Rich Dad Poor Dad

 🎀 Highlights

To encourage children to be employees is to advise your children to pay more than their fair share of taxes over a lifetime, with little or no promise of a pension.

“Rich people included,” said rich dad. “In fact, the

“Rich people included,” said rich dad. “In fact, the reason many rich people are rich is not because of desire but because of fear. They actually think that money can eliminate that fear of not having money, of being poor, so they amass tons of it only to find out the fear gets worse. They now fear losing it. I have friends who keep working even though they have plenty. I know people who have millions who are more afraid now than when they were poor. They’re terrified of losing all their money. The fears that drove them to get rich got worse. That weak and needy part of their soul is actually screaming louder. They don’t want to lose the big houses, the cars, the high life that money has bought them. They worry about what their friends would say if they lost all their money. Many are emotionally desperate and neurotic, although they look rich and have more money.”

The donkey’s owner may be going where he wants to go, but the donkey is chasing an illusion. Tomorrow there will only be another carrot for the donkey.”

“What intensifies fear and desire is ignorance. That is why rich people with lots of money often have more fear the richer they get. Money is the carrot, the illusion. If the donkey could see the whole picture, it might rethink its choice to chase the carrot.”

Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.

Most people fail to realize that in life, it’s not how much money you make, it’s how much money you keep. We have all heard stories of lottery winners who are poor, then suddenly rich, then poor again. They win millions and are soon back to where they started. Or stories of professional athletes, who, at the age of 24, are earning millions of dollars a year, and are sleeping under a bridge by age 34.

Money only accentuates the cashflow pattern running in your head. If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending.

When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house. My educated dad’s personal financial statement best demonstrates the life of someone in the rat race. His expenses seem to always keep up with his income, never allowing him to invest in assets. As a result, his liabilities, such as his mortgage and credit card debts are larger than his assets.

The asset column generates more than enough income to cover expenses, with the balance reinvested into the asset column. The asset column continues to grow and, therefore, the income it produces grows with it. The result being: The rich get richer!

The middle class finds itself in a constant state of financial struggle. Their primary income is through wages, and as their wages increase, so do their taxes. Their expenses tend to increase in equal increments as their wages increase; hence the phrase “the rat race.” They treat their home as their primary asset, instead on investing in income-producing assets.

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. This process of increased spending throws families into greater debt and into more financial uncertainty, even though they may be advancing in their jobs and receiving pay raises on a regular basis. This is high risk living caused by weak financial education.

Mutual funds are popular because they represent safety. Average mutual fund buyers are too busy working to pay taxes and mortgages, save for their children’s college and pay off credit cards. They do not have time to study to learn how to invest, so they rely on the expertise of the manager of a mutual fund. Also, because the mutual fund includes many different types of investments, they feel their money is safer because it is “diversified.”

Mutual funds are popular because they represent safety. Average mutual fund buyers are too busy working to pay taxes and mortgages, save for their children’s college and pay off credit cards. They do not have time to study to learn how to invest, so they rely on the expertise of the manager of a mutual fund. Also, because the mutual fund includes many different types of investments, they feel their money is safer because it is “diversified.” This group of educated middle class subscribes to the “diversify” dogma put out by mutual fund brokers and financial planners. Play it safe. Avoid risk.

Mutual funds are popular because they represent safety. Average mutual fund buyers are too busy working to pay taxes and mortgages, save for their children’s college and pay off credit cards. They do not have time to study to learn how to invest, so they rely on the expertise of the manager of a mutual fund. Also, because the mutual fund includes many different types of investments, they feel their money is safer because it is “diversified.” This group of educated middle class subscribes to the “diversify” dogma put out by mutual fund brokers and financial planners. Play it safe. Avoid risk. The real tragedy is that the lack of early financial education is what creates the risk faced by average middle class people. The reason they have to play it safe is because their financial positions are tenuous at best. Their balance sheets are not balanced. They are loaded with liabilities, with no real assets that generate income. Typically, their only source of income is their paycheck. Their livelihood becomes entirely dependent on their employer.

The investment is not risky. It’s the lack of simple financial intelligence, beginning with financial literacy, that causes the individual to be “too risky.”

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.

Although net worth often includes these 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.

Let’s use an example. Let’s say I have cash flow from my asset column of $1,000 a month. And I have monthly expenses of $2,000. What is my wealth? Let’s go back to Buckminster Fuller’s definition. Using his definition, how many days forward can I survive? And let’s assume a 30-day month. By that definition, I have enough cash flow for half a month. When I have achieved $2,000 a month cash flow from my assets, then I will be wealthy. So I am not yet rich, but I am wealthy. I now have income generated from assets each month that fully cover my monthly expenses. If I want to increase my expenses, I first must increase my cash flow from assets to maintain this level of wealth. Take notice that it is at this point that I no longer am dependent on my wages. I have focused on and been successful in building an asset column that has made me financially independent. If I quit my job today, I would be able to cover my monthly expenses with the cash flow from my assets.

