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.
Cone of Learning
Summary
When he was 9 years old, Robert Kiyosaki and his childhood friend weren't invited to a classmate's beach house because they were "poor kids" in an affluent school. After being told by his poor dad-his father who was a teacher and made a good living but always struggled to make ends meet-to simply go and "make money," he and his friend, Mike, did just that: They collected empty toothpaste tubes, which at that time were made of lead. They melted them down and used plaster molds to make counterfeit nickels. They were soon set straight by Robert's dad, who told them they should talk to Mike's dad, who never finished eighth grade but ran multiple successful businesses. Mike's dad, the "rich dad" of the book title, agreed to teach them, but on his terms. He had them work three hours every Saturday morning at one of his convenience stores, dusting the food packaging and cleaning. He paid them 10 cents an hour, which Robert usually spent on 10-cent comic books. Fairly quickly, Robert grew disenchanted with the boring work and low pay. When he told his friend he was going to quit, Mike told him that his dad said that would happen and that Robert needed to meet with him. Robert's dad as a schoolteacher used lectures, but Mike's dad was a man of few words and taught in a very different way, which Robert was about to find out. The next Saturday morning, Robert went to meet Mike's dad but was kept waiting in a dusty, dark living room for an hour. He was fed up and emotional by the time he got to complain to Mike's dad, accusing him of being greedy and not showing him respect. When he said Mike's dad hadn't taught him anything despite their agreement, the business owner calmly disagreed. His rich dad explained that life doesn't teach you with words, but by pushing you around. Some people let life push them around; others get angry and push back against their boss or their loved ones. But some people learn a lesson from it, and in fact welcome life pushing them around because it means they need to learn something. Those who don't learn that lesson spend their lives blaming everyone else and waiting for a big break-or decide to play it safe and never risk, or win, big. He told Robert that he and Mike were the first people who had ever asked him to teach them how to make money. He had more than 150 employees, and though they had asked for a job, they had never asked for the knowledge that Robert and Mike wanted. So the rich dad decided to create a course that mirrored life and pushed the boys around a little. Robert asked what lesson he'd learned, other than that his rich dad was cheap and exploited his workers. The rich dad challenged him on this, saying that most people blamed others when in fact their attitude was the problem. What would solve the problem? His brain, Mike's dad told him. He wanted Robert to learn how money worked so he could make it work for him. He was also glad that Robert was angry, because anger combines with love to create passion-a key component of learning. Money wouldn't solve people's problems, he went on. Many people who have a high-paying job still struggle with money problems-like Robert's poor dad-because they didn't know how to make money work for them. He said that the emotions Robert had felt working for those 10 cents an hour-disappointment and feeling like it wasn't enough-was what he'd feel like his whole life if he didn't learn this lesson now. He introduced Robert to the concept of taxes, explaining that the poor and middle class allow the government to tax them, but the rich don't. He asked if Robert still had a passion to learn. When he said yes, his rich dad told him he was going to stop paying him for the work at the store. He told Robert to use his head to figure it out. Robert and Mike worked for free for three weeks. Mike's dad showed up and took them outside for a talk, asking if they'd learned anything yet. They hadn't. The rich dad told them if they didn't learn this lesson, they'd be like most people who work hard for little money their whole lives. He offered them 25 cents an hour, which they resisted. He upped it to $1 an hour, then $2. But Robert stayed silent. A final offer of $5 an hour-a princely sum at that time-solidified for Robert that he wouldn't be bought. The rich dad said it was good they didn't have a price. Most people did, because their lives are