger picture, you can easily find yourself
holding a portfolio that does not allow you to realize your dream.
To be a successful investor, you need to know where you want to go and how you will get
there. Decide how you will construct your investment portfolio over the years and what
instruments you will use. Be sure to include milestones related to specific dollar amounts
and a best- and worst-case scenario. The entire process will take time and many are
tempted to forgo such planning and leave their future to chance. They think they can figure it out as they go along or that planning is wasting time that could be used for actually
investing. But ask the same people if knowing where they are going and how they will get
there is a good idea, and you will get a unanimous response in the affirmative.
Secret #2 – Be Agile.
Once you begin executing your plan in the real world, you will almost immediately find
you will need to make adjustments. This is not a shortcoming or indictment of your plans,
but evidence as to how quickly things change. You need to be able to change just as
fast if not faster.
Agility is another secret to jump starting your cash flow.
You need to be agile in your investing by being quick when responding to changes and
opportunities and well coordinated in how you implement your response. Be quick to the
punch without being coordinated among your portfolio, your team, and your resources
and you will find yourself pulling the trigger on something that may appear to be a good
investment; but does not contribute to the bigger picture or worse, a bad investment
not exposed for what it truly was. Conversely, if you spend too much time coordinating
information from team members, resources, and research, you may miss an opportunity
to another investor.
Agility marries speed and resources into a skill used to seize the right opportunities at
the right time
Secret #3 – Work “on” your investing business, not “in” it.
If agility is executing on the field, then Secret #3 is the adjustment made at halftime.
When you work so closely with each of your investments, it becomes easy to find yourself wrapped up in the details and forget the big picture. By taking time to work “on” the
business as opposed to always working “in” the business, you elevate yourself and gain
a valuable perspective. Whether you invest in stocks, commodities, or real estate, you
need to manage your investment portfolio like a business. By thinking strategically about
your investments and holding yourself accountable to the bottom line, you can identify
ways to make your investing more effective One essential part of working “on” the business is setting up systems. Systems handle—
and many times automate—the various aspects of your investing business. For example,
a real estate investor could build a website to automate how he or she markets properties and collects information from possible buyers and renters. Another investor could
consult with legal counsel to help him set up the best entity that establishes the necessary protection in case he is sued. The stock market investor could establish systems
that allow her to closely monitor her investments so she can adhere to the “rules” she
established in her plan such as never risking more than 3% of her portfolio in a position.
Working “on” the business also allows you to identify those practices that are not working and are weighing you down. A certain practice might produce acceptable—or even
great—results out of the gate, but start to wane over time. If you never get above the
trees, investments can fall victim to an out-of-sight out-of-mind trap and occupy precious capital that could be better used elsewhere
Secret #4 – Be Aware of Blind Spots.
Being aware of a habit that holds you back is tricky. After all, if you knew there was a
better way, you would change or at least attempt to change, right? The problem is that
most of us are not interested in knowing what we are doing wrong. And if we have been
able to experience even the smallest degree of success, we are even less likely to believe
something is wrong. By seeking feedback from others, you can expose blind spots and
make changes that you did not even know you needed to make.
Discuss your successes and failures with friends, fellow investors, mentors, and coaches
and then carefully listen to their feedback. Often, their words will provide insight that will
help you identify and eliminate bad habits or biases that have been holding you back.
Talking with those who are where you want to be will help you identify what you need to
let go of to make it to the next level. Think of it as the PGA golfer with a hitch in his swing.
By working with a coach to breakdown and pinpoint the smallest part of his swing, he
can overcome what is holding him back. A minor change or adjustment can yield tremendous results.
Be sure to put emotions aside when receiving and evaluating feedback. Too often, we
dismiss an observation because it hits too close to home. Remember the intent was not
to put you down, but to expand your thinking to another approach. That being said, not
all feedback is created equal. Take into account the experience level and accomplishments of the one giving you feedback. How relevant is their advice to your unique situation? Even if the advice is misguided, is there a bit of wisdom contained in it that can help
you become a better investor?
Secret #5 – Be Confident and Humble.
Albert Einstein defined insanity as continuing to do the same thing over and over again
and expect different results. Adapted to the world of investing, if you continue to invest
how you have always invested, you will continue to get the same returns you have always
earned. By itself, that is not a bad thing. It is comforting to know a certain type of investment can yield you a predictable and steady rate of return. However, in order to take your
investing to the next level, you need to make investments that stretch you beyond your
comfort zone. It is in these moments that you need to believe in your abilities.
Take time to reflect on your progress up to this point. Confidence comes from remembering and acknowledging your past success. As you inventory your progress from where
you started to where you are now, you will quickly realize that the next level of investing
is not an exclusive club; but the next chapter in your investing story. Realize you do not
have to have all the answers before you begin, but you do need to take the first step.
To keep your confidence in check, be sure to inventory accurately your contributions to
your success. Anyone can make money in an “up” market and sometimes people begin
to think too highly of their skills when it was nothing more than the walking into the right
Before the real estate bubble burst, plenty of people who did not know what they were
doing made money hand over fist in booming markets. The bankruptcy courts are now
littered with people who became too self-assured and began taking bigger and bigger
risks that they were not equipped to handle—all because of a false sense of confidence.
This is not to say that you cannot or should not run with the big dogs. On the contrary,
your dreams and plans should be as big as you can make them. But be sure you are the
reason for your success. Luck will have something to do with it from time to time; but
most luck is manufactured from skill, understanding, desire, and hard work.
Learn to temper confidence with humility and you will be able to find and execute the
right investments for you at the right stage of your investing career.
As we said before, the newest investor all the way up to the most experienced one can use
these 5 Secrets. The reason why is because each secret contains a principle—or truth—
that governs success. Investing principles are timeless. They work in up or down markets.
They operate whether you are aware of them or not, and they do not care where you are
from and how much—or how little—you know. Learn to master them and apply them in
your investing and you will find greater degrees of success than you would without.