Applying Kiyosaki's So Called "Unfair Advantage"

When I facilitate groups with my kids at work,  one of the concepts that I teach them is called "LAP". This is an acronym which means: Learn, Apply, and Practice. The video above is called An Unfair Advantage, which refers to the advantage that a person has when they have learned, applied, and practiced effective financial education. In an earlier post a projection of a penny compounded was shown over a 30 day period. In this article I want to focus on the first 20 days.  I will use the first 20 days as targets to aim at as I write my blog articles. 


Targets 1 through 6 seem to have already been achieved based on my current investing.  Targets 7 through 13 are so small that I am almost embarrassed to mention them, yet they are necessary steps that need to be taken in order to get to higher levels. Targets 14 through 17 would relieve some financial pressure. And, Targets 18 through 20 would create life style upgrade.

Target 1 ------------------------------>$0.01

Target 2------------------------------> $0.02

Target 3 ------------------------------>$0.04

Target 4------------------------------> $0.08

Target 5 ------------------------------>$0.16

Target 6 ------------------------------>$0.32

Target 7 ------------------------------>$0.64

Target 8 ------------------------------>$1.28

Target 9 ------------------------------>$2.56

Target 10 ------------------------------>$5.12

Target 11------------------------------> $10.24

Target 12 ------------------------------>$20.48

Target 13 ------------------------------>$40.96

Target 14 ------------------------------>$81.92

Target 15 ------------------------------>$163.84

Target 16 ------------------------------>$327.68

Target 17 ------------------------------>$655.36

Target 18 ------------------------------>$1,310.72

Target 19 ------------------------------>$2,621.44

Target 20------------------------------> $5,242.88

As a youth counselor I have never earned over 30 thousand a year. Targets 19 and 20 would create financial independence and wealth for most people in my peer group.  The challenge is to figure out how to bridge the gap between Target 7 and 18.


All I can do at this point is take one step at a time. I currently earn approximately 60 cent a month through dividends. I know this is not a lot of money but it is a start. I will start saving at least 30 dollars a month and invest that money into dividend paying stocks. When I have built up enough money I will move into covered calls. My next target is to raise my 60 cent in income to at least 64 cent.


What are your Financial Targets? Please tell what they are in the comment box below.

Renting Shares

In my last blog article I went over the basics of covered calls. I also included a short video from zecco.com. I decided to add one more post showing a video of Jamie McIntyre. While he discusses "Renting Shares" or covered calls from the Australian markets, the information still correlates to the American Market.


In Australia a person must buy 1000 shares in order to use a covered call strategy. Here in the United States, we only have to buy 100 shares. Just make the mental adjustments as you watch the video. I hope you enjoy this video.

What are Covered Calls?

Covered calls are a way to generate monthly income and wealth on a stock purchase. In a covered call an investor buys 100 shares of a stock and sells someone else the right but not the obligation to purchase the shares from them (a contract) at a certain price up to a certain date. Another way to look at this is to think about real estate. If a person purchased a property for $100,000 dollars and rented the property to someone for $1000 dollars per month, then they would be earning a 1% return per month on their investment, with a positive income or cashflow of 1000 dollars. The covered call strategy allows the person who buys stock to treat their shares of stock like a property, generating monthly income through cashflow. There are only two possible scenarios that can take place with a Covered Call.

In Scenario #1, the stock will be above the sell price (Assigned/Called). If the stock is above the sell price then the stock will be taken away from the seller and the seller will receive the amount of money they sold the stock for in there account and also keep the premium or rental that they received. This is known as being assigned or having your stock called away.

In Scenario #2 , the stock will be below the sell price (Expire worthless/ Uncalled). If the stock is below the sell price then the seller will keep the stock and keep the premium because the buyers contract has expired worthless or been uncalled. The owner of the stock can then sell another contract or "rent" out the stock again the following month.

Please watch the following video.

Dividend Income --> While I Sleep Money?!?!

Making money while you sleep

View more presentations from Demond Johnson

I currently own Microsoft (ticker symbol "MSFT").  It pays a quarterly dividend of 16 cent per share or a yearly dividend of 64 cent. That equals a 2.58% return not including commissions. While it is not a huge return, it is a better return that I would receive at a bank.

A second stock I am holding is ARMOUR Residential Reit Inc (ticker symbol "ARR"). It pays a monthly dividend of 12 cent per share or a yearly dividend of 1.44 dollars. That equals a 18.73% return not including commissions.


There is a Chinese proverb that says "The journey of a thousand miles begins with the 1st step." I love receiving dividend income. While the passive income generated from this stock holdings is not significant, Holding them is helping to take steps forward on the path to success. 


In my opinion it is the best way to convert earned income into passive income. 


That's all I have for now. If you have dividend paying stocks that you like please post them in the comment box.

Applied Wealth Theory

Power  is defined as the ability to cause an intended effect. A common phrase I hear is "Knowledge is Power." I no longer believe this. I now hold the belief that "Knowledge is not Power, applied knowledge is Power." In other words it is not what you know that counts, but what you do with what you know that counts. 


My plan is to buy stocks that pay dividends. I will also by stocks and use a covered call strategy on them. I will re-invest 90% of the profit and use 10 % as an incentive to join our wealth investment network. If this is done consistently a positive monthly cash flow should be created.


In my next post I will embed a report called Making money while you sleep. It will give an example of how buying stocks that pay dividends will start us on the path of wealth. 



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The Model: Compound Interest

A person that I have a great deal of admiration for is Albert Einstein. He once said that "Everything should be made as simple as possible but not simpler." And, when asked what the greatest invention of man was, he said compound interest. He considered it to be the the 8th wonder of the world. 


When Einstein was asked to expound on his statement about compounding he said "Compounding is mankind's greatest invention because it allows for the reliable systematic accumulation of wealth."


