t gh .

tau rks oa wo mb ey z Ga on che rry m an La e how Bo S m

Learning the secret of how to become rich is one thing but how to stay rich is a
nother matter.
In the wake of the stunning success of his rst bestseller, Think Rich, Pinoy!, a
uthor and real estate investor Larry Gamboa continues to impart his hard-earned
wisdom on how to stay comfortably and con dently wealthy for years to come. Ther
es a lot more work to do if you want your passive income to become massive income
. And its lots of fun! Larry will tutor you as you enroll in the school of life a
nd learn from the failure and success stories of a self-made taipan, a computer
genius and Pinoys who are working at thinking rich. As you aim to make the grade i
n staying rich, youll learn more about: How to determine your nancial report card
so you motivate yourself by measuring your way to nancial freedom How to amass
wealth with Larrys 5/7 program

From the best-selling author of Think Rich, Pinoy!

GROW RICH, PINOY!
Larry Gamboa, PhD
GROW PINOY!
By Larry Gamboa, PhD

The myths Pinoys have about making money and how to debunk them with the right b
eliefs The Four Types of Thinkers The Six Levels of Pinoy Investors How to TLD (
Think It, Learn It, Do It) your way to massive passive income (the key to nancia
l freedom)

Combined with Think Rich, Pinoy!, Grow Rich, Pinoy! will challenge you to say to
yourself and to the world, YAYAMAN AKO. And to act.
ISBN 978-971-93671-1-6
www.shepherdsvoice.com.ph
GROW RICH,
1
PINOY!
By Larry Gamboa, PhD
Edited by Coylee Gamboa and Rissa Singson
2 GROW RICH,
PINOY!
ISBN 978 971 93671 1 6
Larry Gamboa, PhD
Copyright 2006 by Shepherds Voice Publications, Inc. 1st Reprint September 2007 Layout
ugo Illustrations by Jose Benedicto T. Gamboa Requests for information should be addressed
RDS VOICE PUBLICATIONS, INC. #60 Chicago St., Cubao, Quezon City, Philippines 1109 P.O. Bo
on City Central Post Of ce 1153 Quezon City Tel. No. (02) 411 7874 to 77 Fax No. 727 5615 e
hepherdsvoice.com.ph All rights reserved. No part of this publication may be reproduced,
otations, without the prior permission of the publisher.
3
To Bel, my kid sister. You challenge me to be a better kuya.
4
Contents
6 9
Preface Foreword SECTION I What Keeps Pinoys from Thinking Rich Chapter 1: Chapt
er 2: Chapter 3: Chapter 4: Its All in Your Head Whats Blocking You? 11 Myths Pino
ys Have About Making Money The Four Types of Thinkers
12 35 59 75 107
SECTION II Some Pinoys Who Are Thinking Rich Chapter 5: Chapter 6: Chapter 7: St
ewardship in Action By Charlie Gamboa Building Wealth Requires Hard Work By Rona
ld Cagape Lessons from an Apprentice By Roy Nabong 153 141 126 128
5
Chapter 8:
Learning the Ropes By Giovanni Olivares
165
SECTION III Guidelines for Growing Rich Chapter 9: Chapter 10: Chapter 11: Chapt
er 12: Chapter 13: Think It Learn It Do It The End Is Only the Beginning Conclus
ion: A New Beginning 177 179 197 203 212 217
6
Preface
When I was four years old, I almost drowned. And for the longest time, I never l
earned how to swim. I was horri ed of the water. I never went in. I just stayed in
the perimeter, playing with the sand in the beach. Consequently, I built the mo
st sophisticated sand castles for kids my age. (Every catastrophe has a bright s
ide.) But at the age of 12, it happened. With my heart palpitating, I walked int
o a shallow pool, lay face down and, wonder of wonders, I oated. It was exhilarat
ing. The water was carrying me. It was an overwhelming feeling Ill never forget.
All of a sudden, I knew how water worked. In the same way, there was also a time
when I didnt know how money worked.
Grow Rich, Pinoy!
7
Proof? I was drowning every day in nancial lack. I didnt know how to keep it, how
to save it, how to invest it, or how to multiply it. I never read anything about
money, and never thought about it, and never talked about it. So I kept asking
God to bail me out. Consequently, Ive experienced quite a number of money miracle
s in my life. These were my sophisticated sandcastles. And they didnt last too. T
hey would be washed away by the waves of my next nancial problem. But one day, I
learned how money worked. Strange sounding words became my friends: Cash ow. Savi
ngs. Interests. Bonds. Mutual Funds. Stocks. Business. And real estate In the pas
t ve years, Ive grown in nancial literacy which led to my nancial freedom. In the pr
ocess, Ive become a nancial mentor to others. Hundreds of thousands have already r
ead my books and articles and listened to my seminars on money. But this book is
nt about me. This book is about Larry Gamboa, my mentor in nances and real estate.
8
Grow Rich, Pinoy!
He taught me how money works. He encouraged me, coached me and inspired me to ke
ep on learning. And my life has never been the same. If youll allow Larry, hell te
ach you too. If youre tired of drowning, and if youre tired of fancy sandcastles t
hat dont last anyway, this book is for you. Open your eyes. A new world awaits yo
u. Bo Sanchez Manila, Philippines
9
Foreword
Unlike Larry Gamboa, who is an entrepreneur, I have been in corporate management
practically all my life, having reached the highest levels of both public and p
rivate sector institutions. Many of my colleagues are unaware that I have tried
my hand in entrepreneurial ventures by partnering with some friends and investin
g in a travel agency, an ethnic food restaurant, an investor relations rm and a h
otel management company. But my experience in these entrepreneurial ventures hav
e been disappointing and, to a large extent, dismal failures. This is the princi
pal reason I have chosen to remain in corporate management. At the same time, I
have been more successful as an investor in corporate bonds, listed equities, mu
tual funds, currency swaps and derivatives. I have personally managed our (my wi
fes and mine) modest portfolio and have learned some valuable lessons. Some of th
e lessons I have shared with my daughters, which Larry has mentioned in his book
, are:
10
Grow Rich, Pinoy!