Let’s use an example. Let’s say I have cash flow from my asset column of $1,000 a month. And I have monthly expenses of $2,000. What is my wealth? Let’s go back to Buckminster Fuller’s definition. Using his definition, how many days forward can I survive? And let’s assume a 30-day month. By that definition, I have enough cash flow for half a month. When I have achieved $2,000 a month cash flow from my assets, then I will be wealthy. So I am not yet rich, but I am wealthy. I now have income generated from assets each month that fully cover my monthly expenses. If I want to increase my expenses, I first must increase my cash flow from assets to maintain this level of wealth. Take notice that it is at this point that I no longer am dependent on my wages. I have focused on and been successful in building an asset column that has made me financially independent. If I quit my job today, I would be able to cover my monthly expenses with the cash flow from my assets. My next goal would be to have the excess cash flow from my assets reinvested into the asset column. The more money that goes into my asset column, the more my asset column grows. The more my assets grow, the more my cash flow grows. And as long as I keep my expenses less than the cash flow from these assets, I will grow richer, with more and more income from sources other than my physical labor.

Just remember this simple observation: The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets.

Ray Kroc was clear on the difference between his profession and his business. His profession was always the same. He was a salesman. At one time he sold mixers for milkshakes, and soon thereafter he was selling hamburger franchises. But while his profession was selling hamburger franchises, his business was the accumulation of income-producing real estate.

To become financially secure, a person needs to mind their own business. Your business revolves around your asset column, as opposed to your income column.

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

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. They have to play it safe.

One day, to get a loan, my financial position did not look too good. So I added my new golf clubs, my art collection, books, stereo, television, Armani suits, wristwatches, shoes and other personal effects to boost the number in the asset column. But I was turned down for the loan because I had too much investment real estate. The loan committee did not like that I made so much money off of apartment houses. They wanted to know why I did not have a normal job, with a salary. They did not question the Armani suits, golf clubs or art collection. Life is sometimes tough when you do not fit the “standard” profile.

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.

In my world, real assets fall into several different 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. Mutual funds. Income-generating real estate. Notes (IOUs). Royalties from intellectual property such as music, scripts, patents. And anything else that has value, produces income or appreciates and has a ready market.

When I say mind your own business, I mean to build and keep your asset column strong. 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. Keep your daytime job, be a great hard-working employee, but keep building that asset column.

When I say mind your own business, I mean to build and keep your asset column strong. 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. Keep your daytime job, be a great hard-working employee, but keep building that asset column. As your cash flow grows, you can buy 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 such as big houses, diamonds, furs, jewelry or boats because they want to look rich. They look rich, but in reality they just get deeper in debt on credit.

When I say mind your own business, I mean to build and keep your asset column strong. 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. Keep your daytime job, be a great hard-working employee, but keep building that asset column. As your cash flow grows, you can buy 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 such as big houses, diamonds, furs, jewelry or boats because they want to look rich. They look rich, but in reality they just get deeper in debt on credit. The old-money people, the long-term rich, built their asset column first. Then, the income generated from the asset column bought their luxuries. The poor and middle class buy luxuries with their own sweat, blood and children’s inheritance.

The reason the middle class is so heavily taxed is because of the Robin Hood ideal. The real reality is that the rich are not taxed. It’s the middle class who pays for the poor, especially the educated upper-income middle class.

He explained that the idea of taxes was made popular, and accepted by the majority, by telling the poor and the middle class that taxes were created only to punish the rich. This is how the masses voted for the law, and it became constitutionally legal. Although it was intended to punish the rich, in reality it wound up punishing the very people who voted for it, the poor and middle class.

the passage of taxes was only possible because the masses believed in the Robin Hood theory of economics, which was to take from the rich and give to everyone else. The problem was that the government’s appetite for money was so great that taxes soon needed to be levied on the middle class, and from there it kept “trickling down.”

No matter what the “Take from the rich” crowd came up with, the rich always found a way to outsmart them. That is how taxes were eventually levied on the middle class. The rich outsmarted the intellectuals, solely because they understood the power of money, a subject not taught in schools.

The government became a large pool of money, but the problem was the fiscal management of that money. There really is no recirculation. In other words, the government policy, if you were a government bureaucrat, was to avoid having excess money. If you failed to spend your allotted funding, you risked losing it in the next budget. You would certainly not be recognized for being efficient. Business people, on the other hand, are rewarded for having excess money and are recognized for their efficiency. As this cycle of growing government spending continued, the demand for money increased and the “Tax the rich” idea was now being adjusted to include lower-income levels, down to the very people who voted it in, the poor and the middle class.

