Sharon Lechter Answers and Reviews Who Took My Money – Part 1

By: Philippe Matthews

In previous issue of the Philippe Matthews Show, you read the exclusive interview with Robert Kiyosaki; in this exciting issue, you will meet with the financial brains behind the Rich Dad company and co-author of countless books and audio programs under the Rich Dad brand, Mrs. Sharon Lechter.

In this two-part all exclusive interview, Sharon reveals and reviews one of my favorite Rich Dad books and possibly the most overlooked by the general population, Who Took My Money.

CPA, co-author of the Rich Dad series of books and CEO of The Rich Dad Company, Sharon Lechter had dedicated her professional efforts to the field of education. She graduated with honors from Florida State University with a degree in accounting, then joined the ranks of a Big Eight accounting firm. Sharon held various management positions with computer, insurance, and publishing companies while maintaining her professional credentials as a CPA.

In 1989 she joined forces with the inventor of the first electronic ‘talking book’ and helped him expand the electronic book industry to a multi-million dollar international market.

Today she remains a pioneer in developing new technologies to bring education into children’s lives in ways that are innovative, challenging, and fun. As co-author of the Rich Dad books and CEO of that company she focuses her efforts in the arena of financial education.

“Our current educational system has not been able to keep pace with the global and technological changes in the world today,” Sharon states. “We must teach our young people the skills – both scholastic and financial – that they need to not only survive but to flourish in the world.”

A committed philanthropist, Sharon ‘gives back’ to the world communities as both a volunteer and a benefactor. She directs the Foundation for Financial Literacy (http://www.ffliteracy.com)and is a director of the Arizona board of Childhelp USA, a national organization founded to eradicate child abuse in the United States. Sharon and her husband Michael were honored by Childhelp as recipients of the 2002 “Spirit of the Children” Award.

As an active member of Women’s Presidents Organization, she enjoys networking with other professional women across the country.

Robert Kiyosaki, her business partner and friend, says “Sharon is one of the few natural entrepreneurs I have ever met. My respect for her continues to grow every day that we work together.”

AOL Time Warner Book Group Chairman, Larry Kirshbaum, has stated: “What Sharon and Robert have accomplished with Rich Dad is a feat that is unprecedented in the publishing arena.”

The Rich Dad Company is the collaborative effort of Robert Kiyosaki, Kim Kiyosaki, and Sharon Lechter who, in 1997, set out to elevate the financial literacy of people throughout the world.

Philippe Matthews
When I met you in Chicago, you talked about the velocity and acceleration of money. What is that exactly?

Sharon Lechter
“There is a culmination of trying to answer the question how is this book different? It talks about accelerating your money. I stayed up one night drawing pictures trying to come up with what we were saying in an easy, graphic format. The graph that you see throughout the book was actually created after the book was written so I had to go back and weave it into the book. It encapsulates the message of keeping your money moving, understanding the three asset classes of business, real estate and paper from the first book, rich dad poor dad. We never really brought together the magic of how you increase your wealth, keep your wealth and continue to reinvest it.

Philippe Matthews
You discussed the power of phantom money as it relates to the depreciation of real estate. In fact, you call it Magic Money. Could you elaborate on that more?

Sharon Lechter
“Magic money relates to the government and tax laws allow you to depreciate a building over the life of that building – 27 years if it’s residential and 39 years if it is commercial. The concept being that things wear out just like your desk or computer. So given the world of real estate where historically it has appreciated, this gives you the opportunity through depreciation to offset your rental income. A lot of times Robert will say he has a rental income or passive income with zero percent tax that is because we had the opportunity to offset our rental income with this depreciation. The tax law also allows you look at that building and have someone come in and do an appraisal and say, ‘these cabinets, fixtures or doors aren’t’ going to last the life of the building.’ So there is another section called Component Depreciation and between depreciating the building and component depreciation, you have an offset against your income and that offset is magic money – its tax free. The true term is tax deferred, obviously when you sell that property that depreciation is recaptured unless you roll it over into a 1031 exchange and then it continues to be deferred.”

Philippe Matthews
You had a figure in the book, OPM 1:9. I understood that OPM means Other People’s Money but what does 1:9 mean?

Sharon Lechter
“I don’t know if you remember the discussion I gave but I had a flip chart where one column as you and one column as your lender. So if I buy a million dollar property and put $100,000 down, the bank puts in $900,000. I still own a hundred percent of the building, I still get a hundred percent of the appreciation, I still get a hundred percent of the depreciation but it’s a great deal because I’m only putting in one dollar for every nine dollars by the bank.”

Philippe Matthews
From reading Who Took My Money, it appears that yet another a bubble is getting ready to burst by 2016 with many of the Baby Boomers pulling their retirement money out. What impact is this going to have on the economy and why aren’t people taking this as seriously as they should?

Sharon Lechter
“That’s a very big and very good question. It’s a multiple tiered question and a multiple tiered answer. We’ve talked about this impending problem for many years even before we had the stock market drop so right now, people have seen and experienced their 401k’s being cut in half so there is a pain out there and a recognition that there is something people need to do but there is also a tremendous fear that has almost immobilized people. The fear is coming from the programming that everybody receives in school and from their parents which was an industrial age idea of go to school to get a good job and put money away in a retirement plan. It goes back to the graph that you talked about earlier where on the left side where we talked about parking our money and saving it for a rainy day. That whole concept is what we’ve all been programmed to do and we’re still programming our children to do the same thing. What we are doing is telling and showing people that they need to take control of their income.”

Philippe Matthews
So in 1974, when President Gerald Ford signed the ERISA (Employee Retirement Income Security Act) that was the day it was no longer safe to be an employee.

Sharon Lechter
“That is correct. 410k’s weren’t developed for several years later but that was the beginning of ten years of pension reform that truly created a nightmare.”

Philippe Matthews
It means companies are no longer responsible nor are they obligated to tell their employees.

Sharon Lechter
“Yes and the public didn’t understand the tremendous change from employee contribution to the employer contribution.”

Philippe Matthews
Is that what your were talking about in the book between the DB plans verses DC plans?

Sharon Lechter
“Yes…totally. Before under the old defined benefit plan it was totally at the expense of the employer and the employee was rewarded for loyalty and tenure and length of service but with the creation of the 401k that thing shifted to defined contribution even if your employer matches, still the responsibility went from the employer to the employee.”

Philippe Matthews
P128: August 15, 1971, President Nixon announced that the United States would no longer redeem currency for gold. Today a U.S. dollar has the words “Federal Reserve Note” across the top. What impact did that make on the economy and debt in America?

Sharon Lechter
“As a nation, we went from being gold based to debt based. It really allows the nation and the government to print money at will. To control inflation, to control pricing and the flow of currency so the other nations around the world that are based on the US dollar also went through that change. By going through a resource based currency to a debt based currency, the skies the limit unfortunately. There is a limit to our resources which is why it is so very important and Alan Greenspan is monitoring daily and working so hard to maintain that balance because never before in history have we been in a situation where we have so much debt as a country. More importantly and from my perspective of greater concern is the height of household debt that we have today. That is the silent killer that I am afraid of. Because of our low interest rates, so many people have been able to get into homes, they’ve had the opportunity to get 125% mortgages and as long as the interest rates stay low and they keep their jobs and can make those payments but what happens when they saddle themselves with so much debt and they lose their job for a few months and don’t have the opportunity to pay those debts, that’s the bubble that concerns me.”