1. You have to learn how to make money work for you instead of you working for m
oney; 2. Identify a good role model who has been successful in making personal i
nvestments, and with his or her help, nd out what makes the most money for you so
that you can focus on that kind of investment; 3. It is all right to borrow mon
ey for an investment provided you could generate a higher yield on your investme
nt than the cost of your loan. Investing in real estate properties, for example,
can provide higher rental income than the loan amortizations you have to pay, t
hus enabling you to build up passive income. The more passive income you make, t
he greater good you can do for the less fortunate. At this point, I cannot say t
hat my daughters have learned all the lessons I have taught them about money or
its use. But my three eldest daughters, who have been working for a number of ye
ars now, have been building up their savings and investing in relatively safe xed
income mutual funds which provide them with signi cantly higher interests than ba
nk deposits would. They have yet to learn from Larry the advantages of investing
in real estate and building a portfolio that provides signi cant passive income.
Grow Rich, Pinoy!
11
While I have known Larry since our grade school days in La Salle, it was only re
cently, after reading his rst book, Think Rich, Pinoy!, that I realized how passi
onate he is about entrepreneurship and sharing his lessons learned to our kababa
yans. I would strongly urge everyone to read his second book Grow Rich, Pinoy! a
nd learn many practical tips from a hard-nosed and successful real estate invest
or. Jose L. Cuisia, Jr. President & CEO, Philamlife Manila, Philippines
12
SECTION 1
What Keeps Pinoys from Thinking Rich
I wrote Think Rich, Pinoy! with one purpose in mind: to show how the principles
of Robert Kiyosakis Rich Dad, Poor Dad can be applied to the Pinoy of today. The
response was overwhelming. Daily I receive e-mails from Pinoys here and abroad s
aying how much they have been inspired and encouraged by reading the book. Pwede
palang yumaman. Okey palang yumaman. And invariably the question comes up: How do I
start? At rst, I was puzzled. Didnt I already answer that in Think Rich? Just look
up Larrys Seven Steps and go!
Grow Rich, Pinoy!
13
Some readers jump right in. They see the goal and, straight as an arrow, they go
for it. Action agad. But some get stuck. They read. They get inspired. But they
do not act. They are blocked. They have more questions. And the questions stop
them from acting. This is the purpose of Grow Rich, Pinoy! to push you beyond yo
ur questions and into action. Before we start, lets see how you fare in your nanci
al report card. Determining Your Financial Report Card David McCleland of Harvar
d University calls it N-Ach. John Burley describes it as the Seven Levels of Inv
estors. Robert Kiyosaki borrows from Burley and describes his understanding of t
he levels of investors. Whatever way you look at it, whether N-Ach or as levels
of investors, all three address the challenge of moving forward nancially. I borr
ow from McClelland, Burley and Kiyosaki and present to you the Pinoy Scale of In
vesting. I will also provide you with vignettes of each type of investor. The go
al is to help you visualize what level of Pinoy investor you are and decide wher
e you want to be. Lets begin by visualizing.
14
Grow Rich, Pinoy!
Think of investing as a scale with zero in the middle. Left of zero is negative
and right of zero is positive.
negative
0
positive
0
1
2
3
4
5
6
On the negative side are the Level 0, Level 1 and Level 2 investors. These are t
he poor Pinoy investors. At zero is the Level 3 investor. On the positive side a
re the Level 4, Level 5 and Level 6 investors. These are the successful Pinoy in
vestors. Obviously, we all want to fall under the right side of the scale. But b
efore we can move up from one level to the next, we rst have to know where we are
. To help you discover where you are on the scale, Ive devised a questionnaire fo
r you to answer. The Pinoy Investor Level Test Simply mark each statement as tru
e or false:
What Keeps Pinoys from Thinking Rich
15
__1. __2. __3. __4. __5. __6. __7. __8. __9. __10. __11.
After all the bills are paid, I have no money left to invest. I spend more money
than I earn each month. I borrow money to invest. I borrow money to pay the int
erest on older debts. My debts are greater than my assets. I shop with my credit
card and spend more than I can pay off in one month. I regularly pay only the m
inimum balance on my credit card. I set aside money every month and put it in a
savings account in the bank. I save money to buy big-ticket items like jewelry,
a stereo or a piano. I dabble in stocks and buy whatever my broker recommends. I
take risks in the stock and nancial markets because I believe the returns always
outweigh the risks.
__12. __13. __14.
I believe I can make a quick killing in the stock market. I am actively involved
in my investment decisions. I avoid bad debt.
16
Grow Rich, Pinoy!
__15. __16. __17. __18. __19. __20.
My passive income far exceeds my expenses. My principles for investments seldom
vary. My money works hard for me. I am a good steward of the material goods give
n me. I am creating a substantial legacy for my loved ones. My companies provide
jobs for thousands of people.
Now, lets take a look at your answers. If you answered true to any of these numbe
rs, check your level of investor and your corresponding grade range provided bel
ow: If you checked these numbers Nos. 1-2 Nos. 3-7 Nos. 8-9 Nos. 10-12 Nos. 13-1
4 Nos. 15-17 Nos. 18-20
Grade 50-60 61-70 71-74 75 Barely passing (pasang awa) 76-85 86-95 95-100
Why a grading system? Well, you know how grade
What Keeps Pinoys from Thinking Rich
17
conscious we Pinoys are. Compare these with your academic grades and see how you
fare. It may jolt you perhaps into seeing how low the correlation between acade
mic grades and nancial literacy grades are. The Level 0 Pinoy Investor (50%-60%)
Procopio has zero money to invest. By the end of each month, he has spent everyt
hing he made, or worse, he has spent more than he has earned. Sure, Procopio is
a minimum wage earner who is struggling to make ends meet while providing for a
growing family. But Ponce, a young graduate who just entered the work force and
joined a call center is in the same boat. He makes good money but nds none left a
t the end of each month. But would you believe that Percival, who earns P100,000
a month is also in the same boat as Procopio and Ponce? Why? Because like Proco
pio and Ponce, Percival also spends more that he earns each month. Financially,
their grade is 50-60%. Sad to say, most adult Pinoys over 60% of them actually f
all into the same category as Procopio, Ponce and Percival. They have money (som
etimes lots of it), but have
18
Grow Rich, Pinoy!
nothing to invest at the end of each month. Their nancial score? 50%. Bagsak. The
Level 1 Pinoy Investor (61%-70%) These Pinoys are the borrowers. Take Margie. M
argie looks rich. She has nice clothes and a classy BMW. She lives in a Makati C
ondo. But in truth, Margie lives on borrowed money. She is buried in debt. She d
oes not use debt to buy assets that will give her income. Rather she uses debt t
o fund a lifestyle that generates negative rather than positive cash ow. Her hous
e of cards can collapse at any time. Sure, Margie has a nice paying job at Makat
i that gives her the credit to fund her lifestyle. Margie does not stop at borro
wing money via credit card. She also loans cash from her relatives. Her idea of n
ancial sophistication is to borrow from one pocket to pay a debt in another. She
is forever juggling funds around. She lives her nancial life in daily stress, ho
ping and praying everything will turn out OK. Margie says You have to have faith.