controlled by fear and greed. Fear of being without makes them work hard and earn a paycheck, but once they have that money, greed gets them thinking about all the things they could buy. Which makes them need more money, which makes them spend more. It's what the rich dad called the Rat Race. He told the boys that the first step was admitting to themselves what they were feeling. Too often people reacted to their emotions instead of thinking logically. They're afraid to admit money is running their lives, and so money controls them. It's not just the poor who face that fear; the rich often operate from a place of fear. He wanted to teach the boys to not just be rich because money doesn't solve the problem. School is important, he told them, but for most people it's the end, not the beginning. And the key for the boys was to learn to use their emotions to think, not to think with their emotions. They must learn to choose their thoughts. He told them to keep an eye out for ways to make money, saying, "The moment you see one opportunity, you'll see them for the rest of your life." The boys did, and soon they saw an opportunity in creating a library where kids could pay an admission fee and read as many comic books as they could in two hours-unsold comic books that otherwise would've been thrown away from the convenience store. They made a great profit, and the business did well for about three months until a fight in the library shut it down. But they'd learned the first lesson of making money work for them, even when they weren't physically present. They were ready to learn more, and Mike's dad was ready to teach them. Left-hemisphere moment: Despite having a high-paying job, people like Robert's poor dad struggled to make ends meet. Right-hemisphere moment: Looking at the discarded comic books in a new, creative way led to a business opportunity. Subconscious moment: People let the emotions of fear and greed rule their lives. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "The poor and the middle class work for money. The rich have money work for them." "Life pushes all of us around. Some people give up and others fight. A few learn the lesson and move on. They welcome life pushing them around." "Stop blaming me and thinking I'm the problem. If you think I'm the problem, then you have to change me. If you realize that you're the problem, then you can change yourself, learn something, and grow wiser." "When it comes to money, most people want to play it safe and feel secure. So passion does not direct them. Fear does." "Most people, given more money, only get into more debt." "It's fear that keeps most people working at a job: the fear of not paying their bills, the fear of being fired, the fear of not having enough money, and the fear of starting over. That's the price of studying to learn a profession or trade, and then working for money. Most people become a slave to money-and then get angry at their boss." "Most people do not know that it's their emotions that are doing the thinking." "A job is really a short-term solution to a long-term problem." "It's just like the picture of a donkey dragging a cart with its owner dangling a carrot just in front of its nose. The donkey's owner may be going where he wants to, but the donkey is chasing an illusion. Tomorrow there will only be another carrot for the donkey."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. How common is the approach to money taken by Robert's poor dad? 2. Robert's rich dad said true learning takes energy, passion, and a burning desire. What are examples of when this has proven true in your life? What's one lesson you never forgot, and why? 3. Would the pay rate of 10 cents an hour-and then nothing an hour-have stirred in you the same reaction as Robert? 4. Is it fear that drives most people to work? Are there other factors at play? 5. Is the temptation strong to think that more money will soothe that fear? Why is that such a common reaction? 6. What's an example from your life when you reacted with your emotions? What's a time when you were able to observe your emotions instead and choose your thoughts? 7. Are the rich or the poor more susceptible to those controlling emotions of fear and greed? Why do you think that is? 8. Do you think most people realize they are stuck in the Rat Race? Why or why not?LESSON 2: WHY TEACH FINANCIAL LITERACY? It's not how much money you make. It's how much money you keep.
Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets. Rule #1: You must know the difference between an asset and a liability, and buy assets. We revisit Robert and Mike some three and a half decades later. Mike has taken over his father's company and is doing an even better job than the rich dad did. As for Robert, he retired in 1994 at the age of 47. His and his wife's wealth is growing automatically, like a well-established tree. He shares a story of the 1923 meeting of some of our greatest leaders and richest businessmen-men who owned the largest steel and gas company, who ran the New York Stock Exchange, and who sat on President Harding's cabinet. Twenty-five years later, most of their lives had ended tragically, with the men either broke, exiled, or in prison. The 1929 stock crash and Great Depression likely played a part in their fates, but today we live in a time of even more turmoil and change than they did. More important than money to our survival is our education and the ability to learn. It's not how much you make but how much you keep-and how many generations you keep it. So when people ask Robert where to start getting rich, he gives them the same answer his rich dad gave him: "If you want to be rich, you need to be financially literate." Robert compares the way many people act to building a skyscraper on a slab made for a small home. Because kids graduate school with little financial education, they launch into their adults lives chasing the American Dream but find themselves deep in debt. The only way out that they can see is a get-rich strategy. But without having that financial-literacy background, their efforts are like building a skyscraper on a weak foundation, and instead of creating the Empire State Building, they end up with the Leaning Tower of Suburbia. Robert and his childhood friend Mike, however, were given a strong foundation worthy of a skyscraper thanks to the teaching of the rich dad. Accounting as a subject is boring, confusing-and absolutely crucial to financial success. To make it accessible to kids, rich dad used pictures to teach it to the two boys. Only later did he start adding numbers to guide the boys through key concepts. Rule No. 1, Robert says, is that you must know the difference between an asset and a liability, and only buy assets. That's all you need to know. But despite it being so simple, it's something that many people don't understand. When rich dad first explained it to the two now-teenagers, they thought he was kidding. How could adults not understand this? Shouldn't everyone be rich? The problem is that most people have been educated differently by bankers, financial planners and others, so they must unlearn what they think they know. Some find this demeaning to return to such a basic introduction. The true definitions of "asset" and "liability" lie not in words, but in numbers. Robert uses drawings to help readers the same way rich dad used them to help him. This is the cash-flow pattern of an asset: The top part of the diagram is an Income Statement, often called a Profit-and-Loss Statement. It measures income and expenses: money in and money out. The lower part of the diagram is a Balance Sheet. It's called that because it's supposed to balance assets against liabilities. Assets add to your income. They put money in your pocket. A liability takes money out of your pocket. Want to be rich? Buy assets. It seems simple, but so many people struggle because they buy liabilities. If you want to gain and maintain wealth, you must build your understanding. It's not just straight numbers; it's how the numbers tell a story. Follow the arrows in each of these diagrams to see where the money is flowing, or "cash flow." It will tell you the story, the plot of that financial situation.Difference in perception between my rich dad and my poor dad when it came to their homes
~ ~ ~How financial statements of rich and poor differ
Why the Rich Get Richer
Why the Middle Class Struggle
Through these simplified diagrams, the cash flow tells the story of how each person handles money. Often, those in debt think the answer is to make more money. But not only will more money not always solve their problems, it may compound them. It's why many people who get a sudden windfall- through the lottery or an inheritance, for instance-so quickly burn through it. An increase in cash only results in an increase in spending. What is missing for so many people is a financial education. It's why they might end up successful in their professions but still struggling with money. They may have learned how to make money, but not how to manage it. People can be very intelligent and still be illiterate when it comes to finances. They learned how to work hard for money, but not how to make their money work hard for them. Robert tells the story of a young couple who get married and start their lives together. Their incomes begin to increase, but so do their expenses. The couple is hit with the No. 1 expense for most people: taxes. And for many people, it's not income tax that gives the biggest hit but Social Security. It's roughly 15 percent (Social Security tax combined with the Medicare tax rate, all of which must be matched by the employer, funds that the employer now can't pay the worker). And the employee is charged income tax on that amount, too. The young couple is faced with those taxes and, when they buy a house, property tax. And to go with the new house is a new car, new furniture, and new appliances. Suddenly, their liabilities go up, filling with mortgage and credit-card debt. The couple is trapped in the Rat Race. Add a baby to the mix, and they work harder: higher incomes that lead to higher taxes. They continue to rack up debt, eventually rolling it into their mortgage in a consolidation loan. But their habits haven't changed, so the credit-card debt continues-not to mention they extended their home loan. For this couple and so many like them, their true problem is not knowing how to handle the money they have. It's caused by financial illiteracy and not understanding the true difference between an asset and a liability. So many people don't take the time to question whether something makes sense and simply follow the crowd. Often, they mindlessly repeat what they have been told: "Diversify." "Your home is an asset." "You get a tax break for going into greater debt." "Get a safe job." "Don't make mistakes." "Don't take risks." Because of the large amount of time Robert and Mike spent sitting in on meetings with rich dad and learning from the intelligent people he surrounded himself with, they learned a