Rich Dad Poor Dad by Robert T. Kiyosaki

(Scottsdale: Plata, 1997), 351

Introduction

For example, one dad had a habit of saying, “I can’t afford it.” The other dad forbade those words to be used. He insisted I ask, “How can I afford it?” (location. 130)
“I don’t work for money!” were words he would repeat over and over. “Money works for me!” (location. 175)
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. (location. 201)

Chapter One LESSON 1: THE RICH DON’T WORK FOR MONEY

The poor and the middle class work for money. The rich have money work for them.

“And that’s exactly what most people do. They quit and go looking for another job, a better opportunity, and higher pay, actually thinking that this will solve the problem. In most cases, it won’t.” (location. 440)
Rich dad explained this point of view over and over, which I call lesson number one: The poor and the middle class work for money. The rich have money work for them. (location. 450)
He understood that every person has a weak and needy part of their soul that can be bought, and he knew that every individual also had a part of their soul that was resilient and could never be bought. It was only a question of which one was stronger.ighlight | Location: 567People’s lives are forever controlled by two emotions: fear and greed. (location. 561)
People’s lives are forever controlled by two emotions: fear and greed. Offer them more money and they continue the cycle by increasing their spending. (location. 572)
“I’ve met so many people who say, ‘Oh, I’m not interested in money.’ Yet they’ll work at a job for eight hours a day. That’s a denial of truth. If they weren’t interested in money, then why are they working? That kind of thinking is probably more psychotic than a person who hoards money.” (location. 615)
Be truthful about your emotions and use your mind and emotions in your favor, not against yourself.” (location. 625)
A job is really a short-term solution to a long-term problem.” (location. 636)
History proves that great civilizations collapse when the gap between the haves and have-nots is too great. (location. 693)

Chapter Two LESSON 2: WHY TEACH FINANCIAL LITERACY?

It’s not how much money you make. It’s how much money you keep.

Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep. (location. 806)
“If you want to be rich, you need to be financially literate.” (location. 816)
Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets. (location. 836)
Rule #1: You must know the difference between an asset and a liability, and buy assets. (location. 838)
An asset puts money in my pocket. A liability takes money out of my pocket. (location. 863)
Money only accentuates the cash-flow pattern running in your head. (location. 905)
When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house. (location. 1,037)
This pattern of treating your home as an investment, and the philosophy that a pay raise means you can buy a larger home or spend more, is the foundation of today’s debt-ridden society. Increased spending throws families into greater debt and into more financial uncertainty, even though they may be advancing in their jobs and receiving raises on a regular basis. This is high-risk living caused by weak financial education. (location. 1,054)
The problem with simply working harder is that each of these three levels takes a greater share of your increased efforts. You need to learn how to have your increased efforts benefit you and your family directly. (location. 1,088)
R. Buckminster Fuller. (location. 1,094)
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? (location. 1,098)
Although net worth often includes non-cash-producing assets, like stuff you bought that now sits in your garage, wealth measures how much money your money is making and, therefore, your financial survivability. Wealth is the measure of the cash flow from the asset column compared with the expense column. (location. 1,102)
If I want to increase my expenses, I first must increase my cash flow to maintain this level of wealth. (location. 1,109)
The rich buy assets.
- The poor only have expenses.
- The middle class buy liabilities they think are assets. (location. 1,117)

Chapter Three LESSON 3: MIND YOUR OWN BUSINESS

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

Mind your own business. Financial struggle is often directly the result of people working all their lives for someone else. Many people will simply have nothing at the end of their working days to show for their efforts. (location. 1,147)
The primary reason the majority of the poor and middle class are fiscally conservative—which means, “I can’t afford to take risks”—is that they have no financial foundation. They have to cling to their jobs and play it safe. (location. 1,167)
Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home. A new car loses nearly 25 percent of the price you pay for it the moment you drive it off the lot. It is not a true asset even if your banker lets you list it as one. My $400 new titanium driver was worth $150 the moment I teed off. (location. 1,185)
Keep expenses low, reduce liabilities, and diligently build a base of solid assets. For young people who have not yet left home, it is important for parents to teach them the difference between an asset and a liability. Get them to start building a solid asset column before they leave home, get married, buy a house, have kids, and get stuck in a risky financial position, clinging to a job, and buying everything on credit. I see so many young couples who get married and trap themselves into a lifestyle that will not let them get out of debt for most of their working years. (location. 1,189)
In my world, real assets fall into the following categories:
- 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 (location. 1,195)
But 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.” (location. 1,208)
With small companies, my investment strategy is to be out of the stock in a year. On the other hand, my real estate strategy is to start small and keep trading up for bigger properties and, therefore, delay paying taxes on the gain. This allows the value to increase dramatically. I generally hold real estate less than seven years. (location. 1,216)
Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities. (location. 1,219)
I don’t encourage anyone to start a company unless they really want to. Knowing what I know about running a company, I wouldn’t wish that task on anyone. (location. 1,225)
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. Keep your day job, be a great hardworking employee, but keep building that asset column. (location. 1,230)