But Margie has done nothing to build a solid nancial foundation. Its all
What Keeps Pinoys from Thinking Rich
19
faith and no action. And what does the Good Book say? Faith without action is de
ad. While she has some assets, in truth, her level of debt is too high. For the
most part, she does not control her cash ow. She simply lets it ow, mostly out rat
her than in. Life in Rich Dads terms is full of doodads (expenses that do not bri
ng in money). Doodads are accumulated through Margies favorite past time shopping
or malling paid for by the ever-present credit card. When the credit card bill co
mes, which gure does Margie pay? She pays what the bill points her to (nicely hig
hlighted by the bank, of course) the minimum balance. See how helpful banks can
be? As a result, Margie ends up carrying a huge interest load (something like 36
% per annum) on the unpaid balance. Margie scores 61%-70% in her nancial report c
ard. The Level 2 Pinoy Investor (71%-74%) These Pinoys are the savers. Pia puts
aside money regularly. Pia puts the money in the bank and it earns interest thro
ugh the money market or through some special promo of the bank.
20
Grow Rich, Pinoy!
Pias biggest joy is the security she feels from having money in the bank. But she
has a sneaking suspicion that her savings give a negative return. The bank offe
rs a 3% interest on time deposits and 1% interest on savings. But in ation is high
er than 7%, plus she is taxed on the interest earnings. Still, she refuses to le
ave the comfort zone of bank-promoted returns. Basta bangko, nakasandal ako sa p
ader (So long as it is a bank, I am secure), she thinks. Some savers like Pia, d
ont even bring their money to the bank. They hide it under the bed, in the mattre
ss, in a coconut shell, in a bamboo piggy bank, the arinola, wherever. Their sav
ings are used to buy things in the future. A piano, a tricycle, a car, some jewe
lry, or they simply save for an emergency. In effect, they save to consume or fo
r an emergency, but not to invest. Still, Pia the Saver is better than Margie th
e Borrower. Pia has something rather than nothing. The problem is that something
is not growing and in effect, is growing negatively. Meaning her savings are ac
tually growing less and less. In time, unless she acts, her savings get graduall
y depleted, and she will be left with nothing. Pias nancial report card score is 7
1%-74%. Bagsak pa rin.
What Keeps Pinoys from Thinking Rich
21
The Level 3 Pinoy Investor (75%) These Pinoys are the Big Dogs. Ramon is an exam
ple. Ramon likes to talk big but in truth he takes a passive approach to investi
ng. In the board game Cash ow 101, Ramon is the Big Dog. Ramon looks and sounds sm
art because he barks out nancial terms such as warrants, margins, puts, calls and
options. But Ramon really doesnt have adequate knowledge about these techniques.
A key giveaway is he does not have any principles or rules of investing. Ramon
buys high on impulse and sell low in a panic. Ramon is a sitting duck for aggres
sive brokers or real estate agents. Generally speaking, big dogs like Ramon come
across as intelligent people. But in truth, they are nancially illiterate. Salit
a ng salita pero wala namang mapakita (They talk and talk but have nothing to sh
ow for it). They have big hats but no cattle, as they say in Texas or Batangas. Ramo
n scores 75%. Pasang awa. There are three categories of Big Dogs. Those who say: 1
. I have delegated it to others. 2. It cant be done. 3. Searching for the Holy Grail.
22
Grow Rich, Pinoy!
I Have Delegated It to Others Noel is an intelligent person who has convinced hims
elf that he does not understand money and never will. Noel makes the following t
ype of comments to show how smart he is. My stock broker picks all my investments
and she is a pro. I have a great nancial planner. I have the best nancial advisor in
town. I dont need to understand everything that is going on. Hes a great guy. The go
vernment (through my SSS) will take care of me in my old age. My friend Pedro is a
great insurance agent. He handles everything for me. The HRD department at work h
andles our pension fund. It will be just ne. Due to his beliefs, Noel has very lit
tle idea where his money is invested in or why. Noel is the type of investor who
likes talking big. Yet he blindly follows the market like sheep and then squeal
s (a lot like a pig) before running to get slaughtered.
What Keeps Pinoys from Thinking Rich
23
It Cant be Done Aida delights in proving to others that getting better returns than
bank rates isnt possible. She whines and complains about missing out on an inves
tment opportunity as if some barrier other than her own mind is to blame. There
is also Virginia the Cynic who says, Ay, magkaka-problema yan. Di ka babayaran ng
tenants (Youre going to have a problem there. The tenants wont pay you). How can you
make money out of that? Siguradong matatalo ka! (Youll surely lose!) If the return
s on bank foreclosed properties are so good, why didnt the banks do that themselv
es? Once in a while they are right in their dire prediction of disaster. This giv
es credence to their belief and so they say, You see, I told you it would be bad.
So you should never venture out. Its too risky. Even when the opportunity is alre
ady there staring you in the eye, they kill your dreams. Virginia and Aida are t
he Dreamslayers. Listening to them, you will become as poor as they are. Youll wa
llow in the same misery and scarcity theyre in. In truth, Virginia and Aida are c
owards. Often vocal, they are quick to try to bring others down to their level.
Because they are afraid and unwilling to gain the
24
Grow Rich, Pinoy!
knowledge they need to invest successfully. They choose instead to shoot down an
d criticize others in an attempt to make themselves, and their beliefs about inv
esting, right. Everybody else is wrong. My friend, spend as little time as possi
ble discussing money or investments with these people. When they see you moving
forward, their natural tendency is to put you down and try to convince you of al
l of the reasons why it cant be done. These are the people who, we Filipinos say, h
ave a crab mentality. Rather than pushing you up to succeed, they delight in pulli
ng you down. If your spouse or signi cant other happens to be one of these people,
please dont argue with him or her. Dont ght them. Just leave them to think theyre r
ight in their own mind for the time being. Save your energy. As for you, go on o
ut there and become a successful investor. When you are in a position to show the
m the money, maybe then they will begin to see things your way. Again though, if
your positive results fuel negativity on their part, dont waste your time arguing
. Focus your energy on becoming even more successful. Napoleon Hill, author of T
hink and Grow Rich, calls this transmutation.
