“When you are lost, go back to the beginning.”– Cecil Castellucci, Tin Star

 

A while ago, I realized that I had to return to the basics so that I could become fiscally healthy again.  To be honest, after my marriage fell apart, I let my hair down a little. But, when I let my hair down fiscally, I let some things get out of control. Being a responsible husband, I managed what little income I worked for and maintained my household. But, after it was over, I lost control over my discipline with my diet and my fiscal discipline.  

When I decided to come back to myself, the first thing I did was instinctually return to tracking my spending habits. Tracking? Yes, tracking. I was first introduced to this concept by reading about John d. Rockefeller. He would say, “If you watch your pennies, the dollars will take care of themselves.” So, I returned to the fundamentals.

But, as time went on, my spirit went back to that quote. I had lost my way, and to get back to who I was, I needed to return to the fundamentals that I had learned in the three or four books that were the bedrock of my fiscal discipline. I was introduced to most of these in the multi-level marketing business that I was involved in over 20 years ago. Those books changed my life.  Today, we will discuss one of those powerful, life-changing books: Rich Dad Poor Dad.

What are you reading?

Recently, I was at work going through this wonderful book, the same book I bought in 1997. It was full of yellow highlights and red ink. I was taking notes, and this fellow that I knew in passing asked me what I was reading. When I told him the name of the book, he began to express his difference of opinion of Kiyosaki. He said,

 “I’m a stock guy. I’ve been investing for years. Kiyosaki speaks negatively about the markets, and I believe that he’s wrong. He leans more towards real estate…”

After he said this, I told him, “You are right and wrong at the same time.”  What do I mean?  Well, let me explain. The gentleman was correct at the time of the conversation. Keep in mind that this was a recent conversation, but the book was written in 1997. Just recently, I saw Kiyosaki say something similar to what the gentleman was saying. Kiyosaki is not into stocks (at this time). I sense that he lost a lot of money in the markets recently because of a statement that he made. Let’s look at Kiyosaki’s recent quote.  

“What’s lesson #1 (of Rich Dad’s philosophy on wealth)?  (interviewer: Rich people don’t work for money.)  Correct.  Money is debt.  I use debt as money, and everybody thinks getting in debt is bad.  Well, who taught you that?  I think the stock market is for losers.  Why would you put money in the stock market when it’s manipulated?  That’s what I think about it.  That’s what my brain is focusing on all the time.  That I don’t pay taxes.  The question is how is it that I don’t pay taxes and I can tell you.  That’s an important question because most people cheat on their taxes.  Because they hate taxes so much, but you don’t have to cheat on taxes if you understood how money was working.  You think Donald Trump pays taxes?  No.  I know him, he is my friend.  We don’t pay taxes.  That’s the question.  How is it we do that?  That’s an intelligent question.  The reason you can’t ask me those questions is because you don’t know how I do it.” Robot Kiyosaki (@wearesimplifyllc)

As you can see, the gentleman that I was having this conversation with was correct in his statement. Kiyosaki had an aversion for the markets at this time, but the fundamentals taught in Rich Dad Poor Dad still stand true.  

Assets…

I let the gentleman speak, and as soon as he gave me a chance to speak, I asked him a simple question:

Moeh: What is an asset?

Gentleman: An asset is something that increases in value. For example, if I purchased this watch and it increases in value, it’s an asset.

I told him that Rich Dad taught that, “an asset is anything that creates profits for you.”  A liability is something that is taking income out of your pocket. For example, if I bought real estate, and I am living in it, I am not creating profit from it. It is a liability. Furthermore, If I am renting the property, but I must take money out of my pocket every month to pay the mortgage, it is still a liability. But, if I am renting out the property, and I am in the black every month, this is an asset.  

I explained to him that Kiyosaki has had to teach this concept to rooms full of accountants because they had the textbook understanding of assets, but to rich people, this was the definition of an asset.  

I further explained to the gentleman that I didn’t know what style of trading Kiyosaki was talking about. I know that there are several methods of investing. You have your day traders, and you also people who stay in longer.  But the wealthiest investor in the world, Warren Buffett, buys and holds. When I begin to invest, I will follow his style of investing. I will touch more on that later.  

Basic storyline

Rich Dad Poor Dad is a book written by Robert Kiyosaki. It’s a story about his rich dad and his poor dad. Two dads? Well, not really. Kiyosaki’s dad was a professor who believed in education and getting a job with hopes to retire from that company. His rich dad was his best friend’s father and a rising entrepreneur.  

As children, both he and his friend aspired to become wealthy. So, they began their apprenticeship on the fundamental principles of wealth under the rich dad.

Decades later, his father, the professor, lost his career for standing up for what he believed was right. His rich dad became wealthy as planned. Furthermore, after poor dad lost his career, he attempted to get into business, and he failed.  

What makes Rich Dad Poor Dad Great

The beauty of this book is that the principles were written at a level that the common man could understand. Many business books confuse the common man, so we tend to stay outside “the store of financial knowledge,” looking in the window. Rich Dad Poor Dad let us in the store! Anyway, Rich Dad Poor Dad teaches the basic, fundamental principles of wealth attainment.  

