Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!

by Robert T. Kiyosaki

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

“I don’t work for money!” were words he would repeat over and over. “Money works for me!”

“Boys,” he said. “You’re only poor if you give up. The most important thing is that you did something. Most people only talk and dream of getting rich. You’ve done something. I’m very proud of the two of you. I will say it again: Keep going. Don’t quit.”

You really wanted to win, but the fear of losing was greater than the excitement of winning.

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.”

What is missing from their education is not how to make money, but how to manage money. It’s called financial aptitude—

These people often work harder than they need to because they learned how to work hard, but not how to have their money work hard for them.

Taxes around the world are getting higher and higher as social demands for tax dollars require higher property, income, and sales (or value-added) taxes. Higher incomes create even more of a ‘bracket creep’ as tax rates become more progressive (steeper) to pay for social services (also called entitlements). Today the government faces serious challenges as entitlement programs like Social Security and Medicare face insolvency.

A person can be highly educated, professionally successful, and financially illiterate.

When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.

Once you understand the difference, concentrate your efforts on buying income-generating assets.

Wealth is a person’s ability to survive so many number of days forward—or, if I stopped working today, how long could I survive?

Wealth is the measure of the cash flow from the asset column compared with the expense column.

It’s not how much you make but how much you keep—and how many generations you keep it.

“If you want to be rich, you need to be financially literate.”

Rule No. 1, Robert says, is that you must know the difference between an asset and a liability, and only buy assets.

Assets add to your income. They put money in your pocket.

A liability takes money out of your pocket.

What is missing for so many people is a financial education. It’s why they might end up successful in their professions but still struggling with money.

Left-hemisphere moment: Look at the numbers and learn to read the story they are telling. Assets put money in your pocket. If something takes money out of your pocket, it’s not an asset; it’s a liability.

FINANCIAL APTITUDE: What you do with the money once you make it, how to keep people from taking it from you, how to keep it longer, and how to make that money work hard for you.

The rich focus on their asset columns, while everyone else focuses on their income statements.

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

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.

Mind your business. Don’t spend your whole life working for someone else.

Robert says real assets fall into the following categories: 1. Businesses that do not require his presence: He owns them, but they are managed or run by other people. If he has to work there, it’s not a business. It becomes his job. 2. Stocks 3. Bonds 4. Income-generating real estate 5. Notes (IOUs) 6. Royalties from intellectual property such as music, scripts, and patents 7. Anything else that has value, produces income or appreciates, and has a ready market

Left-hemisphere moment: When assets generate enough income to cover luxuries, that’s when you can buy them.

Right-hemisphere moment: Think creatively about what your business is. It’s not your profession.

Subconscious moment: Acquire the type of assets you love, because you will take better care of them a...

“Once a dollar goes into it, never let it come out. Think of it this way: Once a dollar goes into your asset column, it becomes your employee. The best thing about money is that it works 24 hours a day and can work for generations.”

What is your profession, and what is your business? How do they differ? 2. What are things you might have counted in your net worth before reading this chapter? How do you view them now? 3. Are the assets you’re acquiring the type that you love? If not, how can you change that? 4. What is a time you bought a luxury that your cash flow couldn’t justify? What is a time you did so when it could justify the purchase? Compare how you felt in the two situations, both at the moment of purchase and later. 5. Have there been people in your family who have spent their whole lives working for someone else, only to end up with nothing? What would you have advised them if you could?

Average Americans today work four to five months for the government just to cover their taxes.

As long as you keep trading up in value, you will not be taxed on the gains until you liquidate.

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

Each dollar in my asset column was a great employee, working hard to make more employees and buy the boss a new Porsche.

When I told my rich dad of my father’s advice, he only chuckled. “Why not own the ladder?” was all he said.

It is not the purpose of this book to go into the specifics of owning a corporation. But I will say that if you own any kind of legitimate assets, I would consider finding out more about the benefits and protection offered by a corporation as soon as possible.

Garret Sutton’s books on corporations provide wonderful insight into the power of personal corporations.

Business Owners with Corporations 1. Earn 2. Spend 3. Pay Taxes Employees Who Work for Corporations 1. Earn 2. Pay Taxes 3. Spend

Left-hemisphere moment: Accounting is financial literacy or the ability to read numbers. This is a vital skill if you want to build an empire. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down.

Subconscious moment: Understanding markets is the science of supply and demand. You need to know the technical aspects of the market, which are emotion-driven, in addition to the fundamental or economic aspects of an investment.

Play CASHFLOW Classic on the web at www.richdad.com

Even though they have money, everyone else seems to be getting ahead of them. And that is true in real life. There are a lot of people who have a lot of money and do not get ahead financially.

Financial intelligence is simply having more options. If the opportunities aren’t coming your way, what else can you do to improve your financial position?

It is not so much what happens, but how many different financial solutions you can think of to turn a lemon into millions. It is how creative you are in solving financial problems.