What Keeps Pinoys from Thinking Rich
25
Bottom line, avoid these it-cant-be-done dreamslayers at all costs. Focus instead
on the opportunities that abound that can propel you forward to becoming succes
sful. Be open, however, to constructive criticism. People who ght you this way ar
e your best allies. How can you distinguish dreamslayers from constructive critics? S
earching for the Holy Grail Enrique is this kind of investor. He is always trying
to make it big. As a result he strikes out in a big way. When asked how he is doing
, he will always state that he is about even or a little bit up. The truth is, hes lo
st money many times and often in huge amounts. Always searching for the Holy Grai
l in entirely the wrong place, these big dogs run around so fast that their inner
abilities and powers of independent thought cannot catch up. They would do well
to learn from Dr. Van K. Tharp who teaches that people make money by nding themse
lves, achieving their potential, and getting in tune with themselves so that the
y can follow the ow of the market. Good investors are not gamblers. In fact, they
are riskadverse people.
26
Grow Rich, Pinoy!
They know how to minimize risk and increase the possibility of return. This does
nt mean they dont make mistakes; but should they lose, they have already minimized
the loss. The Level 4 Investor (76%-85%) Helen is the Automatic Investor who ha
s learned a simple system on how to be rich. Her nancial report card score is 76%
to 85%. According to Bo Sanchez, these Pinoy Automatic Investors may well be th
ose who have reached the Promised Land. Theyre no longer getting manna in the dese
rt but are reaping the bounty of the Promised Land, says Bo. They have sown and t
herefore theyre now able to reap. They pray and they willingly put in the work ne
eded to succeed. Grace does build on nature. Faith coupled with action equals su
ccess. John Burley, author of The Secrets of the Rich, says, When people reach th
is level, their investment success is assured. Why? Because they are actively inv
olved in their investment decisions. To hell with what the broker says.
What Keeps Pinoys from Thinking Rich
27
Helen follows her own judgment and not the brokers. More often than not, Helens c
alls are better than theirs. Helen has written a long-term plan that will enable
her to reach her nancial objectives. The plan contains the following elements: s
he pays herself rst and she re-invests her investment returns. Helen receives Lev
el 4 investment returns of 15% a year or more; she is disciplined in executing h
er plan. She is nancially literate and responsible; and she avoids bad debt and i
s not averse to taking advantage of good debt. Helens investment plan is steady a
nd reliable, like a Swiss watch. In fact, its boring because its simple, repetitiv
e and steady. Her sound investment plans avoid the reworks and the dramatics whic
h are good for the movies but not so good for the income statement or the balanc
e sheet. Among investors like Helen are the Pinoys who, month after month, colle
ct royalties (from their songs, for example), dividend payments (from stocks) or
rental income from properties. These are the Pinoy investors who have gone past
the pull of gravity (i.e. poverty). While theyre not yet in the fast track, theyv
e already broken through the poverty barrier and are on the way to nancial freedo
m.
28
Grow Rich, Pinoy!
The Level 5 Pinoy Investor (86%-95%) These Pinoys are the Sophisticated Investor
s. Theyre no longer affected by the pull of the poverty gravity and have reached
the fast track. Their nancial report card shows a score of 86% to 95%. Susan is a
n example of a Level 5 investor. Susan continues to build her wealth by making m
oney work for her. Her main focus is on increasing her assets and thus her cash o
w. She is very clear on her principles and rules for investing. She may invest i
n real estate, businesses or stocks, or any combination thereof. Susans default i
nvestment vehicle may vary, but her principles or rules seldom do. Susan has mas
tered her inner life. She has character, discipline, work ethics and play ethics
. She has grappled with her fears and can stare them down. She has a rhythm and
balance in her life. She is no longer driven by the external so she doesnt burn o
ut. How often have we heard the story of the man who wins the Lotto jackpot. Big
lang yaman! Overnight, he becomes a multimillionaire. He becomes a different per
son, he spends wildly. Pretty soon, he spends all of it and hes poor again.
What Keeps Pinoys from Thinking Rich
29
Will Manny Pacquiao fall into this category after he has passed his prime as a b
oxer? The answer lies in his ability to grow in character as he grows in wealth.
Jim Rohn says it well, The greatest value in life is not what we get. The greate
st value in life is what we become. Challenging Pacquiao to a Fight While Pacquia
o is currently able to knock out the best of the boxers in his division, he need
s to be just as strong to steward (exercise duciary responsibility) the wealth hes
amassing with his wins. Why? Because his internal character muscles have to be
properly developed as well. As he builds up his boxing skills, he needs to grow
in his inner character to keep pace with his wealth. Otherwise, as Bo Sanchez sa
ys, his psychological wallet stays small. And he will behave in line with it. Ri
ch now. Poor later (sometimes sooner). But when youve mastered yourself and you h
ave the internal under control, you dont get knocked out. No matter what punches
are thrown at you internally, character-wise. You come out better, wiser, strong
er. Steve Jobs was kicked out of the company he founded: Apple. Instead of letti
ng it take him down, he used the experience to come back up stronger, humbler an
d
30
Grow Rich, Pinoy!
wiser. He developed Pixar and Next and regained control of Apple. More recently,
he launched the iPod, which is revolutionizing the music industry. Talk about m
aking a comeback and growing bigger as a human being! For the Sophisticated Inve
stors, the smooth ow of their inner life and outer life is evident in their inves
tment results. Their investments create more money for their businesses. They ex
perience the velocity of money, although not yet at the pace of the Level 6 Inve
stor. As John Burley says, Rich people work hard to have their money work hard, w
hile poor and middle-class people work hard for money. Very few Pinoys reach this
level of being truly rich. But, for those who have, their stories are worth tel
ling and listening to. Who do you know that are Level 5 Investors? Often they ar
e the next-door millionaires who look so ordinary and drab but who are quietly and
steadily building their assets. Who are these Pinoys? It could be the hardware
vendor at the street corner in Banawe. Or your suki at the wet market. Or that c
hildhood friend you thought would never amount to anything like the story of Jin
g Olivares in chapter 8.