The government became a large pool of money, but the problem was the fiscal management of that money. There really is no recirculation. In other words, the government policy, if you were a government bureaucrat, was to avoid having excess money. If you failed to spend your allotted funding, you risked losing it in the next budget. You would certainly not be recognized for being efficient. Business people, on the other hand, are rewarded for having excess money and are recognized for their efficiency. As this cycle of growing government spending continued, the demand for money increased and the “Tax the rich” idea was now being adjusted to include lower-income levels, down to the very people who voted it in, the poor and the middle class. True capitalists used their financial knowledge to simply find a way to escape. They headed back to the protection of a corporation. A corporation protects the rich. But what many people who have never formed a corporation do not know is that a corporation is not really a thing. A corporation is merely a file folder with some legal documents in it, sitting in some attorney’s office registered with a state government agency. It’s not a big building with the name of the corporation on it. It’s not a factory or a group of people. A corporation is merely a legal document that creates a legal body without a soul. The wealth of the rich was once again protected.

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 do not just sit there and voluntarily pay more taxes. 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 have the resources to effect change.

An individual with the knowledge of the tax advantages and protection provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor.

Tax advantages: A corporation can do so many things that an individual cannot. Like pay for expenses before it pays taxes. That is a whole area of expertise that is so exciting, but not necessary to get into unless you have sizable assets or a business. Employees earn and get taxed and they try to live on what is left. 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. They’re easy to set up and are not expensive if you own investments that are producing good cash flow.

Tax advantages: A corporation can do so many things that an individual cannot. Like pay for expenses before it pays taxes. That is a whole area of expertise that is so exciting, but not necessary to get into unless you have sizable assets or a business. Employees earn and get taxed and they try to live on what is left. 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. They’re easy to set up and are not expensive if you own investments that are producing good cash flow. For example; by owning your own corporation — vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses. And on and on — but do it legally with pre-tax dollars.

The rich hide much of their wealth using vehicles such as corporations and trusts to protect their assets from creditors. When someone sues a wealthy individual they are often met with layers of legal protection, and often find that the wealthy person actually owns nothing. They control everything, but own nothing. The poor and middle class try to own everything and lose it to the government or to fellow citizens who like to sue the rich. They learned it from the Robin Hood story. Take from the rich, give to the poor.

Inc. and Grow Rich provides a wonderful insight into the power of personal corporations.

In my personal experience, your financial genius requires both technical knowledge as well as courage. If fear is too strong, the genius is suppressed. In my classes I strongly urge students to learn to take risks, to be bold, to let their genius convert that fear into power and brilliance.

I’d rather be excited about making millions than worrying about not getting a raise.

Land was wealth 300 years ago. So the person who owned the land owned the wealth. Then, it was factories and production, and America rose to dominance. The industrialist owned the wealth. Today, it is information. And the person who has the most timely information owns the wealth.

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? If an opportunity lands in your lap, and you have no money, and the bank won’t talk to you, what else can you do to get the opportunity to work in your favor? If your hunch is wrong, and what you’ve been counting on doesn’t happen, how can you turn a lemon into millions. That is financial intelligence. 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.

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? If an opportunity lands in your lap, and you have no money, and the bank won’t talk to you, what else can you do to get the opportunity to work in your favor? If your hunch is wrong, and what you’ve been counting on doesn’t happen, how can you turn a lemon into millions. That is financial intelligence. 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. Most people only know one solution: work hard, save and borrow.

So why would you want to increase your financial intelligence? Because you want to be the kind of person who creates your own luck. You take whatever happens and make it better. Few people realize that luck is created. Just as money is. And if you want to be luckier and create money instead of working hard, then your financial intelligence is important. If you are the kind of person who is waiting for the “right” thing to happen, you might wait for a long time. It’s like waiting for all the traffic lights to be green for five miles before starting the trip.

In the Information Age, money is increasing exponentially. A few individuals are getting ridiculously rich from nothing, just ideas and agreements. If you ask many people who trade stocks or other investments for a living, they see it done all the time. Often, millions can be made instantaneously from nothing. And by nothing, I mean no money was exchanged. It is done via agreement: a hand signal in a trading pit; a blip on a trader’s screen in Lisbon from a trader’s screen in Toronto, and back to Lisbon; a call to my broker to buy and a moment later to sell. Money did not change hands. Agreements did.

As I said, the economy was terrible at that time. For investors, this is the perfect market condition. A chunk of my money was in the stock market and in apartment houses. I was short of cash. Because everyone was giving stuff away, I was buying. I was not saving money; I was investing. My wife and I had more than a million dollars in cash working in a market that was rising fast. It was the best opportunity to invest. The economy was terrible. I just could not pass up these small deals.

