My Interpretation of Kiyosaki's "Pay Yourself First" Theory - Posted by Frank

Posted by Deano on May 03, 2000 at 22:49:42:

Its refreshing to read comments from folks who seem to really have their priorities in line. I believe that tithing(10%)is only the begining,I challange you to give above and beyond that. As you begin to recieve your profits from your deals dont forget the most powerful principal known to man.“The principal of sowing and reaping”.
Plant one apple seed into “FERTILE SOIL” and reap an apple tree, that will yield 100`s of apples year after year.
That same powerful little seed stored safely in your pocket will die.
Profits from our Real Estate ventures are “seeds”. What will you do with them?
Put them in a safe place, like our bank accounts,where they just seem to wither and die.
Or will you have the faith to invest and bury those seeds, into fresh,fertile ground,like your local church,people who are less blessed than we are, or maybe just a neighbor or friend who need a helping hand.
Look around, their is fertile ground everywhere.
Or are you walking right past it, on your way to the bank.
"Give and it shall be given to you…with the measure you have given it will be used to give to you"
Give with a thimble–Recieve from a thimble.
Give with a wheelbarrow–recieve from a wheelbarrow
Thanks for hearing me out

p.s. I am a full time real estate investor, as a result
of following this principal.

My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by Frank

Posted by Frank on April 30, 2000 at 17:14:00:

Thought I’d start a new post since the one below was getting too big.

I think I understand his “pay yourself first” theory however I don’t think he is explanining it well. It came off as “don’t pay your bills until creditors and collection agencies come after you”. I don’t think many people will A+ credit will buy into this one. My feeling on this is that you set aside a portion of money each month for yourself and consider that a bill. So along with paying Mastercard and the phone bill, you also have a $300 bill to yourself. You need to treat the $300 (or whatever amount) as important as the rest of your bills. Think of that $300 as your mortgage payment - it must be paid. You can let the phone bill slide a month if you need to but you must pay that $300 bill. This is how I think he should have presented it.

One more thought. Despite the fact that Kiyosaki learned all these skills from his rich dad, he didn’t become financially independent til his late forties (47 I think) and he said on Oprah that he was broke at one point. So, even with all this knowledge, he still failed at times which means he’s as human as the rest of us.

My response - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 01, 2000 at 11:15:49:

My belief is that most people’s “income” is pretty well static in the short run. But what is NOT static is their expenses. So that if you pay yourself LAST, you will have frittered away that money on trivial (typically cash) expenses. But if you pay yourself 1st, you wont have the chance to fritter it away. And you wouldn’t buy 20 packs of beer instead of paying your car payment would you??
The other point about failing is a good one… But it’s sort of backwards… The sports analogy works well here. Look at how many times Babe Ruth struck out. Or how many shots Michael Jordan missed. The greatest athletes fail somewhere between 50 and 67% of the time, depending on the sport. Or an even better way to look at it is to redefine what fail means. For me, I don’t fail if I am not financially independent yet or if a deal falls through. I fail if I give up. And there is no way that is ever going to happen…

Cheers,

Mark

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by Zee

Posted by Zee on May 01, 2000 at 04:45:48:

BTW, a reasonable goal, perhaps to work up to, is 10% of your income to pay yourself first. That’s 10% of Gross…(after all you pay your “Uncle” off of your gross, so, why not YOU?)

Just for fun, pay yourself first – right after setting aside 10% as tithe.

Now you’re really living below your means!

Need motivation?

Look at it this way: if your can’t honor your God and take care of yourself while you have just a little but of money, then how do you expect to do it when you finally “arrive”? And just when will THAT be, exactly?

By (tithing, and) paying yourself first, you gaurantee success because now you have capital to work with. Then go multiply it.

My Take… - Posted by Brandi_TX

Posted by Brandi_TX on May 01, 2000 at 02:07:08:

My take on the “pay yourself first plan” is this:

If you pay yourself first, and there is not enough left to pay the typical bills, then (if you are to come out a winner) you will be resourceful - dare I say MOTIVATED to come up with the difference SOMEHOW.

Obviously this is not for the faint of heart. It is only intended for those who are strong enough to make a commitment to A.) NOT TOUCH what was “saved” (read invested) and B.) EARN the money that is “missing” because you paid yourself first.

Kind of like the “backed in a corner” sinario. Back yourself into a corner by paying yourself first, then FIGHT your way out. But if you have no intention of FIGHTING (I mean REALLY fighting), then this whole thing is probably not a good idea.

Also, I do not think Robert means to pay yourself by putting the $ in a 3% savings account - that would be stupid with 10-20% consumer credit rates. I think the whole point of paying yourself first is to make that money produce something for you that will help you get ahead.

Just my 2 pennies,
Brandi_TX

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by David Alexander

Posted by David Alexander on April 30, 2000 at 22:10:00:

The choices are simple credit or no credit. You can learn to pay yourself first or you can learn to use that money to generate more money (motivate you) to make it work harder to be able to afford the bills.

My opinion although I dont agree with save your way to wealth mentality. At first if you find it hard to achieve then there are probably expenses you can cut a little bit, until you learn how to generate more and live by investing excess cash.

There will be a point (when you cross the quadrant to the left side) when in your mind there will No Choice but to pay yourself first (Make Your Money Work) before you pay your bills. Because the flip side is never getting ahead, and never controlling Money.

Once your Wealthy and Rich you wont need credit but it will given to you anyway. So you can start by simply deciding which you want to be a slave to your creditors caving to the pressure and never gaining control of Your money or Reinvesting the money and paying the bills with the profits, and then your problem will soon be as he says “Too Much Money”

David Alexander

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by Rob FL

Posted by Rob FL on April 30, 2000 at 21:18:30:

R.K. talks in more detail about being broke in the Cashflow Quadrant. A must read for any investor.