What Keeps Pinoys from Thinking Rich
31
Bellum and Doreen Tan from Singapore, who represent Rich Dad Asia, claim to be L
evel 5 Investors since they have more than enough passive income from real estat
e holdings in Singapore, Australia and Thailand. They (and Robert Kiyosaki) belo
ng to the initial investor group in a gold mine in China, which has since made a
successful IPO. Therefore, their capital has already multiplied many times over
. Now, Bellum and Doreen can use their time to spread the gospel of nancial liter
acy by promoting the game Cash ow 101 all over Asia (in Malaysia, Singapore, Phili
ppines, Indonesia, India, China and Australia.) The Level 6 Pinoy Investor (96%-
100%) These are the Pinoy capitalists the movers and shakers of the business wor
ld locally and internationally. Their scores in the nancial report card of life?
96 to 100%. For example, Forbes magazine (March 2006) listed Lucio Tan, Henry Sy
, Jaime Zobel de Ayala and John Gokongwei among the top billionaires of the worl
d. These Pinoy magnates are motivated by the desire to be capitalists and to cre
ate a legacy even while theyre alive. John Burley wrote, Bottom line, the capitali
st not only creates large amounts of wealth, they invariably also
32
Grow Rich, Pinoy!
create vast legacies of innovation, ef ciency, economic prosperity, employment opp
ortunity and philanthropy and thereby greatly increase the standard of living fo
r hundreds of millions of people throughout the world every year. Aside from thos
e that Forbes mentioned, other Pinoys who fall in this category include Jollibees
Tony Tan Caktiong, Metrobanks George Ty, plastic king William Gatchalian, and Co
ring Ramos of National Bookstore. Steadily, through their businesses and foundat
ions (like the Ayala Foundation, Metrobank Foundation, Lucio Tan Foundation, and
Gokongwei Brothers Foundations), lives are being touched. Abroad, the Rockefell
ers, the Carnegies, Bill Gates, Michael Dell, Ted Turner, Rupert Murdoch and War
ren Buffett are in a class of their own. Having made so much money that they cou
ld never spend a fraction of it in their lifetimes, many of them are giving away
fortunes to charity. They believe that by accelerating giving and doling out la
rge sums, they have a better chance of effecting change. Last year, Bill and Mel
inda Gates gave their $3 billion dividends from Microsoft Corp. to their foundat
ion to be spent on health, education and information access. Philanthropist Andr
ew Carnegie made so much money
What Keeps Pinoys from Thinking Rich
33
in the rst half of his life that he couldnt spend it fast enough in the second hal
f for his foundation to spend, building the libraries and educational initiative
s he supports all over the US. The velocity of money he generated on the earning
side was so fast that he could barely keep up with the spending side. I have so
much money coming in, I cant spend it fast enough. What a nice problem to have! Th
e Question Finally, let me ask you, Do you want to become the next great Pinoy ca
pitalist? Are you willing to ght poverty big time? What price are you willing to p
ay in terms of time, energy, and sacri ce? That is what a capitalist does. Thats th
eir legacy. If you want to rise to the challenge, your question would be: How do
I start? Begin by becoming a Level 4 investor. When you get there, you can set
your target at becoming a Level 5 investor. From that vantage point, with prepar
ation, hard work and luck, you become a Level 6 investor the next Pinoy capitali
st.
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Grow Rich, Pinoy!
So how do I become a Level 4 investor, you ask. The rst step is to honestly disce
rn what level youre presently in. Next, determine what you need to become a Level
4 investor. What do you need to change? What do you need to develop? What do yo
u need to set aside? Commit to whatever it takes to get there. Then act. In real
estate. In building businesses. Or in stocks. Find your default vehicle of choi
ce and move forward from there. Most of us are in Levels 0, 1, 2 or 3. Time to t
ake stock and change. Some are in Level 4 or even Level 5. Kudos to you sirs, wh
oever and wherever you are. Being aware is the rst step. Now plan and work at you
r plan. As you move, write to me at thinkrichpinoy@gmail. com. Together, we can
work to raise the nancial literacy of the Filipino so she can get a better grade
in her nancial report card. Now lets work on those things in your head that keep y
ou from actually thinking rich, Pinoy.
35
CHAPTER 1
Its All in Your Head
Until he was 13, taipan John Gokongwei enjoyed a privileged lifestyle as the son
of a rich man. He went to Cebus best school, lived in a big house and got free en
trance to the Vision,1 the largest movie house in Cebu which his father owned. Bu
t then his father died and the family became poor and had to split up. His mothe
r returned to China, taking his ve siblings because it was cheaper to live there.
John
Quotes from John Gokongwei in this chapter come from http://www.webphil.com/phil
ippineentrepreneur-mrjohngokongwei.htm (accessed November 15, 2006) or see Biz N
ews Asia, vol 4 no 30, Aug 14-21, 2006.
1
36
Grow Rich, Pinoy!
Gokongwei was placed in the care of his grand uncle, Manuel Gotianuy, who put hi
m through school. Two years later, World War II came to the Philippines and the
young Gokongwei found himself out in the streets. His grand uncle could no longe
r see him through because they lost everything. But so did everybody. Mr. Gokong
wei, giving the Commencement Address at Ateneo de Manila University in March 200
4, recalled, War was the great equalizer. In that setting, anyone who was willing
to size up the situation, use his wits and work hard could make it! The young Go
kongwei had to nd a way to support himself and his family. You would hardly think
today that John Gokongwei of the Robinson group found himself in the same x that
many Pinoys are in today. But he did and look where he is now. The 5/7 Program
Whether consciously or not, Gokongwei followed a simple framework of action to a
mass his wealth. I stumbled into this framework after immersing myself in Kiyosa
kis books starting with Rich Dad, Poor Dad, studying stories of Pinoys who made i
t big like John Gokongwei, and
Its All in Your Head
37
re ecting on my own experience of success and failure. I call the framework Larrys
5/7 program. Larrys 5/7 program for making massive income through real estate for
eclosures in the Philippines and providing housing for our kababayan: P T L F A
(thats the 5) Larrys Seven Steps (thats the 7) Both are linked by the letter A. The
letters P T L F A stand for: Plan Team Locate Finance Act (Carry out Larrys 7 st
eps) So theres the framework. Youve got to have a plan, youve got to have a team, y
ou must gure out the location where you want to work, you have to work out your na
nces.