Chapter Four LESSON 4: THE HISTORY OF TAXES AND THE POWER OF CORPORATIONS

My rich dad just played the game smart, and he did it through corporations—the biggest secret of the rich.

The reality is that the rich are not taxed. It’s the middle class, especially the educated upper-income middle class, who pays for the poor. (location. 1,256)
The rich created the corporation as a vehicle to limit their risk to the assets of each voyage. The rich put their money into a corporation to finance the voyage. The corporation would then hire a crew to sail to the New World to look for treasure. If the ship was lost, the crew lost their lives, but the loss to the rich would be limited only to the money they invested for that particular voyage. (location. 1,289)
It is the knowledge of the legal corporate structure that really gives the rich a vast advantage over the poor and the middle class. (location. 1,294)
A corporation is merely a file folder with some legal documents in it, sitting in some attorney’s office and registered with a state government agency. (location. 1,308)
This is why I cringe every time I hear a parent advise their children to go to school so they can find a safe, secure job. An employee with a safe, secure job, without financial aptitude, has no escape. (location. 1,315)
If you work for money, you give the power to you employer. If money works for you, you keep the power and control it. (location. 1,341)
If you know what you’re talking about, you have a fighting chance. That is why he paid so much for smart tax accountants and attorneys. It was less expensive to pay them than to pay the government. (location. 1,344)
I remind people that financial IQ is made up of knowledge from four broad areas of expertise: (location. 1,382)
1. Accounting: 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. This is the left-brain side, or the details. Financial literacy is the ability to read and understand financial statements which allows you to identify the strengths and weaknesses of any business.
2. Investing: Investing is the science of “money making money.” This involves strategies and formulas which use the creative right-brain side.
3. Understanding markets: 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. Does an investment make sense or does it not make sense based on current market conditions?
4. The law: A corporation wrapped around the technical skills of accounting, investing, and markets can contribute to explosive growth. A person who understands the tax advantages and protections provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor. It’s like the difference between someone walking and someone flying. The difference is profound when it comes to long-term wealth. (location. 1,384)
Tax advantages (location. 1,404)
Protection from lawsuits (location. 1,412)
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. (location. 1,419)
Garret Sutton’s books on corporations provide wonderful insight into the power of personal corporations. (location. 1,421)

Chapter Five LESSON 5: THE RICH INVENT MONEY

Often in the real world, it’s not the smart who get ahead, but the bold.

