Rich Dad Poor Dad

by Robert T. Kiyosaki

one dad would say, “The love of money is the root of all evil.” The other said, “The lack of money is the root of all evil.”

Most of us learn about money from our parents.

Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth.

There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.

I decided to listen to and learn from my rich dad about money. In doing so, I chose not to listen to my poor dad, even though he was the one with all the college degrees.

Money is one form of power. But what is more powerful is financial education. Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth.

History proves that great civilizations collapse when the gap between the haves and have-nots is too great. Sadly, America is on that same course because we haven’t learned from history.

At an early age, we found out how hard it was to find good staff.

Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep.

Cash flow tells the story of how a person handles money.

The number-one expense for most people is taxes. Many people think it’s income tax, but for most Americans, their highest tax is Social Security. As an employee, it appears as if the Social Security tax combined with the Medicare tax rate is roughly 7.5 percent, but it’s really 15 percent since the employer must match the Social Security amount. In essence, it is money the employer can’t pay you. On top of that, you still have to pay income tax on the amount deducted from your wages for Social Security tax, income you never received because it went directly to Social Security through withholding.

If my wife and I were to buy a bigger, flashier house, we realize it wouldn’t be an asset. It would be a liability since it would take money out of our pocket.

As my friend tells the story, Ray spent a good amount of time explaining his viewpoint. In his business plan, Ray knew that the primary business focus was to sell hamburger franchises, but what he never lost sight of was the location of each franchise. He knew that the land and its location were the most significant factors in the success of each franchise. Basically, the person who bought the franchise was also buying the real estate under the franchise for Ray Kroc’s organization. Today, McDonald’s is the largest single owner of real estate in the world, owning even more than the Catholic church. McDonald’s owns some of the most valuable intersections and street corners in America and around the globe.

To become financially secure, a person needs to mind their own business. Your business revolves around your asset column, not your income column.

I cringe every time I hear someone say to me that their net worth is a million dollars or $100,000 dollars or whatever. One of the main reasons net worth is not accurate is simply because, the moment you begin selling your assets, you are taxed for any gains.

Businesses that do not require my presence I own them, but they are managed or run by other people. If I have to work there, it’s not a business. It becomes my job. • Stocks • Bonds • Income-generating real estate • Notes (IOUs) • Royalties from intellectual property such as music, scripts, and patents • Anything else that has value, produces income or appreciates, and has a ready market

my rich dad encouraged me to begin acquiring assets that I loved. “If you don’t love it, you won’t take care of it.” I collect real estate simply because I love buildings and land.

As your cash flow grows, you can indulge in some luxuries. An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. The poor and the middle class often buy luxury items like big houses, diamonds, furs, jewelry, or boats because they want to look rich.

Every time people try to punish the rich, the rich don’t simply comply. They react. They have the money, power, and intent to change things. They don’t just sit there and voluntarily pay more taxes. Instead, they search for ways to minimize their tax burden. They hire smart attorneys and accountants, and persuade politicians to change laws or create legal loopholes. They use their resources to effect change.

For example, “1031” is jargon for Section 1031 of the Internal Revenue Code which allows a seller to delay paying taxes on a piece of real estate that is sold for a capital gain through an exchange for a more expensive piece of real estate. Real estate is one investment vehicle that has a great tax advantage. As long as you keep trading up in value, you will not be taxed on the gains until you liquidate. People who don’t take advantage of these legal tax savings are missing a great opportunity to build their asset columns.

If you work for money, you give the power to you employer. If money works for you, you keep the power and control it.

A corporation earns, spends everything it can, and is taxed on anything that is left. It’s one of the biggest legal tax loopholes that the rich use.

This period we are in now is a most exciting time, unprecedented in our world’s history. Generations from now, people will look back at this period of time and remark at what an exciting era it must have been. It was the death of the old and birth of the new. It was full of turmoil, and it was exciting.

“Workers work hard enough to not be fired, and owners pay just enough so that workers won’t quit.”

It comes from the scene where Tom Cruise is leaving the firm. He has just been fired, and he is asking the entire company, “Who wants to come with me?” And the whole place is silent and frozen. Only one woman speaks up and says, “I’d like to, but I’m due for a promotion in three months.”

always make offers with escape clauses. In real estate, I make an offer with language that details “subject-to” contingencies, such as the approval of a business partner. Never specify who the business partner is. Most people don’t know that my partner is my cat. If they accept the offer, and I don’t want the deal, I call home and speak to my cat.

I told him that profit is made when you buy, not when you sell.