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Grow Rich, Pinoy!
When you have these gured out you act. The time frame can be: daily, weekly, mont
hly or yearly. Make a Plan The plan is not a complicated big business plan. Its a
s simple as starting by buying four small houses (could be townhouses, apartment
s or duplexes) and converting them to one big hotel (or bigger apartment units o
r multiple condo units) just like in the game, Monopoly. Or, in the case of John
Gokongwei, he became a market vendor. Gokongwei describes that time: It was ever
y man for himself, and I had to nd a way to support myself and my family. I decid
ed to be a market vendor. Why? Because it was something that a 15-year-old boy i
n short pants could do. The young Gokongwei had a bicycle which he loaded up with
thread, soap and candles. At 5 a.m., he pedaled 30 minutes to the market outsid
e the city, rented a stall, laid out his goods on a small table and started sell
ing P20 of goods every day. He recalled, Sixty-three years ago, it was enough to
support my family. And it left me enough to plow back
Its All in Your Head
39
into my small but growing business. Today, we know that Gokongweis business spans
nine core businesses: retailing, real estate, publishing, petrochemicals, textil
es, banking, food manufacturing, airlines and telecoms. But he started it all wi
th a simple plan by becoming a market vendor. Its the same thing for the rest of
us, whether its real-life bank foreclosed property or the games Cash ow 101 or Mono
poly. How do you win in Monopoly? You have to get those houses. And when you hav
e four houses, you can replace them and buy a big hotel. In our context (bank fo
reclosed properties), we start with small deals, like a duplex, two-three-or-fou
r condominiums, ve adjacent townhouses or four-or- ve door apartments. You get a nu
mber of those and generate passive income of P5,000 a month, P10,000 a month, P2
0,000 a month per property. Your plan can be: I will acquire two properties a ye
ar for the next 10 years so that I can generate P100,000 in passive income month
ly for the next 10 years. Suppose you get your rst property and make a mistake an
d earn maybe only P100 a month or you have
40
Grow Rich, Pinoy!
negative income. If you dont have a plan, youll quit. Youll say its too much trouble
for too little money. But if you have a plan, you wont quit. Youll say, Wait a min
ute. Thats just the rst property. My plan is two per year for the next 10 years. S
o lets go on to my second property. Losers quit. Winners never do. They just move
on, learning from each You must build experience. And if they have a team of tru
sted a daily journal to record their specialists. Choose experience, learning be
comes professionals who tangible. are not only experts You learn a lot in your i
n their areas but are rst purchase. By the time themselves investors in you hit y
our third, fourth, fth their own right. property, youre ying. Youre slowly becoming
an expert. I didnt have a plan. All I knew was that I wanted passive income, whic
h I learned about from the network marketing business, Skybiz. I started buying
property after three months of failure. I didnt even know how many properties I w
anted to get. By the end of the rst two years, I had more than a dozen properties
. Yet, I wouldnt be able
Its All in Your Head
41
to tell you if I was doing well then because I didnt have a plan. Youve got to hav
e a plan and it has to be simple. It will be your yardstick. Plan! And hopefully
you check it out with someone whos a more successful investor than you. Build a
Team Next, you must have a team. You need a real estate broker who provides you
with properties. You need a handyman who repairs the properties. You need an acc
ountant who prepares the nancial statements which you need and which you present
to the banks. You need a lawyer to handle potential defaults, and an insurance p
erson to protect you and your properties. You need a banker from whom you can bo
rrow money and who can give you an idea of how money works. And you need a prope
rty manager to manage your growing portfolio of real estate assets. You must bui
ld a team of trusted specialists people who understand what you want and can mov
e at your speed. It doesnt happen overnight. Choose professionals who are not onl
y experts in their areas but are themselves investors in their own right.
42
Grow Rich, Pinoy!
As you build your team, you might have to get rid of your old friends, especiall
y if they pull you down and discourage you. You cant do that, Larry, or You will nev
er be able to succeed. You can still socialize with them but they wont be crucial
to your team. In effect, consciously build a team of investor professionals who
will support you with a can-do mind set. The young Gokongwei set up his own team
of people he could trust and work with. In his own words: After the war, I had s
aved up P50,000. That was when you could buy a chicken for 20 centavos and a car
for P2,000. I was 19 years old. Now, I had enough money to bring my family home
from China. Once they were all here, they helped me expand our trading business
to include imports. Gokongwei and his siblings imported whatever wartorn Philipp
ines needed, including used clothing and textile remnants. After gaining more ex
perience and building his reputation, he borrowed money from the bank and went i
nto manufacturing. Blend 45 was their rst branded hit. With their pro ts, they laun
ched Jack and Jill food products. Now their many businesses include Cebu Paci c Ai
r and Sun Cellular.
Its All in Your Head
43
De ne Your Location Third, de ne your location. Ask yourself, Where am I going to loc
ate? Even before he brought his family back from China, the young Gokongwei made
his rst big decision about location. As the youngest vendor in the market in Cebu
, he could move faster, stay under the sun more and keep selling longer than eve
ryone else. So he soon had some savings. He shared, When I had enough money and m
ore con dence, I decided to travel to Manila from Cebu to sell all kinds of goods
like rubber tires. Instead of my bike, I now traveled on a batel a boat so small
that on windless days, we would just oat there. On bad days, the trip could take
two weeks! Gokongwei recalled, During one trip, our batel sank! We would have all
perished in the sea, had it not been for my inventory of tires. The viajeros we
re happy because my tires saved their lives, and I was happy because the viajero
s, by hanging on to them, saved my tires. On those long and lonely trips, I had
to entertain myself with books, like Gone with the Wind. The young Gokongwei reco
gnized that Manila was
44
Grow Rich, Pinoy!
the marketplace then and moved his base to Manila. Doubtless, over the years, he
made other crucial decisions like where to locate his malls, for instance. When
I rst started with bank foreclosed properties, I was strike anywhere. San Pedro, M
arilao, Cubao. Of course, I could justify that they were all in Metro Manila. Bu
t, ideally, if you The best place to could have your properties do a deal is clo
se to within a certain radius from home. If you cant do your home, it would be so
deals where you live, convenient. You could be moving wont help. If jogging arou
nd in that radius you can do deals where look for properties that are you live,
no reason you sitting there, both foreclosed cant do it anywhere. and for sale. T
hat would be your diamond in the rough. When I started out I violated this rule
and paid the price. For example, my property in Marilao required me to visit eve
ry week for four months just to make sure I could meet prospective buyers and cl
ose deals. Aside from travel time because of the distance, there was the Manila
traf c to contend with. Sometimes I deliberately violate my rule of distance.