As I said, the economy was terrible at that time. For investors, this is the perfect market condition. A chunk of my money was in the stock market and in apartment houses. I was short of cash. Because everyone was giving stuff away, I was buying. I was not saving money; I was investing. My wife and I had more than a million dollars in cash working in a market that was rising fast. It was the best opportunity to invest. The economy was terrible. I just could not pass up these small deals. Houses that were once $100,000 were now $75,000. But instead of shopping at the local real estate office, I began shopping at the bankruptcy attorney’s office, or the courthouse steps. In these shopping places, a $75,000 house could sometimes be bought for $20,000 or less. For $2,000, which was loaned to me from a friend for 90 days for $200, I gave an attorney a cashier’s check as a down payment. While the acquisition was being processed, I ran an ad in the paper advertising a $75,000 house for only $60,000 and no money down. The phone rang hard and heavy. Prospective buyers were screened and once the property was legally mine, all the perspective buyers were allowed to look at the house. It was a feeding frenzy. The house sold in a few minutes. I asked for a $2,500 processing fee, which they gladly handed over, and the escrow and title company took over from there. I returned the $2,000 to my friend with an additional $200. He was happy, the home buyer was happy, the attorney was happy, and I was happy. I had sold a house for $60,000 that cost me $20,000. The $40,000 was created from money in my asset column in the form of a promissory note from the buyer. Total working time: five hours. So now that you are financially literate and read numbers, I will show you why this is an example of money being invented.

During this depressed market, my wife and I were able to do six of these simple transactions in our spare time. While the bulk of our money was in larger properties and the stock market, we were able to create more than $190,000 in assets (notes at 10 percent interest) in those six buy, create and sell transactions. That comes to approximately $19,000 a year income, much of it sheltered through our private corporation. Much of that $19,000 a year goes to pay for our company cars, gas, trips, insurance, dinners with clients and other things. By the time the government gets a chance to tax that income, it’s been spent on legally allowed pre-tax expenses.

The point I would like to make is that investments come and go, the market goes up and goes down, economies improve and crash. The world is always handing you opportunities of a lifetime, every day of your life, but all too often we fail to see them. But they are there. And the more the world changes and the more technology changes, the more opportunities there will be to allow you and your family to be financially secure for generations to come.

it is a matter of understanding financial statements, investment strategies, a sense of the market and the laws. If people are not versed in these subjects, then obviously they must follow standard dogma, which is to play it safe, diversify and only invest in secure investments. The problem with “secure” investments is that they are often sanitized. That is, made so safe that the gains are less.

An example of how fast gains can be made are 100,000 shares purchased for 25 cents each before the company goes public. Six months later, the company is listed, and the 100,000 shares now are worth $2 each. If the company is well-managed, the price keeps going up, and the stock may go to $20 or more per share. There are years when our $25,000 has gone to a million in less than a year.

It is not gambling if you know what you’re doing. It is gambling if you’re just throwing money into a deal and praying.

My personal basis is real estate. I love real estate because it’s stable and slow moving. I keep the base solid. The cash flow is fairly steady and, if properly managed, has a good chance of increasing in value. The beauty of a solid base of real estate is that it allows me to be somewhat riskier with the more speculative stocks I buy.

My personal basis is real estate. I love real estate because it’s stable and slow moving. I keep the base solid. The cash flow is fairly steady and, if properly managed, has a good chance of increasing in value. The beauty of a solid base of real estate is that it allows me to be somewhat riskier with the more speculative stocks I buy. If I make great profits in the stock market, I pay my capital-gains tax on the gain and then reinvest what’s left in real estate, again further securing my asset foundation.

Most people never win because they’re more afraid of losing. That is why I found school so silly. In school we learn that mistakes are bad, and we are punished for making them. Yet, if you look at the way humans are designed to learn, we learn by making mistakes. We learn to walk by falling down. If we never fell down, we would never walk.

There are two kinds of investors. The first and most common type are people who buy a packaged investment. They call a retail outlet, such as a real estate company or a stockbroker or a financial planner, and they buy something. It could be a mutual fund, a REIT, a stock or a bond. It is a good clean and simple way of investing. An example would be a shopper who goes to a computer store and buys a computer right off the shelf. The second type are investors who create investments. This investor usually assembles a deal, much like there are people who buy components of computers and put it together. It’s like customizing. I do not know the first thing about putting components of a computer together. But I do know how to put pieces of opportunities together, or know people who do. It is this second type of investor that is most probably the professional investor. Sometimes it may take years for all the pieces to come together. And sometimes they never do come together. It was this second type of investor my rich dad encouraged me to be. It is important to learn how to put the pieces together because that is where the huge wins are, and sometimes some huge losses if the tide goes against you.

If you want to be the second type of investor, you need to develop three main skills. These skills are in addition to those required to become financially intelligent: How to find an opportunity that everyone else has missed. You see with your mind what others miss with their eyes. For example, a friend bought this rundown old house. It was spooky to look at. Everyone wondered why he bought it. What he saw that we did not was that the house came with four extra empty lots. He realized that by going to the title company. After buying the house, he tore it down and sold the five lots to a builder for three times what he paid for the entire package. He made $75,000 for two months’ work. It’s not a lot of money, but it sure beats minimum wage, and it’s not technically difficult. How to raise money. The average person only goes to the bank. This second type of investor needs to know how to raise capital, and there are many ways that don’t require a bank. To get started, I learned how to buy houses without a bank. It was not so much the houses, but the learned skill of raising money that is priceless. All too often I hear people say, “The bank won’t lend me money.” Or “I don’t have the money to buy it.” If you want to be a Type 2 investor, you need to learn how to do that which stops most people. In other words, a majority of people let their lack of money stop them from making a deal. If you can avoid that obstacle, you will be millions ahead of those who don’t learn those skills. There have been many times I have bought a house, a stock or an apartment building without a penny in the bank. I once bought an apartment house for $1.2 million. I did what is called “Tying it up,” with a written contract between seller and buyer. I then raised the $100,000 deposit, which bought me 90 days to raise the rest of the money. Why did I do it? Simply because I knew it was worth $2 million. I never raised the money. Instead, the person who put up the $100,000 gave me $50,000 for find

The sad truth is, great talent is not enough. I am constantly shocked at how little talented people earn.