I first read about paying yourself first in the “Richest Man in Babylon.” That book was written in the 1920’s so it is nothing new. The second time I read about it was about 10 years ago in a book by the late Charles Givens, “Wealth Without Risk.”

R.K. does stress paying yourself first to the extreme. The Richest Man in Babylon tells you to come up with a budget plan on how you can possibly achieve this “pay yourself first” mentality. The point made in that book is that if you plan things out and find ways to cut back that you can begin to pay yourself first and not even miss the money you saved. Treat your savings kind of like you already do the FICA and withholding taxes and any other deductions coming out of your paycheck.

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by Glenn-OH

Posted by Glenn-OH on April 30, 2000 at 18:28:42:

A couple of points:
The pay yourself amount needs to be MORE important than the rest of your bills. That’s what he meant by ahead of your bills - beleive me, they will still be there the next month, the next month, … , then next month. Our chance to pay ourselves first is gone each time we miss it - it will never come back.
Also, yes he was poor once, and yes I think he perceives himself to be as human as the rest of us. That is why he is trying so hard to help educate us all (you don’t see Bill Gates, Donald Trump, Ted Turner, or Rupert Murdock making this kind of effort). As far as his being poor, he and his wife were homeless at one point. They had both agreed to take the plunge and quit there jobs to start on the plans that he is outlining for all of us. Talk about gutsy! Talk about a supportive wife! Obviously things worked out, as he said in his books. But it certainly makes one think about what you are doing to “mind our business first”.
Glenn

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by StewNE

Posted by StewNE on May 01, 2000 at 14:46:00:

I totally agree. I “fell down” one time and stop tithing. It was amazing even with more money to spend I got deeper in debt. In the last year I have been tithing and just paid off my $10,000 2nd Mortgage 2.5 years EARLY. 2 Peter Verse 1, 4:10 is what I stand on.

Re: My Take… - Posted by Zee, of PA

Posted by Zee, of PA on May 03, 2000 at 24:38:40:

After viewing the interview, my wife, Mary Ann, and I decided to think up ways to save money by living even farther below our means. We came up with the idea of keeping track of cash we avoided spending due to readdressing our priorities and not buying something on impulse, and by working very hard at finding cheaper alternatives to spending we already are doing and have decided we cannnot live without.

On the first count, we take more mind of wasteful cash outflow, like “needing” that cup of Starbucks coffee, or going out for ice cream. We refrain from spending and focus on more important values. For example, instead of stopping at the grocery for a half gallon of vanilla, I went straight home and watered my vegetable garden…

On the saving money end, we seee that we can cut $5 a month off out internet service cost by switching to a different provider through a program with my employer.

The KEY to getting anyplace with this is: We physically move the cash that would have been used into a “Do Not Touch” container (our “Cash Can”).

How does this work with money we chose NOT to spend? Well, if we kept out $200 in cash from our paycheck deposit for wekly petty cash expenses (groceries, gasoline, etc.) we physically move the equivalent amount of that $2.50 cup of Starbucks into our “Cash Can” and consider it on its way toward building up our capital.

Out of our hands!

Looking hard at what you must buy also helps you really think hard about just how much (little?) of it your really need. Right now I see I have cases of motor oil in my garage available for servicing two of my cars. But why do I now need enough on hand to do oil changes three times over?

I could have bought just four or five quarts when I needed them. And invested the difference in something that could grow! The small savings I received in buying quantity probably isn’t worth the opportunity cost, nor the hassle of storage.

I figured out now why manufacturers in the 1980’s have gone to a Just-In-Time system of raw goods ordering. Same idea, I figure.

Some day I’ll tell you about our “Envelope System” of cash management

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by Matthew Chan

Posted by Matthew Chan on May 01, 2000 at 10:16:59:

I agree. The thing about credit is, it only serves you to a certain point. It is a great tool which I often use but there is a point of diminishing returns especially when you consider the “paying yourself first” issue.

Kind of like frugality, saving helps but it certainly isn’t the tool to propel you forward in great strides.

As you say, once you have money and income, it can overcome credit issues. But you can have great credit and still not get the money to do what you want…

Not a hard decision for me anymore…

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by Matthew Chan

Posted by Matthew Chan on May 01, 2000 at 10:05:24:

There may be times in your life where you may not be able to both make the payment to the bill collectors and yourself.

His approach may be extreme but it does drive the point home. Who is more important? You or your bill collectors? Not to say never to pay your your bills or to not make good on your debts but sometimes you have to make a crucial decision.

It is tough for me for a guy like me with great credit. But I have tussled with this for awhile and I have decided that I will postpone bill collectors than to short myself.

A very personal choice. Some people are unable to do it. Others are.

Re: My Interpretation of Kiyosaki’s “Pay Yourself First” Theory - Posted by Zee, of PA

Posted by Zee, of PA on May 03, 2000 at 24:08:45:

Nice going, Stew! May our Lord continue to reward and bless your committment of giving.

I too have seen the difference… - Posted by Brandi_TX

Posted by Brandi_TX on May 01, 2000 at 16:44:15:

…in what happens when I pay it, and what happens when I don’t.

In fact, one of my written goals is to write a check for all the tithe I failed to pay in the past.

Brandi_TX

Re: I too have seen the difference… - Posted by Zee, of PA

Posted by Zee, of PA on May 03, 2000 at 24:04:54:

WOW! That’s bold!

Reminds me of the principle of “restitution”. Of restoring to those to whom we have done harm what should have been there’s had we not taken it from them, or otherwise caused them loss.

No more “stealing from God”…