Its All in Your Head
45
For example, I purchased a property in Tagaytay because I did not mind traveling
there every week. I loved the drive and drinking coffee from the veranda at Bre
akfast at Antonios which overlooks Taal Lake. It was my weekly Artists Date with m
yself. It was relaxing, a way to love myself and move the business forward in on
e motion. Thats my kind of life balance. Work and play in one smooth uninterrupte
d motion. So, you have to gure out your location. You start in your area, then wo
rk around your city, then the Philippines, then you can go abroad also. The best
place to do a deal is close to home. If you cant do deals where you live, moving
wont help. If you can do deals where you live, no reason you cant do it anywhere
like Australia, for example? My dream is to take what I learn in Manila and do i
t in another country and succeed. Think big, Pinoy. Figure Out Your Finances Fou
rth, you have to gure out your nances. You dont need money of your own to make mone
y but youve got to know where to get the money. And you need to know the source o
f money before you need the nancing. When I talk to people now, I describe the pr
operty and say that the ROI is 40%. They respond, I want a piece of that
46
Grow Rich, Pinoy!
action. So I ask, How much do you want to invest? They answer, Can I put in P500,000
? Another said, Can I put in P2 million? The best time to look for If you expect to
investors is when you dont know all the answers need the money. Because people b
efore you begin, you feel it the desperation of will end up stuck. someone tryin
g to make a deal. Perfectionism leads Its human nature to doubt you to paralysis.
Action and say, Naku, he needs the always beats inaction. money! Delikado! He mi
ght run away with my money. Thats just the way people are. So I suggest that you l
ocate the funds before you actually need the money. Your sources can be friends,
relatives, banks, people who are willing to lend to you. Gokongwei shared, When
we had shown success in the smaller businesses, we were able to raise money in t
he capital markets through IPOs (Initial Public Offerings) and bond offerings an
d then get into more complex, capital-intensive enterprises. We did it slow, but
sure. With all his millions, Gokongwei today does not need to use his own money
to build his businesses. He goes to the
Its All in Your Head
47
capital markets and, in effect, uses other peoples money (OPMs). Does the P T L F
A framework apply to other people, like Steven Jobs of Apple or Tony Tan Caktio
ng of Jollibee? Does it apply to going after bank foreclosed properties? Take a
look at the following matrix and ll in the blanks for your own business.
John Gokongwei Steven Jobs Larry Gamboa Tony Tan Caktiong You (Fill in the blank
s)
PLAN
Manufacturing
Apple Computer Business Woziack
Bank Foreclosed Property Family, Trace Trajano & Bo Sanchez Metro Manila 10% dow
n ESTI (Larrys Seven Steps to Success)
Food Retail Franchising Family
TEAM
His Family
LOCATE FINANCE ACT
Cebu to Manila Saved P50,000.00 Built 8 More Core Businesses
Silicon Valley IPO Apple Pixar, Next, iPod
Nationwide Franchise Fee Franchise Jollibee, Chow King, etc.
48
Grow Rich, Pinoy!
Now Get Going! So youve got a plan, a team, the location you want and nancing. Now
its time for action! Here are ve points to remember: learn the basics, decide wha
t you want out of your deals, develop your expertise gradually, work from home,
and learn your lessons well. Learn the Basics You have to learn the basics which
Ive already covered in Chapter 7 of Think Rich, Pinoy! Let me summarize them her
e for you: Larrys Seven Steps to Success 1. Own your dream. 2. List down the prop
erties you want to get. 3. Call to inquire. 4. Visit the property. 5. Learn nanci
al (and computer) literacy. 6. Prepare and submit that offer to buy. 7. Sharpen
the saw and have fun.
Its All in Your Head
49
Decide What You Want from Your Deals Once you have the basics in place, you need
to nd what works best for you. What do you want from your deals? Is it cash ow? T
his means you are not after capital appreciation which involves buying low and s
elling high. What you want is steady monthly income money owing into your pocket
every month for 10 to 15 years. For example, if you generate P2,000 per month in
passive income from a rent-to-own property, that would give you P24,000 a year
for the next decade or so. Thats money owing into your pocket even as you sleep. I
s it buy and hold? This is the Philippine model. My mom, Isabel, provided for ou
r family using this. She got a piece of land, for example, Ayala Alabang, built
a house on it (with swimming pool, of course). Then she rented it out (the swimm
ing pool fetched a premium). Then she moved on to another property. She demolish
ed the structure on a prime piece of property we owned and built a six-story bui
lding on it. Then she rented it out, collecting rental income from each property
. Again, you have created an asset that gives you passive income. You are no lon
ger working for money; money is
50
Grow Rich, Pinoy!
working for you. You now have the freedom to do what you wish. Is it quick cash?
You buy low and sell high, a practice also known as ipping. Some folks never put
out cash. They simply take out an option on a piece of property, advertise and
sell before the option period is up. They simply pocket the difference between t
he buying price and the selling price and move on to the next deal. For example,
Dinna The cost of Revilla found a foreclosed education is always property that
had a cell site cheaper than the price which generated rental income. of ignoran
ce. Or to put She bid for the property and it bluntly, If you think won. Then she
sold the rights education is expensive, to an interested buyer and she try igno
rance. earned P300,000 from the deal. The title to the property never passed thro
ugh her name but went straight to the buyer. Dinna simply ipped the property. Dev
elop Your Expertise Gradually Dont expect to be an expert before you begin. Do th
e gures for potential target properties until you nd a property
Its All in Your Head
51
that makes nancial sense. Make an offer then move on to the next property until y
ou have a pipeline of offers brewing. Odds are one will click. And before you kn
ow it, youre making a down payment (usually 10%) and taking control of a property
. You then turn around and x it up then lease it out on a rent or rent-to-own bas
is. You have become an investor. If you expect to know all the answers before yo
u begin, you will end up stuck. Perfectionism leads to paralysis. Action always
beats inaction. I receive e-mails asking such detailed questions that I get the
impression the person is caught in analysis paralysis. They have so many questio
ns oating around in their mind (like the spaghetti thinker in chapter 4) that the
y never get to act and move towards achieving their goal. They think themselves
into paralysis. Work from Home Unless you already have an existing of ce thats bein
g successfully funded by another of your businesses, choose to work from home. Y
ou dont need a large investment and you dont need to pay a huge franchise fee. And
every day is a joy. You can literally tiptoe (or dance, if you prefer) your way
to work.
