Investor Lesson 9 - Each Plan Has A Price

“What is the difference between the plan to be rich and the other two core values?” I asked.

“You mean the difference between rich and secure and comfortable?” “That's what I am asking, ” I responded.

“The difference is the price,” said rich dad. “There is a tremendous price difference between a financial plan to be rich and the other two positions.” “You mean the investments in the rich financial plan cost more money?” I asked.

“Well, to most people, it looks like the price is measured in terms of money. But if you look closer , you'll see that the price is not measured in money; it is really measured in time. And of the assets of time and money, time is really the more precious asset.”

A scowl came over my face as I tried to comprehend what rich dad was saying. “What do you mean the price is measured in time? Give me an example. ” “Sure,” said rich dad. “If I wanted to go from LA to New York, how much would a bus ticket cost?”

“I don't know . I 'd guess under $100,” I replied. “I've never purchased a bus ticket from LA to New York.”

“Neither have I, ” said rich dad. “Now tell me how much a ticket by a 747 jetliner from LA to New York would cost.”

“Again, I don't really know. But I guess it would be around $500,” I replied. “That's close enough,” said rich dad. “Now let me ask you. Why the

difference in price? You're traveling from LA to New York in both instances. Why would you pay so much more for a ticket on a jet airliner?” “Oh, I got it, ” I said as I began to understand what rich dad was getting at. “I pay more for the jet airliner ticket because I am saving time. ” “Think of it more like buying time than saving time. The moment you begin to think of time as precious and that it has a price, the richer you will become.” I sat thinking silently. I really was not getting what rich dad was talking about ... yet I knew that it was important to him. I wanted to say something but I did not know what to say. I did understand the idea that time was precious but I never really thought of it as having a price. And the idea of buying time rather than saving time was important to rich dad, but it was not important to me yet. Finally, sensing my mental struggle, rich dad broke the silence by saying, “I'll bet in your family you use the words ‘save' or ‘saving' a lot. I'll bet your mom often says she goes shopping and tries to save money. And your dad thinks that how much money he has in savings is important. ”

“Well they may work hard at trying to save but they waste a lot of time. I've seen shoppers in grocery stores spend hours trying to save a few dollars, ” said rich dad. “They may save money but they waste a lot of time.”

“I'm not saying that saving is not important, ” rich dad continued. “And yes you can become rich by saving. All I am saying is that the price is really measured in time.”

“Look, ” said rich dad. “You can get rich by saving and you can become rich by being cheap, but it takes a heck of a long time, just as you can go from LA to New York by bus so you can save some money. However, your real price will be measured in time. In other words, it takes five hours by jet for $500 or it can take up to five days by bus for $100. Poor people measure in money and rich people measure in time. That may be why there are more poor people who ride buses.”

“Because they have more time than money?” I asked. “That is why they ride the bus?”

“That is part of it,” said rich dad, shaking his head, indicating that he was not happy with the way our conversation was going.

“Closer, ” said rich dad. “I have noticed that the less money a person has the harder that person clings to it. I have met a lot of poor people with a lot of money.”

“Yes,” said rich dad. “They have a lot of money because they cling to money like it has some magical value. So they have a lot of money but are just as poor as if they had no money.”

“I think of money as only a medium of exchange. In reality, money by itself has very little value. So as soon as I have money, I want to exchange it for something of value. The irony is that for many people who cling desperately to money, the money they spend for things of very little value…is why they are poor. They say things like ‘safe as money in the bank,' and when they do spend their hard-earned money, they turn their cash into trash.”

“Yes,” said rich dad. “In many cases, the poor and middle class struggle because they place far too much importance on money itself. So they cling to it, work hard for it, work hard at living frugally, shop at sales, and do their best to save as much of it as they can. Many of these people try to get rich by being cheap. But at the end of the day, you may have a lot of money, but you're still cheap.”

“I don't understand,” I replied. “You're talking about the values my mom and dad tried to instill in us. You're talking about the way I currently think. I'm in the Marine Corps, and they don't pay much money so I find myself naturally thinking that way.”

“I understand,” rich dad replied. “Thrift and frugality have their place. But today we are talking about the difference between the plan to be rich and the other two plans.”

“Yes,” said rich dad. “And most people think the price is measured in money.” “And what you're saying is that the price is measured in time,” I added, beginning to understand what rich dad was getting at. “Because time is more important than money.”

Nodding, rich dad said, “Many people want to get rich, or invest in the investments the rich invest in, but most are not willing to invest the time. That is why only three out of a hundred Americans are rich—and one of those three inherited that money.”