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.” That is why medical doctors immediately begin to seek a specialty such as orthopedics or pediatrics. The same is true for accountants, architects, lawyers, pilots and others.

Rich dad encouraged me to do exactly the opposite. “You want to know a little about a lot” was his suggestion. That is why for years I worked in different areas of his companies. For awhile, I worked in his accounting department. Although I would probably never have been an accountant, he wanted me to learn via “osmosis.” Rich dad knew I would pick up “jargon” and a sense of what is important and what is not. I also worked as a bus boy and construction worker, as well as in sales, reservations and marketing.

Rich dad explained to me that the hardest part of running a company is managing people. He had spent three years in the Army; my educated dad was draft-exempt. Rich dad told me of the value of learning to lead men into dangerous situations. “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.”

Xerox has one of the best sales-training programs in America. Rich dad was proud of me. My educated dad was ashamed. Being an intellectual, he thought that salespeople were below him.

Xerox has one of the best sales-training programs in America. Rich dad was proud of me. My educated dad was ashamed. Being an intellectual, he thought that salespeople were below him. I worked with Xerox for four years until I overcame my fear of knocking on doors and being rejected. Once I could consistently be in the top five in sales, I again resigned and moved on, leaving behind another great career with an excellent company.

another horrible management theory that goes, “Workers

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

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

Often I recommend joining a network marketing company, also called multilevel marketing, if they want to learn sales skills. Some of these companies have excellent training programs that help people get over their fear of failure and rejection, which are the main reasons people are unsuccessful.

Maybe McDonald’s does not make the best hamburger, but they are the best at selling and delivering a basic average burger.

He never understood that the more specialized you become, the more you are trapped and dependent on that specialty.

The rich often “groom” their children or the children of others. By doing so, their children gain an overall knowledge of the operations of the business and how the various departments interrelate.

The most important specialized skills are sales and understanding marketing. It is the ability to sell—therefore, to communicate to another human being, be it a customer, employee, boss, spouse or child—that is the base skill of personal success. It is communication skills such as writing, speaking and negotiating that are crucial to a life of success. It is a skill that I work on constantly, attending courses or buying educational tapes to expand my knowledge.

I know of no other skills to be more important than selling as well as marketing. 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. Just as I advised that newspaper writer who wanted to become a “best-selling author,” I advise anyone else today. Being technically specialized has its strengths as well as its weaknesses. I have friends who are geniuses, but they cannot communicate effectively with other human beings and, as a result, their earnings are pitiful. I advise them to just spend a year learning to sell. Even if they earn nothing, their communication

I know of no other skills to be more important than selling as well as marketing. 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. Just as I advised that newspaper writer who wanted to become a “best-selling author,” I advise anyone else today. Being technically specialized has its strengths as well as its weaknesses. I have friends who are geniuses, but they cannot communicate effectively with other human beings and, as a result, their earnings are pitiful. I advise them to just spend a year learning to sell. Even if they earn nothing, their communication skills will improve. And that is priceless.

I know of no other skills to be more important than selling as well as marketing. 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.

My educated dad always said, “When I have some extra money, I’ll give it.” The problem was, there was never any extra. So he worked harder to draw more money in rather than focus on the most important law of money: “Give and you shall receive.” Instead, he believed in “Receive and then you give.”

I have never met anyone who really likes losing money. And in all my years, I have never met a rich person who has never lost money.

If you have any desire of being rich, you must focus. Put a lot of your eggs in a few baskets. Do not do what poor and middle class people do: put their few eggs in many baskets.

But staking the asset column is a high-attitude game. It takes guts, patience and a great attitude toward failure. Losers avoid failing. And failure turns losers into winners.

I hold a small portion of my assets in tax lien certificates instead of CDs. I earn 16 percent per year on my money, which certainly beats the 5 percent the bank offers. The certificates are secured by real estate and enforced by state law, which is also better than most banks. The formula they’re bought on makes them safe. They just lack liquidity. So I look at them as 2 to 7-year CDs. Almost every time I tell someone, especially if they have money in CDs, that I hold my money this way, they will tell me it’s risky. They tell me why I should not do it. When I ask them where they get their information, they say from a friend or an investment magazine. They’ve never done it, and they’re telling someone who’s doing it why they shouldn’t. The lowest yield I look for is 16 percent, but people who are filled with doubt are willing to accept 5 percent. Doubt is expensive.