52
Grow Rich, Pinoy!
Ive tried being an employee and enjoyed it. This was when I worked for Proctor &
Gamble in Cincinnati while studying at the University of Michigan. They voluntee
red to pay for my shipping expense if I would work for them at Proctor & Gamble
Philippines, so I continued to be an employee, earning a steady income. I enjoye
d the prestige of working for a multinational giant. The experience trained and
disciplined me to think, write and talk business the P&G way. Next, I was hired
as a Professor for the Asian Institute of Management. How prestigious! I could s
ense the envy of my family and friends. Galing talaga ni Larry AIM professor. Un
fortunately, I was miserable. I could not put a nger on why. I thought it might b
e the dog-eat-dog atmosphere of the business school. I preferred cooperation to
competition. I tried to learn the case method but it wouldnt click. Looking back,
I now believe I felt miserable as an AIM professor because while I had the acad
emic credentials (I had a PhD from the University of Michigan Business School),
I did not have the hands-on experience of actually starting a business, running
it or of being an investor. I had no successes and no failures to share. And
Its All in Your Head
53
here I was a professor of business kuno. I felt I was being a hypocrite. I becam
e conscious of my incompetence. Starting out on my own, I rented an of ce in Mabin
i. I got stuck paying rent during a downturn in the economy. I had to re everybod
y and cut my costs. I started to work from home. You cannot imagine how much I s
aved in overhead. And I even got to charge myself rent! In the United States, if
you work from home, there are IRS rules. Youve got to have a corner speci cally fo
r the thing. Youve got to have a job description. And expenses, like the portion
for the rent for that space, are deductible. Later, as a self-employed joint ven
ture partner of SyCip Gorres Velayo & Co. (SGV) and Development Dimensions Asean
International (DDAI), I lived the corporate life, going to the tall skyscraper
at Makati to my of ce at SGV. For 10 years, I managed the DDAI joint venture, on a
n eight-to- ve schedule every workday of the week. I was a co-owner of the company
(together with Washington Sycip and Bill Byham). I looked good, but the bottoml
ine was that I was in Kiyosakis S quadrant I was self-employed. At times, when me
eting with Bill Byham, I felt very much like an employee.
54
Grow Rich, Pinoy!
This was proven when I decided to quit as managing director of DDAI. Bill Byham
required that I sell my 30% equity share in the company. And he told me this in
no uncertain terms. Rather than ght him and make a big issue, I decided to get ou
t. This, in effect, closed a possible opportunity from moving to the B quadrant
and becoming a business owner. Through all of these transitions from employee to
selfemployed to budding business owner and now investor, nothing beats the expe
rience of working from home. I love getting up early and starting work at 4:00 a
.m. or 6:00 a.m. or whatever time I want to begin. Then I put on my trunks and g
o for a swim at the clubhouse whenever it suits me. Or jump into the car and go
boxing at Ringside. Or, I just drink a glass of iced tea and read one of the boo
ks I am currently immersed in (I enjoy reading two or more books at the same tim
e). Or I can go back to sleep. Or take the other half of the day off after I fee
l I have put in few solid hours of work. Under these conditions, I wake up rarin
g to go. I cant wait to engage in my passion. Investing, writing and sharing. Sur
e, its work. But to me its also play. And I keep learning and seeing new angles to
the same thing. I journal.
Its All in Your Head
55
I do my daily checklist. I am on re even as the day is just about to start. Its a
joy to wake up each day in this my ideal lifestyle. Learn Your Lessons Well In t
his business, you can choose to enroll in the University of Prior Learning or th
e School of Hard Knocks. Choose your wild. In the School of Hard Knocks, you mak
e your mistakes and hopefully learn from them. Theres no need to reinvent the whe
el. Or, you attend the University of Prior Learning. There, the only people who
are quali ed to teach are those who have gone before you and paved the way for you
. Its not at all academic; its based on experience. You learn from other peoples ex
periences and mistakes. Thats cheaper than making the mistakes yourself instead o
f reinventing the wheel. The cost of education is always cheaper than the price
of ignorance. Or, to put it bluntly, If you think education is expensive, try ign
orance. So I am more than happy to pay for a seminar like the two-day business se
minar of Rich Dad which I
56
Grow Rich, Pinoy!
attended in Singapore. Learning from someone like Robert Kiyosaki who has been t
here and done it and failed and succeeded helps me move forward in my own busine
ss while minimizing mistakes (due to ignorance).
Me with Rich Dad author Robert Kiyosaki.
In choosing which seminar to attend, heres a tip. Ask yourself, Who am I listening
to? Never take nancial advice from someone who isnt making several times your inco
me. For example, I get concerned when I see professors in our so-called top scho
ols like U.P., La Salle or Ateneo teach investing when they themselves are not i
nvestors. Or teaching business when they have not run
Its All in Your Head
57
a business. They have not been through the School of Hard Knocks and graduated.
And they call themselves professors? Of course, it would be wonderful if the per
son is a successful investor and, at the same time, has the gift of teaching oth
ers to be successful investors too. In short, they are both school-smart and str
eet-smart. Once you nd a suitable role model, then, with his or her help, nd out w
hat makes the most money for you and give it your laser-beam focus. Right now, f
or me, its cash ow from bank foreclosed real estate. I see opportunities to take c
ourses on investing in the stock market (under David Novac) or on sales (under T
om Hopkins), and have decided on taking one course yearly that would sharpen my
skill as an investor. Meanwhile, I continue learning by reading, listening to ta
pes (or CD-ROMs) like the set The Art of Exceptional Living by Jim Rohn. These k
eep me on my toes, giving me an awareness of what I have yet to learn about inve
sting. Recently, I had the privilege of becoming the local mentor of someone enr
olled in the Rich Dad coaching program. I learn as the person learns. It is supe
r synergistic.
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Grow Rich, Pinoy!
So there you have it: How to get started. But one day it hit me. The problem fac
ing Pinoys is not so much getting started. It is overcoming blocks that stop us
from getting started. Just what are those blocks that hinder Pinoys from becomin
g rich?