Rich dad again wrote on his yellow legal tablet the three core values we had been discussing:

“You can invest to be secure and comfortable using an automatic system or plan. In fact, I recommend that for most people. Simply work and turn your money over to professional managers or institutions and invest for the long term. People who invest in this manner will probably do better than the individual who thinks he or she is the Tarzan of Wall Street. A steady program of putting money away following a plan is the best way to invest for most people.”

“But if I want to be rich, I have to invest in something more valuable than money, and that is time. Is this what you've been getting at with this lesson?” “I wanted to make sure you understood the lesson,” said rich dad. “You see, most people want to be rich but they are not willing to first invest the time. They operate on hot tips or wild get-rich-quick schemes. Or they want to start a business so they rush out and start a business without the basic skills of business. And then we wonder why 95% of all small businesses fail in the first five to ten years.” “They are in such a hurry to make money, they eventually lose both time and money,” I added. “They want to do things on their own rather than invest in a little study.”

“Or follow a simple long-term plan, ” rich dad repeated. “You see, almost anyone in the Western world can easily become a millionaire if he or she simply follows a long-term plan. But again, most people aren't willing to invest the time; they want to get rich now.”

“Instead they say things like ‘investing is risky' or ‘it takes money to make money' or ‘I don't have the time to learn to invest. I'm too busy working and I have bills to pay,' ” I added as I began to understand rich dad's point.

Rich dad nodded. “And those very common ideas or excuses are why so few people achieve great wealth in a world that is filled with money. Those ideas or words are why 90% of the population has the problem of having not enough money rather than the problem of too much money. Their ideas about money and investing cause their money problems. All they have to do is change a few words, a few ideas, and their financial world will change like magic. But most people are too busy working and they do not have the time. Many often say, “I'm not interested in learning to invest. It is a subject that does not interest me.” Yet they fail to see that by saying that, they become slaves to money, working for money, having money dictate the financial boundaries of their lives, living frugally and within their means, instead of investing a little time, following a plan, and having money work for them.”

“That is true for me, ” said rich dad. “So if you want to move on to the rich level of investing, you are going to have to invest much more time than you do at the other two levels. Most people do not go beyond secure and comfortable because they are not willing to invest the time. That is a personal decision we all need to make. At least the person has a financial plan to be secure and/or comfortable. There is nothing more high risk than a person who does not have those two basic plans, who is focused only on becoming rich. While a few make it, most don't. You see them in the later years of their lives, broke, spent, and talking about the deal they almost made or the money they once had. At the end of their lives, they have neither time nor money.”

“So I think it is time I begin to invest more time, especially since I want to invest at the rich level, ” I said, shuddering at the thought of being a broke and broken old man, muttering in my beer about the deals that almost happened. I had already seen and met such investors. It is not pretty to see a person who is out of both time and money.

Investing at the secure level and the comfortable level should be as mechanical or as formulated as possible. They should be “no-brainers. ” All you do is turn your money over to professional—and hopefully reputable—managers, and all they do is follow your plan. If you start early and if the stars shine on you, at the end of the rainbow should be the pot of gold. Investing can—and should be—that simple, at these two fundamental levels.

There is a word of caution, however. There is no such thing in life as risk free. There are lower-risk things, and that is so for investing. So, if you feel uncertain about the fate of the financial world and don't trust the people or the industry, then you have much more research to do. It is important to be true to your emotions and instinct but don't let them run your entire life. So if you cannot shake this nervousness, then invest with greater caution . . . but always remember the price: the more secure an investment, the more time it takes to make money . . . if it makes money. So there is always a tradeoff, or as they say, “There is no such thing as a free lunch.” Everything has a price, and in the investment world, that price is measured in both time and money.

Once your investment plans of being financially secure and/or comfortable are in place and on track, then you are better able to speculate on that hot stock tip you heard from a friend. Speculating in the world of financial products is fun, yet it should be done responsibly. There are many so-called investors in the markets who are really addicts with a gambling problem.

When people ask me questions such as “What stocks are you investing in?” I have to say, “I don't pick stocks. Professional money managers do that for me.”

And I reply, “I am. But I do not invest in the ways that most people invest. I invest how my rich dad taught me to invest.”

I personally and actively invest in the rich level of investing. Very few people invest or play the game of investing at this level. The remainder of this book is dedicated to that level of investing, which my rich dad taught me. It is not a method for everyone . . . especially if you do not already have the secure and comfort levels already in place.

1. Are you willing to set in place an investment plan to cover your financial needs to be secure and/or comfortable?

If you are not sure of your answer and want to find out what level of commitment rich dad's investment in study requires, the rest of the book will give you some insights as to what it takes to invest at the rich level.