The power of this concept is clearly shown when one takes a penny and doubles it or compounds it(@100%) for 30 days. At the end of 30 days the penny's value has gone from 1 cent to over 5 million dollars.

Here is the mathematical progression:

# of Days 1 Penny Compounded Daily
Day 1 ------------------------------>$0.01
Day 2------------------------------> $0.02
Day 3 ------------------------------>$0.04
Day 4------------------------------> $0.08
Day 5 ------------------------------>$0.16
Day 6 ------------------------------>$0.32
Day 7 ------------------------------>$0.64
Day 8 ------------------------------>$1.28
Day 9 ------------------------------>$2.56
Day 10 ------------------------------>$5.12
Day 11------------------------------> $10.24
Day 12 ------------------------------>$20.48
Day 13 ------------------------------>$40.96
Day 14 ------------------------------>$81.92
Day 15 ------------------------------>$163.84
Day 16 ------------------------------>$327.68
Day 17 ------------------------------>$655.36
Day 18 ------------------------------>$1,310.72
Day 19 ------------------------------>$2,621.44
Day 20------------------------------> $5,242.88
Day 21 ------------------------------>$10,485.76
Day 22 ------------------------------>$20,971.52
Day 23 ------------------------------>$41,943.04
Day 24 ------------------------------>$83,886.08
Day 25 ------------------------------>$167,772.16
Day 26 ------------------------------>$335,544.32
Day 27 ------------------------------>$671,088.64
Day 28 ------------------------------>$1,342,177.28
Day 29 ------------------------------>$2,684,354.56
Day 30 ------------------------------>$5,368,709.12

When I look at this I find it to be amazing. Based on my understanding this could have practical application if we copy the actions of the wealthy. This can be broken down in 3 steps: (Step 1) Buy Assets or things that pay us. (Step2) Re-invest the profits. And (Step 3) Form a network.


If this is done consistently compounding effect would take place. Our Asset Column would grow when we purchase an asset and re-invest the profits. Our "Wealth Investment Network" would also grow when we find people who are willing learn apply and practice wealth principles.

The next question to answer specifically is --> HOW????


I'll tackle that in my next post.

How to Teach Youth About Wealth.

My name is Demond Johnson. I am 38 years old, and I work as a Youth Counselor with “At Risk” Youth here in Phoenix Az.

One day I was running a group with some of the kids I work with. One of them asked me if to run a group on how to make money? I told the young man that I would be happy to put a group together on the topic.

So, with that being said, I grabbed information from the Rich Dad Poor Dad series and started to put the information into a power point presentation called how “How to be Wealthy!”

After summarizing the information I ran across a video on YouTube, put out by Tim Sales called What the Wealthy Buy on Payday. This animated video gave an overview of the entire Rich Dad Poor Dad book in less than 9 minutes.

I showed my kids the video and they loved it. When I went to check for understanding the hands in the room were flying up and some kids were excitedly blurting out answers. I asked them the questions which will follow in a moment.

Once I asked a question, they gave their answer, and the presentation revealed if they were right. It was like being on some type TV game show or something. “Is that your Final Answer?”…If a kid did not answer correctly then everyone else in the room made sure he did.

My kids were working together as a team and eager to be in group. All I can say is… it was a good day. It was the kind of day that makes you remember your passion, and, why you do what you do.

Anyway, here are the questions I asked:

What are the 4 financial terms we need to know in order to discuss wealth?

What are the 3 classes of people we need to talk about?

What are the spending patterns of the 3 classes of people?

And, what is compounding?

These questions sparked conversation about how the kid’s families spent money or how they could actually apply the information.

This is where the problem started.

I am always telling the kids that they can be anything, have anything, and do anything they want, if they will simply put their minds to the task at hand.

I had just run a great group on “How to be Wealthy!” As I drove home that night, that positive happy feeling turned into an angry and hateful resentment. As I looked myself in the eyes through the rear view mirror all I could see was a hypocrite. I started thinking,” If I knew all this, How come I didn’t do all this?”

I am a husband, father, and counselor living paycheck to paycheck. I am struggling to pay my student loans, and the words “YOU ARE FIRED!” would destroy any illusion of safety that I have. With that thought in mind I started working to apply the information I had learned to my own life.

I now run a group with the kids that I work with, on Monday and Wednesday nights. We apply the information we learned about wealth to the stock market.

I have opened up a virtual account at www.optionsxpress.com where we learn and practice our skill in the markets without risk. Recently, I started to trade with real money. My goal in writing this article is to continue to learn principles of wealth and share those principles of wealth with others.

This experience caused a major shift in my Consciousness. I started thinking, if a group kids could be that inspired, that motivated, and that willing to work together as a team to learn how to be wealthy… Why couldn’t a group of positive like-minded people get together and do the same?

Let’s Eradicate Poverty by Building Wealth through Financial Education.

How to be wealthy

View more presentations from Demond Johnson.

If you would like to receive a copy of the power point presentation or PDF (report), click here.

Test Everythng Keep the Good !

In 1 Thessalonians 5:21 , it says "test everything and hold on to the good". In this blog my intention is to put the principles of wealth, compound interest, and networking to the test. In the book Rich Dad Poor Dad, Robert Kiyosaki states that a person is wealthy when their assets create a monthly income that is greater than the persons monthly expenses. Mr. Kiyosaki, goes on to state that the wealthy stay wealthy because their money works for them through compounding, and because the wealthy form networks. I think this is very powerful information, and, I want to "put it to the test". 

I call this test or endevor... The Cashflow Collaboration. Imagine how powerful it would be to create a network of people committed to building wealth (Cashflow), and working together (Collaboration) to help eliminate poverty and build Wealth through Financial Education.

Please Stand By