The Principles…

This book reveals six principles to attaining wealth. They are as follows:  

  1. The rich don’t work for money
  2. If you want to be rich, you need to be financially literate
  3. Mind your own business
  4. The history of taxes and the power of corporations
  5. The rich invent money
  6. Work to learn

Summary of Rich Dad’s 6 Principles of the wealthy

1) The rich don’t work for money

One of the differences between the rich and the poor (and middle class) is how they perceive money. The rich look perceive money as an illusion, while the others don’t perceive it as such.  Because the rich perceive it as such, money doesn’t intimidate them.

Furthermore, the poor and the middle class are trained by their parents, schools, and the environment to work for money., while the rich are taught to have money work for them. They can manipulate money to work for them and multiply it because they view it as an illusion. 

2) If you want to be rich, you need to be financially literate

If you desire to be rich, you’re must learn the language of money, which is the language of numbers. You must learn to read and understand numbers. In other words, accounting. Financial literacy involves reading and understanding numbers and fundamental principles and concepts of money. 

The first rule of financial literacy is:

You must know the difference between ASSETS and LIABILITIES and buy ASSETS!

As Kiyosaki said in Rich Dad Poor Dad, “Rich people acquire assets. The poor and the middle class acquire liabilities, but they think they are assets.” (52)

  • An asset is something that puts money in your pocket. 
  • A liability is something that takes money out of your pocket.  

If you desire to be rich, you must spend your life acquiring assets. If you desire to be poor and middle class, just spend your entire life buying liabilities. To be even more accurate:

  • The rich buy assets
  • The poor only have expenses
  • The middle class buy liabilities that they think are assets.

Financial literacy involves the understanding of four categories of knowledge. They are as follows:

  1. Accounting
  2. Investing (The science of money making)
  3. Understanding the markets
  4. Understanding the law (tax laws and protection from lawsuits)

3) Mind your own business

In essence, this means is rich mind their own business while the poor and middle-class mind someone else’s business, i.e., your job. When you work for a company, you are working for the person or persons that own that company. Therefore, you are building their legacy. The rich are focused on building their legacy by creating or buying assets. Ultimately, this is the difference between the rich and the poor (and middle class).

For the working man, minding your business also means to continue working your job, but taking what you can save and purchase assets with it. If you continue to do this, you can be able to free yourself from working for someone and building their legacy.

But, before you’re able to purchase assets, you should understand the eight categories of assets. The eight categories of assets are as follows:

8 Categories of Assets

  1. Businesses that don’t require your presence. If it requires your presence to operate, it isn’t a business, it’s a job that you created for yourself.
  2. Stocks
  3. Bonds
  4. Mutual Funds
  5. Income-producing real estate
  6. Notes (IOU’s)
  7. Royalties from intellectual properties such as music, scripts, patents
  8. Anything that has value, products, income, or appreciates and has a ready market (i.e. Art)

Lastly, when rich people purchase assets, they purchase it with income that comes from their assets.  

4) The history of taxes and the power of corporations

In the words of Kiyosaki, “…the rich are not taxed. It’s the middle class who pays for the poor, especially the educated, upper-income middle class.” (87)

As taxes were made law in 1913 with the 16th Amendment, the rich did not sit there and accept it. They found that, using corporations, they could pay as little tax as possible. The working class pays a higher rate of taxes. They are also taxed before they receive their pay. The rich, because of their corporations, can make income, spend, and then they are taxed afterwards. Because they do this through corporations, they can write vehicles and other things off through the corporations before they pay taxes.  

5) The Rich invent money

The rich, by learning, attaining financial knowledge, and courage can create deals and opportunities. They don’t wait for the right opportunities; they create the right opportunities.  Remember they don’t believe that money is real. In this way, they believe that money is what you agree it is.  

6) Work to Learn

The rich encourage their children to work only to learn skills that are needed for what they have in mind to do. Robert Kiyosaki spoke about this principle concerning his life. Rich dad taught him this and guided him with this principle.  

For example, Kiyosaki knew that, to run companies, he needed strong leadership skills. He decided that the best way to attain great leadership skills was to become an officer in the United States Marine Corps during the Vietnam war! Only his rich dad knew his motives for joining the Marine Corps during Vietnam. His father and others had no idea. After all, what better way to learn leadership than when people’s lives were on the line?  

He also knew that he was shy. He knew that, to get over it, he had to throw himself into the fire by becoming employed by Xerox to sell! Furthermore, he knew that he needed to master the art of selling if he wanted to be successful in business. He stayed there until he got over his fear.  In the end, he won repeated sales awards, and he used his bonuses to purchase assets.  

This principle molded my mind concerning the future of my future children. I remember my ex asked me one day, “What if our children don’t want to be entrepreneurs?” I told her, “My teaching on entrepreneurship affects them too! Whatever their talent is, I will teach them to own their own business in their fields. If they have a gift in music, I will teach them to own their own masters (intellectual properties), own their studios, and own their own production company.  If they have a gift in law or medicine, I will send them to work in law firms or hospitals, not to have a job. I will send them to learn how the system works, to learn all aspects of running a law firm or clinic/hospital. Once they’ve got it figured out and come to me with their plans and ideas in writing, then I will fund their business!” Work to learn!

I learned this principle from Rich Dad Poor Dad!  

 

Conclusion

This is the core concept in the book. There is so much more to learn in this book. In over 20 years, I’ve introduced people to this book, and I’ve seen people start companies and leave their jobs. This book demonstrates to you how rich people think in plain English! 

 I will discuss Kiyosaki’s opinion versus my opinion on stocks. 

Remember, BE a MAN…

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