I hold a small portion of my assets in tax lien certificates instead of CDs. I earn 16 percent per year on my money, which certainly beats the 5 percent the bank offers. The certificates are secured by real estate and enforced by state law, which is also better than most banks. The formula they’re bought on makes them safe. They just lack liquidity. So I look at them as 2 to 7-year CDs. Almost every time I tell someone, especially if they have money in CDs, that I hold my money this way, they will tell me it’s risky. They tell me why I should not do it. When I ask them where they get their information, they say from a friend or an investment magazine. They’ve never done it, and they’re telling someone who’s doing it why they shouldn’t. The lowest yield I look for is 16 percent, but people who are filled with doubt are willing to accept 5 percent. Doubt is expensive. My point is that it’s those doubts and cynicism that keep most people poor and playing it safe. The real world is simply waiting for you to get rich. Only a person’s doubts keep them poor. As I said, getting out of the rat race is technically easy. It doesn’t take much education, but those doubts are cripplers for most people.

Eleanor Roosevelt said it best: “Do what you feel in your heart to be right—for you’ll be criticized anyway. You’ll be damned if you do, and damned if you don’t.”

“So if I pay myself first, I get financially stronger, mentally and fiscally.”

“And if I pay myself last, or not at all, I get weaker. So people like bosses, managers, tax collectors, bill collectors and landlords push me around all my life. Just because I don’t have good money habits.”

“What I know makes me money. What I don’t know loses me money. Every time I have been arrogant, I have lost money. Because when I’m arrogant, I truly believe that what I don’t know is not important,” rich dad would often tell me.

IF YOU DO NOT HAVE A STRONG REASON, THERE IS NO SENSE READING FURTHER. IT WILL SOUND LIKE TOO MUCH WORK.

“How would Peter Lynch do this, or Donald Trump or Warren Buffett or George Soros?” The only way I can access their vast mental power is to be humble enough to read or listen to what they have to say. Arrogant or critical people are often people with low self-esteem who are afraid of taking risks. You see, if you learn something new, you are then required to make mistakes in order to fully understand what you have learned.

I have had more close friends try to talk me out of a deal or an investment. A few years ago, a friend told me he was excited because he found a 6 percent certificate of deposit. I told him I earn 16 percent from the state government. The next day he sent me an article about why my investment was dangerous. I have received 16 percent for years now, and he still receives 6 percent.

Wise investors buy an investment when it’s not popular. They know their profits are made when they buy, not when they sell. They wait patiently.

The reason you want to have rich friends who are close to the inside is because that is where the money is made. It’s made on information. You want to hear about the next boom, get in and get out before the next bust.

Most junior colleges and community colleges have classes on financial planning and buying of traditional investments. They are great places to start.

Another side note. In today’s fast-changing world, it’s not so much what you know anymore that counts, because often what you know is old. It is how fast you learn.

The three most important management skills necessary to start your own business are: Management of cash flow. Management of people. Management of personal time.

There have been months in my life, when for whatever reason, cash flow was far less than my bills. I still paid myself first. My accountant and bookkeeper screamed in panic. “They’re going to come after you. The IRS is going to put you in jail.” “You’re going to ruin your credit rating.” “They’ll cut off the electricity.” I still paid myself first.

So rule No. 1 in paying yourself first is don’t get into debt in the first place. Although I pay my bills last, I set it up to have only small unimportant bills, that I will have to pay. Secondly, when I occasionally come up short, I still pay myself first. I let the creditors and even the government scream. I like it when they get tough. Why? Because those guys do me a favor. They inspire me to go out and create more money. So I pay myself first, invest the money, and let the creditors yell. I generally pay them right away anyway. My wife and I have excellent credit.

Don’t get into large debt positions that you have to pay for. Keep your expenses low. Build up assets first. Then, buy the big house or nice car. Being stuck in the rat race is not intelligent. When you come up short, let the pressure build and don’t dip into your savings or investments. Use the pressure to inspire your financial genius to come up with new ways of making more money and then pay your bills. You will have increased your ability to make more money as well as your financial intelligence.

My rich dad taught me to take the opposite tack. He believed in paying professionals well, and I have adopted that policy also. Today, I have expensive attorneys, accountants, real estate brokers and stockbrokers. Why? Because if, and I do mean if, the people are professionals, their services should make you money. And the more money they make, the more money I make.

A good broker saves me time in addition to making me money—as when I bought the piece of vacant land for $9,000 and sold it immediately for over $25,000, so I could buy my Porsche quicker.

Also, people who sell their house on their own must not value their time much. Why would I want to save a few bucks when I could use that time to make more money or spend it with those I love?

Just remember the old saying, “Never ask an encyclopedia salesperson if you need an encyclopedia.”

When I interview any paid professional, I first find out how much property or stocks they personally own and what percentage they pay in taxes. And that applies to my tax attorney as well as my accountant. I have an accountant who minds her own business. Her profession is accounting, but her business is real estate. I used to have an accountant that was a small business accountant, but he had no real estate. I switched because we did not love the same business.