lot-and learned to question the standard dogma taught at their school. It began to cause problems and made them grow distant from their teachers. Robert also began disagreeing with his own father over money matters, especially when it came to his poor dad's view that his home was his greatest investment. In contrast, rich dad saw his home as a liability. Many people still believe that their home is an asset. But Robert teaches that a home is a liability, because it takes money out of your pocket-not only with taxes and expenses, but because of its loss in value and the opportunities missed when all your money is tied up in your house. And that causes you to lose out on the education of investment experience. That doesn't mean you can't ever buy a bigger house. But make sure to first buy assets that will generate the cash flow to pay for the house. When there are enough assets to generate more than enough income to cover expenses, the balance is reinvested into assets. Which grows the asset column on a balance sheet. Which produces more income. The result is that the rich who understand the difference between assets and liabilities, get richer. The middle class get stuck in the Rat Race because they treat their home as an asset instead of investing in income-producing assets. They are also stuck because their salary is their primary source of income- and thus when their income increases, so do their taxes. Many invest in mutual funds, paying a manager to handle their accounts, because they don't have the time or the expertise to do it themselves. They feel like a mutual fund is playing it safe, and they have to play it safe because their balance sheets are not balanced. They can't take advantage of opportunities because they are maxed out on debt and only have their salary bringing money in. Want to grow rich? Concentrate your efforts on buying income- producing assets-when you truly understand what an asset is. Keep liabilities and expenses low. You'll deepen your asset column. So how do you know when you're wealthy? Robert uses a definition by R. Buckminster Fuller: "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?" Another way of stating it: Wealth is the measure of the cash flow from the asset column compared with the expense column. When your assets generate enough income to cover your expenses, you are wealthy, even if you are not yet rich. Left-hemisphere moment: Look at the numbers and learn to read the story they are telling. Assets put money in your pocket. If something takes money out of your pocket, it's not an asset; it's a liability. Right-hemisphere moment: The balance sheet drawings help explain the movement of money through different people's lives. Subconscious moment: The fear of ostracism causes people to conform to, and not question, commonly-accepted opinions or popular trends, often to their financial detriment. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "It's not how much money you make. It's how much money you keep." "Intelligence solves problems and produces money. Money without financial intelligence is money soon gone." "If you are going to build the Empire State Building, the first thing you need to do is dig a deep hole and pour a strong foundation. If you are going to build a home in the suburbs, all you need to do is pour a six-inch slab of concrete. Most people, in their drive to get rich, are trying to build an Empire State Building on a six-inch slab." "Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets." "If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending." "In 80 percent of most families, the financial story paints a picture of hard work to get ahead. However, this effort is for naught because they spend their lives buying liabilities instead of assets." "By not fully understanding money, the vast majority of people allow its awesome power to control them."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. When did your financial education begin? Was it with this book, or from another source? 2. How did you react when you first read Robert's definition of assets and liabilities? 3. How did you react when he stated that a home is not an asset? Had you viewed yours as one? After he fully laid out his argument, did he change your mind? 4. Which cash-flow situation looks most like your life? 5. Other than your home, is there something that you thought was an asset that later revealed itself to be a liability? 6. Would you agree with this statement: "What is missing from most people's education is not how to make money, but how to manage money." Why or why not? 7. Rich dad told the boys that it's not the numbers that matter in accounting, but what the numbers are telling you. What story do the numbers in your life tell? 8. When was a time in your life that a seemingly positive accomplishment, such as a promotion or raise, didn't lead to the balance-sheet result you expected? 9. How many days forward could you survive if you stopped working today? Does that number surprise or frighten you? Term definitions: 401(k): A U.S. retirement plan developed by the ERISA Act of 1974 when companies realized they could not provide for retirees' health care. ASSET: Something that puts money "in your pocket" with minimum labor. BALANCE SHEET: The lower part of an income-statement diagram, so called because it's supposed to balance assets against liabilities. CASH FLOW: Cash coming in (as income) and cash going out (as expenses). It is the direction of cash flow that determines whether something is income, expense, asset, or liability. Cash flow tells the story. FINANCIAL APTITUDE: What you do with the money once you make it, how to keep people from taking it from you, how to keep it longer, and how to make that money work hard for you. GOLDEN RULE: He who has the gold makes the rules. INCOME: The money that is received as a result of the normal business activities of an individual or business. INCOME STATEMENT, OR PROFIT-AND-LOSS STATEMENT: It measures income and expenses: money in and money out. LIABILITY: Something that takes money "out of your pocket." MUTUAL FUND: A variety of stocks, bonds, or securities grouped together, managed by a professional investment company and purchased by individual investors through shares. The shares possess no direct ownership value in the various companies. SOCIAL SECURITY: A social welfare or social insurance program commonly funded through automatic payroll deductions to subsidize persons in their old age and with disabilities.LESSON 3: MIND YOUR OWN BUSINESS The rich focus on their asset columns while everyone else focuses on their income statements.