We all have tremendous potential, and we all are blessed with gifts. Yet the one thing that holds all of us back is some degree of self-doubt. It is not so much the lack of technical information that holds us back, but more the lack of self-confidence. (location. 1,442)
It broke my heart to see students know the answers, yet lack the courage to act on the answer. Often in the real world, it’s not the smart who get ahead, but the bold. (location. 1,451)
The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth. (location. 1,557)
1. Accounting: Accounting is financial literacy, or the ability to read numbers. This is a vital skill if you want to build businesses or investments.
2. Investing: Investing is the science of money making money.
3. Understanding markets: Understanding markets is the science of supply and demand Alexander Graham Bell gave the market what it wanted. So did Bill Gates. A $75,000 house offered for $60,000 that cost $20,000 was also the result of seizing an opportunity created by the market. Somebody was buying, and someone was selling.
4. The law: The law is the awareness of accounting corporate, state and federal regulations. I recommend playing by the rules. (location. 1,629)
I do it because I know there are changes coming. I’d rather welcome change than cling to the past. I know there will be market booms and market crashes. I want to continually develop my financial intelligence because, at each market change, some people will be on their knees begging for their jobs. Others, meanwhile, will take the lemons that life hands them—and we are all handed lemons occasionally—and turn them into millions. That’s financial intelligence. (location. 1,654)
Personally, I use two main vehicles to achieve financial growth: real estate and small-cap stocks. I use real estate as my foundation. Day in and day out, my properties provide cash flow and occasional spurts of growth in value. The small-cap stocks are used for fast growth. (location. 1,661)
Of course, there is always risk. It is financial intelligence that improves the odds. Thus, what is risky for one person is less risky to someone else. That is the primary reason I constantly encourage people to invest more in their financial education than in stocks, real estate, or other markets. The smarter you are, the better chance you have of beating the odds. (location. 1,722)
Yet for the average individual, a passive income of more than $100,000 a year is nice and not hard to achieve. (location. 1,729)
Winners are not afraid of losing. But losers are. (location. 1,753)
There are two kinds of investors: (location. 1,758)
1. The first and most common type is a person who buys a packaged investment. (location. 1,759)
2. The second type is an investor who creates investments. This investor usually assembles a deal in the same way a person who buys components builds a computer. (location. 1,763)
If you want to be the second type of investor, you need to develop three main skills. (location. 1,769)
1. Find an opportunity that everyone else missed. (location. 1,771)
2. Raise money. (location. 1,777)
3. Organize smart people. (location. 1,792)

Chapter Six LESSON 6: WORK TO LEARN—DON’T WORK FOR MONEY

Job security meant everything to my educated dad. Learning meant everything to my rich dad.

What this phrase means is that most people need only to learn and master one more skill and their income would jump exponentially. I have mentioned before that financial intelligence is a synergy of accounting, investing, marketing, and law. Combine those four technical skills and making money with money is easier than most people would believe. When it comes to money, the only skill most people know is to work hard. (location. 1,836)
In school and in the workplace, the popular opinion is the idea of specialization: that is, in order to make more money or get promoted, you need to specialize. (location. 1,857)
“You want to know a little about a lot” was rich dad’s suggestion. (location. 1,860)
“Leadership is what you need to learn next,” he said. “If you’re not a good leader, you’ll get shot in the back, just like they do in business.” (location. 1,881)
I found a job with Xerox Corp. I joined it for one reason, and it was not for the benefits. I was a shy person, and the thought of selling was the most frightening subject in the world. Xerox has one of the best sales-training programs in America. (location. 1,883)
Job is an acronym for “Just Over Broke.” (location. 1,893)
Instead, I recommend to young people to seek work for what they will learn, more than what they will earn. Look down the road at what skills they want to acquire before choosing a specific profession (location. 1,903)
Instead of simply working for the money and security, which I admit are important, I suggest they take a second job that will teach them a second skill. (location. 1,930)
Skills do not necessarily transfer from industry to industry. (location. 1,951)
The answer is obvious: McDonald’s is excellent at business systems. The reason so many talented people are poor is because they focus on building a better hamburger and know little to nothing about business systems. (location. 1,959)
He never understood that the more specialized you become, the more you are trapped and dependent on that specialty. (location. 1,976)
The main management skills needed for success are:
1. Management of cash flow
2. Management of systems
3. Management of people (location. 1,985)
The most important specialized skills are sales and marketing. The ability to sell—to communicate to another human being, be it a customer, employee, boss, spouse, or child—is the base skill of personal success. Communication skills such as writing, speaking, and negotiating are crucial to a life of success. These are skills I work on constantly, attending courses or buying educational resources to expand my knowledge. (location. 1,990)
The skills of selling and marketing are difficult for most people, primarily due to their fear of rejection. The better you are at communicating, negotiating, and handling your fear of rejection, the easier life is. (location. 2,001)
In addition to being good learners, sellers, and marketers, we need to be good teachers as well as good students. (location. 2,007)

Chapter Seven OVERCOMING OBSTACLES

The primary difference between a rich person and a poor person is how they manage fear.