When I interview any paid professional, I first find out how much property or stocks they personally own and what percentage they pay in taxes. And that applies to my tax attorney as well as my accountant. I have an accountant who minds her own business. Her profession is accounting, but her business is real estate. I used to have an accountant that was a small business accountant, but he had no real estate. I switched because we did not love the same business. Find a broker who has your best interests at heart. Many brokers will spend the time educating you, and they could be the best asset you find. Just be fair, and most of them will be fair to you. If all you can think about is cutting their commissions, then why should they want to be around you? It’s just simple logic. As I said earlier, one of the management

When I interview any paid professional, I first find out how much property or stocks they personally own and what percentage they pay in taxes. And that applies to my tax attorney as well as my accountant. I have an accountant who minds her own business. Her profession is accounting, but her business is real estate. I used to have an accountant that was a small business accountant, but he had no real estate. I switched because we did not love the same business. Find a broker who has your best interests at heart. Many brokers will spend the time educating you, and they could be the best asset you find. Just be fair, and most of them will be fair to you. If all you can think about is cutting their commissions, then why should they

When I interview any paid professional, I first find out how much property or stocks they personally own and what percentage they pay in taxes. And that applies to my tax attorney as well as my accountant. I have an accountant who minds her own business. Her profession is accounting, but her business is real estate. I used to have an accountant that was a small business accountant, but he had no real estate. I switched because we did not love the same business. Find a broker who has your best interests at heart. Many brokers will spend the time educating you, and they could be the best asset you find. Just be fair, and most of them will be fair to you. If all you can think about is cutting their commissions, then why should they want to be around you? It’s just simple logic.

The real skill is to manage and pay well 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. And that is financial intelligence.

Frequently, my broker will call me and recommend 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.

Frequently, my broker will call me and recommend 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. True, I have lost money on many occasions. But I only play with money I can afford to lose. I would say, on an average ten investments, I hit home runs on two or three, while five or six do nothing, and I lose on two or three. But I limit my losses to only the money I have in at that time.

I found a small condominium, a few blocks from where I live, that was in foreclosure. The bank wanted $60,000, and I submitted a bid for $50,000, which they took, simply because, along with my bid, was a cashier’s check for $50,000. They realized I was serious. Most investors would say, aren’t you tying up a lot of cash? Would it not be better to get a loan on it? The answer is, not in this case. My investment company uses this as a vacation rental in the winter months, when the “snowbirds” come to Arizona, and rent it for $2,500 a month for four months out of the year. For rental during the off-season, it rents for only $1,000 a month. I had my money back in about three years. Now I own this asset, which pumps money out for me, month in and month out.

So wise investors must look at more than ROI; it’s the assets you get for free once you get your money back. That is financial intelligence.

For while the process of developing cash flow from an asset column in theory is easy, it is the mental fortitude of directing money that is hard. Due to external temptations, it is much easier in today’s consumer

For while the process of developing cash flow from an asset column in theory is easy, it is the mental fortitude of directing money that is hard. Due to external temptations, it is much easier in today’s consumer world to simply blow it out the expense column.

Too often today, we focus to borrowing money to get the things we want instead of focusing on creating money. One is easier in the short term, but harder in the long term. It’s a bad habit that we as individuals and as a nation have gotten into. Remember, the easy road often becomes hard, and the hard road often becomes easy.

I also have heroes such as Donald Trump, Warren Buffett, Peter Lynch, George Soros and Jim Rogers. In my older years, I know their stats just like I knew the ERAs and RBI of my baseball heroes. I follow what Warren Buffett invests in, and read anything I can about his point of view on the market. I read Peter Lynch’s book to understand how he chooses stocks. And I read about Donald Trump, trying to find out how he negotiates and puts deals together.

My rich dad gave money as well as education. He believed firmly in tithing. “If you want something, you first need to give,” he would always say. When he was short of money, he simply gave money to his church or to his favorite charity.

My rich dad gave money as well as education. He believed firmly in tithing. “If you want something, you first need to give,” he would always say. When he was short of money, he simply gave money to his church or to his favorite charity. If I could leave one single idea with you, it is that idea. Whenever you feel “short” or in “need” of something, give what you want first and it will come back in buckets. That is true for money, a smile, love, friendship. I know it is often the last thing a person may want to do, but it has always worked for me. I

My rich dad gave money as well as education. He believed firmly in tithing. “If you want something, you first need to give,” he would always say. When he was short of money, he simply gave money to his church or to his favorite charity. If I could leave one single idea with you, it is that idea. Whenever you feel “short” or in “need” of something, give what you want first and it will come back in buckets. That is true for money, a smile, love, friendship. I know it is often the last thing a person may want to do, but it has always worked for me. I just trust that the principle of reciprocity is true, and I give what I want. I want money, so I give money, and it comes back in multiples. I want sales, so I help someone else sell something, and sales come to me. I want contacts and I help someone else get contacts, and like magic, contacts come to me. I heard a saying years ago that went, “God does not need to receive, but humans need to give.”

