Blog | Paper Assets, Personal Finance

Get Your Financial Crisis Action Plan Ready

The world is on the verge of a true economic crisis. You can’t avoid it... but you can get ready for it with a financial crisis plan

Summary

• The next financial crisis is not far, now is the time to prepare

• Remember, savers are losers. Saving is not a secure plan for your future

• The best way to get ahead is to secure a financial education - the rest will come your way

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This is one of those unique posts that is very timely with what is going on in the world. It was written after Robert and Kim Kiyosaki hosted a ZOOM call with Andy Tanner, their stock advisor, and their partners at Rich Dad World. If you want to watch the actual call which goes into a lot more detail about our financial crisis plans than this blog, you can click here to watch it in its entirety for free.

For brevity, this article is a paraphrasing of what the advisors have taught both Kim and Robert.

Old school money

Go to school, get a job, work hard, save money, buy a house, get out of debt and invest in a long term and a well-diversified portfolio of stocks, bonds, mutual funds and ETFs is the only plan for a financial crisis you get from so-called experts. The problem is, anyone following that advice is now toast because this whole thing is going down like the Hindenburg.

In 1999, Robert wrote Rich Dad’s Prophecy because he wanted to prepare people for the massive financial crisis headed our way. He wanted to warn people and teach them how to prepare for and profit from it. Unfortunately, he predicted the biggest crash would come in 2016 but missed it by four years. It came in March 2020. And further, he doesn’t think the economy is coming back; rather, that the world has been changed forever.

The prophecy is finally coming true. And the reason it took till 2020 versus 2016 is because back in 1999, Robert did not foresee the desperation of Wall Street, the US government and the Federal Reserve Bank. He had no idea they might create quantitative easing, which basically violated the rules of the economy of the Federal Reserve Bank.

The printing of trillions of dollars in the last few months means that savers are losers. Why would you save money when governments are printing money? Saving money is losing money because the dollar is beginning to lose its purchasing power (i.e. value) drastically.

We are definitely going into a massive recession, possibly a depression, and quite possibly an economic collapse. That's how dangerous things are today.

If you’re reading this blog it means you are preparing yourself and gaining a solid foundation to survive this financial crisis. Here, you’re going to get an overview of what a real financial education is, not that FAKE stuff they feature from Wall Street.

Investing long term in the stock market is a suicide mission, especially after March of 2020 because the biggest crash did come and it's still crashing. It’s still getting bigger. The real crash — the one you probably heard nothing about — started actually in September 2019. That is when the shadow banking system crashed.

The Death of the Shadow Banking System

So what is the shadow banking system? Basically it’s a hidden system where banks loan other banks money for very short periods of time, like 24 to 48 hours, so their books can look good. It’s a buddy system where the interest rates and loans are very inexpensive and cheap.

But the shadow banking system crashed in September of 2019 and suddenly the biggest banks in the world like Deutsche Bank, the hedge funds and all those huge financial institutions ran out of money. There was not enough money in the world to cover, or hide, their debt and so the shadow bank loans soared from super cheap interest rates to 10%! A huge and sudden inflation.

What that means is that the markets had no confidence in our banks or financial institutions. The banks and financial institutions didn’t have faith or trust in their fellow banks and institutions. That was the first sign that the economy was coming down.

To make it even more crazy, at the same time that the banks were raising the interest rates on the biggest banks’ financial institutions, the interest rates for the consumer and the public market were dropping.

So the big banks are raising interest on their fellow banks, because they didn’t trust them, but at the same time they were giving the peasants outside of the system, regular civilians, cheap rates to buy investments and stocks. This drove the stock market to all-time highs.

So if you remember, in December of 2019, the stock market was at an all-time high, and the unemployment was at record low 3%, but everybody who was a professional investor knew it was all about to come crashing down.

Now everyone else, the common people who never received any financial education, took those cheap interest rates and jumped into the stock market. Basically, the professional investors got out and all the suckers rushed into the market.

Then suddenly… the Coronavirus panic hit, right when the Fed and all the powerful bankers knew the internal banking system was collapsing. They needed a scapegoat, an excuse. Enter Coronavirus.

So the masses now think the real crisis is a Coronavirus crisis. But really, it was more of a smokescreen, a diversion from the financial crisis we’re in the middle of. This isn’t a statement of controversy, but instead, a thought that the virus was a smokescreen for the real collapse. The question is, how far is this collapse going to go? We don’t think the crash is over. We think it’s just starting

According to Robert Kiyosaki, the looming crash has the potential to be the biggest in Earth’s history. We are on the edge of depression right now. And the last depression, which started in 1929, lasted 25 years. So if this depression is much larger than the Great Depression, how long do you think it will last? Does the old advice of investing for the long term still make any sense?

Real estate crisis management action plan

We need to accept that we have entered a brave new world. This is scary. But it’s good to be disturbed, because nothing is worse than somebody being comfortable in a crash.