There are five main reasons why financially literate people may still not develop abundant asset columns that could produce a large cash flow. The five reasons are:
1. Fear
2. Cynicism
3. Laziness
4. Bad habits
5. Arrogance (location. 2,025)
Overcoming Fear (location. 2,033)
I have never met a rich person who has never lost money. But I have met a lot of poor people who have never lost a dime— (location. 2,034)
“If you hate risk and worry, start early.” (location. 2,042)
He constantly told Mike and me that the greatest reason for lack of financial success was because most people played it too safe. (location. 2,057)
For most people, the reason they don’t win financially is because the pain of losing money is far greater than the joy of being rich. (location. 2,070)
Failure inspires winners. Failure defeats losers. (location. 2,086)
The greatest secret of winners is that failure inspires winning; thus, they’re not afraid of losing. (location. 2,093)
The main reason that over 90 percent of the American public struggles financially is because they play not to lose. They don’t play to win. (location. 2,097)
If you have little money and you want to be rich, you must first be focused, not balanced. If you look at any successful person, at the start they were not balanced. Balanced people go nowhere. They stay in one spot. To make progress, you must first go unbalanced. (location. 2,103)
Put a lot of your eggs in a few baskets and FOCUS: Follow One Course Until Successful. (location. 2,109)
Doubt is expensive. (location. 2,161)
“Cynics never win,” said rich dad. “Unchecked doubt and fear creates a cynic.” “Cynics criticize, and winners analyze” was another of his favorite sayings. (location. 2,165)
A great property manager is key to success in real estate. Finding a good manager is more important to me than the real estate. A great property manager often hears of great deals before real estate agents do, which makes them even more valuable. (location. 2,177)
Busy people are often the most lazy. (location. 2,205)
If they aren’t busy at work or with the kids, they’re often busy watching TV, fishing, playing golf, or shopping. Yet deep down they know they are avoiding something important. That’s the most common form of laziness: laziness by staying busy. (location. 2,211)
Our lives are a reflection of our habits more than our education. (location. 2,260)

Chapter Eight GETTING STARTED

There is gold everywhere. Most people are not trained to see it.

Find a reason greater than reality: the power of spirit (location. 2,331)
Make daily choices: the power of choice (location. 2,353)
Choose friends carefully: the power of association (location. 2,395)
Master a formula and then learn a new one: the power of learning quickly (location. 2,427)
Pay yourself first: the power of self-discipline (location. 2,450)
Pay your brokers well: the power of good advice (location. 2,521)
Be an Indian giver: the power of getting something for nothing (location. 2,549)
Use assets to buy luxuries: the power of focus (location. 2,578)
Choose heroes: the power of myth (location. 2,625)
Teach and you shall receive: the power of giving (location. 2,642)

IF YOU DO NOT HAVE A STRONG REASON, THERE IS NO SENSE READING FURTHER. IT WILL SOUND LIKE TOO MUCH WORK. (location. 2,352)
“You become what you study.” (location. 2,430)
George Clason’s book, The Richest Man in Babylon. (location. 2,468)
The real skill is to manage and reward the people who are smarter than you in some technical area. That is why companies have a board of directors. You should have one too. (location. 2,547)
Frequently, my broker calls and recommends I move a sizable amount of money into the stock of a company that he feels is just about to make a move that will add value to the stock, like announcing a new product. I will move my money in for a week to a month while the stock moves up. Then I pull my initial dollar amount out, and stop worrying about the fluctuations of the market, because my initial money is back and ready to work on another asset. So my money goes in, and then it comes out, and I own an asset that was technically free. (location. 2,565)

Chapter Nine STILL WANT MORE? HERE ARE SOME TO DO’S

Stop doing what you’re doing. In other words, take a break and assess what is working and what is not working. (location. 2,676)
Look for new ideas (location. 2,679)
Find someone who has done what you want to do (location. 2,685)
Take classes, read, and attend seminars (location. 2,691)
Make lots of offers (location. 2,695)
Jog, walk, or drive a certain area once a month for 10 minutes (location. 2,717)
For there to be profit in a deal, there must be two elements: a bargain and change. (location. 2,718)
Shop for bargains in all markets (location. 2,726)
Profits are made in the buying, not in the selling. (location. 2,729)
Look for people who want to buy first. Then look for someone who wants to sell (location. 2,738)
Think big (location. 2,743)
Learn from history (location. 2,748)
Action always beats inaction (location. 2,751)

FINAL THOUGHTS

Think and Grow Rich (location. 2,795)
The key to becoming wealthy is the ability to convert earned income into passive income or portfolio income as quickly as possible. (location. 2,807)

Topic: Investing

Source: Cory

Created: 2017-12-10
Updated: 2022-02-24-Thu