Whenever I feel that people aren’t smiling at me, I simply begin smiling and saying hello, and like magic, there are suddenly more smiling people around me. It is true that your world is only a mirror of you.

Look for new ideas. For new investing ideas, I go to bookstores and look for books on different and unique subjects.

Find someone who has done what you want to do. Take them to lunch. Ask them for tips, for little tricks of the trade.

A friend wanted me to show her how to buy apartment houses. So one Saturday she, her agent and I went and looked at six apartment houses. Four were dogs, but two were good. I said to write offers on all six, offering half of what the owners asked for. She and the agent nearly had heart attacks. They thought it would be rude, that I might offend the sellers, but I really don’t think the agent wanted to work that hard. So they did nothing and went on looking for a better deal. No offers were ever made, and that person is still looking for the “right” deal at the right price.

A friend wanted me to show her how to buy apartment houses. So one Saturday she, her agent and I went and looked at six apartment houses. Four were dogs, but two were good. I said to write offers on all six, offering half of what the owners asked for. She and the agent nearly had heart attacks. They thought it would be rude, that I might offend the sellers, but I really don’t think the agent wanted to work that hard. So they did nothing and went on looking for a better deal. No offers were ever made, and that person is still looking for the “right” deal at the right price. Well, you don’t know what the right price is until you have a second party who wants to deal. Most sellers ask too much. It is rare that a seller will actually ask a price that is less than something is worth.

Jog, walk or drive a certain area once a month for ten minutes. I have found some of my best real estate investments while jogging. I will jog a certain neighborhood for a year. What I look for is change. For there to be profit in a deal, there must be two elements: a bargain and change. There are lots of bargains, but it’s change that turns a bargain into a profitable opportunity. So when I jog, I jog a neighborhood I might like to invest in. It is the repetition that causes me to notice slight differences. I notice real estate signs that are up for a long time. That means the seller might be more agreeable to deal. I watch for moving trucks, going in or out. I stop and talk to the drivers. I talk to the postal carriers. It’s amazing how much information they acquire about an area.

I find a bad area, especially an area that the news has scared everyone away from. I drive it for sometimes a year waiting for signs of something changing for the better. I talk to retailers, especially new ones, and find out why they’re moving in. It takes only a few minutes a month, and I do it while doing something else, like exercising, or going to and from the store.

As for stocks, I like Peter Lynch’s book Beating the Street for his formula for selecting stocks that grow in value. I have found that the principles of finding value are the same regardless if it’s real estate, stocks, mutual funds, new companies, a new pet, a new home, a new spouse, or a bargain on laundry detergent.

I look for people who want to buy first, then I look for someone who wants to sell. A friend was looking for a certain piece of land. He had the money and did not have the time. I found a large piece of land larger than what my friend wanted to buy, tied it up with an option, called my friend and he wanted a piece of it. So I sold the piece to him and then bought the land. I kept the remaining land as mine for free. Moral of the story: Buy the pie and cut it in pieces. Most people look for what they can afford, so they look too small. They buy only a piece of the pie, so they end up paying more for less. Small thinkers don’t get the big breaks. If you want to get richer, think bigger first.

I turned $5,000 cash into a $1 million dollar asset producing $5,000 a month cash flow in less than six years. But I started learning as a kid.

In the world of accounting, there are three different types of income. They are: Earned Income Passive Income Portfolio Income

Passive income, in most cases, is income derived from real estate investments. Portfolio income is income derived from paper assets…paper assets such as stocks, bonds, and mutual funds. Portfolio income is the income that makes Bill Gates the richest man in the world, not earned income.

“The key to becoming wealthy is the ability to convert earned income into passive income and/or portfolio income as quickly as possible.” He would say, “The taxes are highest on earned income. The least taxed income is passive income.

In my second book, The CASHFLOW Quadrant, I explain the four different types of people who make up the world of business. They are E- employee, S- self-employed, B- Business Owner and I- Investor. Most people go to school to learn to be an ‘E’ or ‘S’. The CASHFLOW Quadrant is written about the core differences between the four different people and how people can make a change of quadrant. In fact, most of our products are created for the people in the ‘B’ and ‘I’ quadrants.

In my second book, The CASHFLOW Quadrant, I explain the four different types of people who make up the world of business. They are E- employee, S- self-employed, B- Business Owner and I- Investor. Most people go to school to learn to be an ‘E’ or ‘S’. The CASHFLOW Quadrant is written about the core differences between the four different people and how people can make a change of quadrant. In fact, most of our products are created for the people in the ‘B’ and ‘I’ quadrants. In Rich Dad’s Guide To Investing, book #3 in this Rich Dad series, I go into the importance of converting earned income into passive and portfolio income in more detail. Rich dad used to say, “All a real investor does is convert earned income into passive and portfolio income. If you know what you’re doing investing is not risky. It’s just common sense.”