Many of you are interested in real estate. Some time ago, Kenny McElroy, Rich Dad Advisor on real estate and Robert’s investment partner, walked Robert through his thoughts; particularly around today’s climate. Below are some insights on what Robert is doing today when it comes to real estate.

Currently Kim and Robert own roughly 7,000 apartment units. When the crisis hit, they were worried about the ability for their tenants to simply pay the rent. Many of them are out of work, struggling and scared. It’s a terrible time for many of them. In April, their rents overall were down only 7%. 7% of the people did not pay rent. In May it decreased to 23%. The trajectory remains unknown.

In real estate investing, there are two principles they have followed from day one and are still applicable today.

Real Estate Investing Principle #1

One of the key principles they’ve always followed is that employment drives real estate. With so many people out of work, and Ken McElroy predicting 50% of small businesses within shopping malls will be out of business, it’s time to start thinking about different locations.

For example, take Orlando, Florida. Disney World was shut down. Thousands of jobs were gone. Las Vegas, same thing. It was a ghost town. Look at Houston. Oil prices dropped. That’s a problem as they are going to have even higher unemployment than the rest of the nation.

Airbnb and VRBO vacation rentals by owner are gone. If you need to travel, that’s very difficult. So where is the opportunity in real estate today? What is the bright side, if there is a bright side? Where is the opportunity?

Employment drives real estate. So we need to keep a very close eye on new employment sectors as they evolve and are created in this new world.

To watch this discussion and get more details, click here.

Real Estate Investing Principle #2

To recap, principle number one is that employment drives real estate. If you can find a place that is crisis proof in regards to their jobs and employment then you need to investigate that area’s real estate opportunities. You take your investment dollars and you go where people are working. If people are moving, then you better move too.

The second principal is do not go after the high end properties.

Do not invest in high-end properties because when a crash happens, when a correction happens, the first people that are going to downsize are those in the high-end units and high-end houses. These high-end renters are now going to move into what we call the “B class” properties, middle of the road properties. People will be forced to downsize but these people still have to have a place to live.

When talking with Ken, who also runs the Kiyosaki’s property management, it’s easy to understand how good this strategy works in these times. Where many landlords are concerned about their tenants paying rent, and worse yet abandoning their apartment, Robert and Kim are in a very good situation. Following this principle has saved them from losing many renters.

Now, there is more to it than just buying correctly, however. You, as a landlord, are partners with your tenants. You must see them as humans, and during this time, a lot of humans are in need. So it’s important to take action to show tenants that you are there for them and willing to help them through this time.

For example, Ken and his team have been very, very smart. They are giving hundred dollar vouchers each month to help tenants. They are also working on payment plans to keep people in their homes even if they are out of work. Robert and Kim made the decision to not evict anyone; it was more important for them to help people to get through this and decided to do so with payment plans, vouchers and similar ideas.

If you want to know more about principles one or two, go here to listen to the full conversation raw and uncensored.

Supply and Demand Issues with AirBnB and VRBO

Another thing we are about to see during our financial crisis is the increase in real estate supply.

Airbnb and the VRBO vacation rentals are going to struggle and possibly go out of business. So, pretty soon, there’s going to be an influx of inventory. And that means there is going to be a great opportunity, if you know what you’re doing.

But, if you don’t have the financial education first, then please do not part with your hard earned money by putting it into something because you just read this ‘hot tip’ or it sounded like a good idea. Get your financial education first. Remember what rich dad taught, a bad investor can ruin even the best deal and a good investor can turn around even the worst deal.

Start very, very, very small because you’re going to make mistakes. This is the time to start preparing for when those opportunities come up.

Financial crisis plan: business opportunities

Businesses that we see doing well are those around camping. Also, the “do-it- yourself” businesses like Home Depot and Lowes. A lot of digital businesses are also being born to teach people how to do things for themselves.

Regional warehouses. Everybody wants speedy delivery. So regional warehousers are looking for properties to warehouse their goods and services.

The point is, we are in a unique place where we have no idea where we’re going. But the best thing we can do is pay attention to what’s happening. Look for the opportunity and how you can invest in it. There’s always an opportunity to start your own business.

Use this window of time wisely

It’s also important to note that this is not a race. This crash could last for decades. Don’t rush into an investment without getting educated first. The most important thing at this time is getting financially educated and learning new things. This is a time to start studying with your families, studying independently, and playing the CASHFLOW, the board game with your family or online.

It has been so encouraging and rewarding to see people use this time to learn and study and grow themselves. It’s been amazing, and if you are reading this blog, then that includes you.

Financial crisis plan: stock market opportunities

The question everyone is asking right now is, “What should I do?”

Markets go up and markets go down. Unfortunately, if a person is on autopilot, if they still have a job that throws money into a 401k, then they will soon find they have lost control. They have no control over whether their 401(k) goes up, or it goes down. It’s like being in a poker game.

When you’re at a poker game, there are often people who show their hand. And when you look at the resulting carnage from this crash, you’ll see that the market really showed its hand. It really showed what it feels about the values of the stocks inside it. And it was not flattering.

The only thing that stopped matters from getting worse was the Federal Reserve pouring in trillions and trillions of dollars into the market.

And so, when you try to figure out what is coming in the future, you have really two choices. You can either have a mindset of a victim, of a helpless worker ant, and say, “tell me what to do,” or you can say, “No, I want a mindset of control. A context of education.”

Right now, everyone is asking what to buy. Gold? More real estate? Stocks? But instead, people should be asking “What should I study?” What you have to do is to invest in your level of education.

Conspiracy or not. The fact is that there are 30 million people that lost their jobs as a result of the pandemic.

It is going to be a very interesting journey now that we’re in the post-coronavirus world to see what lengths the Fed will go to try and keep the stock market going. How much money will they print?

To hear Andy’s thoughts about the stock market and the post Corona world you can click here to listen and watch the actual call.

The recommendation isn't to buy stocks, or to buy bitcoins, or gold, or any of that. The recommendation is for you to realize that now is the time for you to get as smart as you possibly can.

We are in the Information Age. But be careful, as we are also living in the MIS-information age and it’s a great opportunity to get smarter. When you see something on Facebook or something in the news, train yourself to say, “Well, do I believe that, or not?”

So, in a world where people can say just about anything, it’s your financial education that’s going to see you through.

So that’s really the question, “What do I do now?” Do you go the ‘advice route’ or do you go the education route? That choice is up to you.

You can spend your time watching Netflix until you’ve watched all those movies or maybe you read a book about investing or real estate or stocks or taxes. Maybe you could take an online course, or get an investment coach. In the post-coronavirus world, the people with the education will be the ones that survive and thrive.

And who knows what’s real and what’s fake? A lot of people are acting on opinions that are not facts. You need to get the education. You need to discover the facts for yourself, otherwise you're going to be operating on opinion and you're going to be setting yourself up to be the victim of the next ‘hot tip’.

Become anti-ignorance. The whole concept of the 401(k) is crazy-making because it sells the notion that all you have to do is go to work, get a job, and put money in here. You can stay ignorant about money.

But, at the same time, investing your own money, without education, is probably even more dangerous. If you don’t know about stocks, is it smart to invest in stocks? No! If you don’t know about real estate, is it smart to invest in real estate? No! If you know nothing about business is it smart to invest in business? No!

That’s the greatness of the CASHFLOW game. The CASHFLOW game is a simulation. If you want a first step, that’s where you should start. In this world of MIS-information and FAKE teachers , the CASHFLOW board game does not have an agenda. It does not have an opinion about the Coronavirus. It just teaches you investing in many different ways.

If we are right, then being prepared is more important than predicting right now. And to those who tell you to buy now and hold, we say, “Good luck to you.”

For example: after the 1929 crash, the market stayed flat for 25 years. 25 years! So if you're 70 years old and you hold for the long haul, you’ll be 95 years old before you see anything. Does that sound like a solid financial plan to you?

Choose your teachers wisely when making your financial crisis plan

Wise people seek the best teachers. Don’t trust financial planners. They are not teachers. Surely they are good guys, personally, but they are sales people. They are just trying to put food on the table. They are not rich. Should you take advice from them?

Learning from real teachers is easier today than ever. It is a new world in terms of how people are delivering information via Zoom.

So just think about that. It’s a brave new world. But if you keep doing what your mommy and daddy did, you’ll probably suffer hard times.

At Rich Dad, a common saying we hear all the time is, “I wish I had a rich dad when I was growing up.” And while Robert Kiyosaki is grateful for everything he learned from rich dad, he did not make it easy. Rich dad was a coach. He wasn’t a teacher, in fact, at one point he actually said: “I don’t teach. I’m an investor. Go take a real estate course.”

So, in 1974, Robert saw an infomercial on learning how to invest in real estate with nothing down. And since he had nothing, he figured this was perfect. And a few months later, he bought his first property for nothing down that changed his life.

If you can buy something for nothing. You really tap into the power of that space between your left ear and your right ear called the brain. Now, Andy can invest with nothing. Kim can invest with nothing. Ken can invest from nothing. Robert can invest with nothing. That is the real power of financial education.

That’s important because, as you are reading this, you probably said to yourself, “I’ll invest when I have money.”

But life happens. Emergencies happen. You never have money.

Taking a leap of faith like that sounds scary. Your thoughts just overran your mind. That is why most people need a coach. Having one can ensure you acquire the right financial education, and make the best investment moves to prepare for the next financial crisis.

Your best assets are your brain, your guts and your heart. Listen and watch the actual call uncut and uncensored here.