Summary
A friend of Robert's got to hear Ray Kroc of McDonald's fame speak in 1974 at the University of Texas at Austin. Afterward, Ray agreed to join the students at their favorite hangout for a few beers. He asked the students what business he was in. At first they laughed, and then they answered that he was in the business of selling hamburgers, of course. But Ray told them he was not in the hamburger business, but in the real estate business. He knew that the land and location of each franchise were the most significant factors in its success. Today, McDonald's is the largest single owner of real estate in the world, owning some of the most valuable intersections and street corners around the globe. Robert's friend took that lesson to heart, and today owns car washes-but his business is the real estate under those car washes. So many people work for everyone else: their employer, the government (taxes), and the bank (mortgage). What Ray Kroc and rich dad knew was secret No. 3 of the rich: Mind your business. Don't spend your whole life working for someone else. There is a big difference between your profession and your business. Often Robert will ask people, "What is your business?" And they will say, "Oh, I'm a banker." Then he asks them if they own the bank. And they usually respond, "No, I work there." In that instance, they have confused their profession with their business. Their profession may be a banker, but they still need their own business. Too many people spend their lives minding someone else's business and making them rich. Minding your business doesn't mean starting a company, though for some people it will. Instead, your business revolves around your asset column, not your income column. Promotions or a better job will only help you become more financially secure if the additional money is used to purchase income- generating assets. The primary reason the majority of the poor and middle class are fiscally conservative is that they have no financial foundation. They have to cling to their jobs and play it safe. They can't afford to take risks. And when hard times come, what many people thought were assets will not help them survive a financial crisis. That car has lost much of its value. Those golf clubs? The same. Too often what a bank will allow a person to list as assets on a financial statement are not true assets. Robert was once turned down for a loan because the bank didn't like how much money he made from rent and was concerned he didn't have a normal job. But they were fine with him listing suits, an art collection, and other personal effects as assets. Net worth isn't the measure that people think it is. Most so-called assets that people base their net worth on either aren't as valuable as they think or, if they have gained value, will trigger taxes on the gain if they're sold. So Robert tells people to 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. Keep expenses low, reduce liabilities, and diligently build a base of solid assets. Parents need to teach young people this before they leave home, so that they understand what a true asset is and won't find themselves trapped in a lifestyle of debt. Robert says real assets fall into the following categories: 1. Businesses that do not require his presence: He owns them, but they are managed or run by other people. If he has to work there, it's not a business. It becomes his job. 2. Stocks 3. Bonds 4. Income-generating real estate 5. Notes (IOUs) 6. Royalties from intellectual property such as music, scripts, and patents 7. Anything else that has value, produces income or appreciates, and has a ready market Acquire assets that you love. Robert loves real estate and thus spends much of his time thinking about and shopping for it. If you don't like real estate, don't invest in it. Robert also loves the stocks of small startup companies, because he himself is an entrepreneur. Some are afraid of the risk of such small-cap companies, but he sees these as the place to make fortunes. His strategy is to be out of the stock in a year. His real estate strategy, on the other hand, is to start small and keep trading up for bigger properties (and delaying taxes on the gain), holding real estate less than seven years. Even while working for the Marines and Xerox, Robert minded is own business. He kept his day job but was active in his asset column, trading real estate and small stocks. The more he understood accounting and cash management, the better he was at analyzing investments and eventually building his own company. He doesn't recommend people start a company unless they really have the desire to. Otherwise, he advises them to keep their day job and mind their business: building and keeping their asset column strong. As cash flow grows, people can indulge in luxuries-but only if the cash flow supports them. Build the asset column and let the income generated by those assets pay for the luxuries. Left-hemisphere moment: When assets generate enough income to cover luxuries, that's when you can buy them. Right-hemisphere moment: Think creatively about what your business is. It's not your profession. Subconscious moment: Acquire the type of assets you love, because you will take better care of them and enjoy learning about them. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "To become financially secure, a person needs to mind their own business." "The rich focus on their asset columns while everyone else focuses on their income statements." "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." "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." "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." "An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first." "The poor and middle class buy luxuries with their own sweat, blood, and children's inheritance."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. What is your profession, and what is your business? How do they differ? 2. What are things you might have counted in your net worth before reading this chapter? How do you view them now? 3. Are the assets you're acquiring the type that you love? If not, how can you change that? 4. What is a time you bought a luxury that your cash flow couldn't justify? What is a time you did so when it could justify the purchase? Compare how you felt in the two situations, both at the moment of purchase and later. 5. Have there been people in your family who have spent their whole lives working for someone else, only to end up with nothing? What would you have advised them if you could? Term definitions: BOND: A debt security in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest at a later date, termed maturity. ENTREPRENEUR: Someone who creates a system to offer a product or service in order to obtain a profit. Entrepreneurs are willing to accept a level of risk to pursue opportunity and are viewed as fundamentally important in the capitalistic society. FINANCIAL STATEMENT: A statement of your income, expenses, assets, and liabilities. Your "report card" when you leave school and what your banker wants to see before lending you money. STOCK: The capital raised by a corporation through the distribution of shares.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.
Financial IQ is made up of knowledge from four broad areas of expertise: 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 that 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. • Tax advantages A corporation can do many things that an employee cannot, like pay expenses before paying taxes. That is a whole area of expertise that is very exciting. 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 cashflow. For example, by owning your own corporation, your vacations can be board meetings in Hawaii. Car payments, insurance, repairs, and health-club memberships are company expenses. Most restaurant meals are partial expenses, and on and on. But it's done legally with pre-tax dollars. • Protection from lawsuits We live in a litigious society. Everybody wants a piece of your action. 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, and give it to the poor.Summary
Many people see Robin Hood as a hero, taking from the rich and giving to the poor. Rich dad did not share that opinion. He called Robin Hood a crook. Though the popular sentiment is that the rich should pay more in taxes and give to the poor, in reality it is the middle class that is heavily taxed, especially the educated upper-income middle class. To understand how this happens, Robert gives a brief history of taxes. In England and America, originally there were no taxes, only occasional temporary levies to pay for such things as wars. In 1874, England made income tax a permanent levy on its citizens. In America-the land where a tax on tea led to the Boston Tea Party protest and helped ignite the Revolutionary War-the adoption of the 16th Amendment in 1913 made an income tax permanent. These countries were able to get taxes accepted by the majority because they were first levied only against the rich. However, although income tax was designed to punish the rich, it wound up punishing those who had voted for it, the poor and middle class. Rich dad explained that he and poor dad were opposite. Poor dad, as a government employee, was rewarded if he spent money and hired people, making his organization larger. But for rich dad, the fewer people he hired and the less money he spent, the more he was respected by his investors. And as the government grows, so does the amount of tax dollars needed to support it. Poor dad sincerely believed the government should help people. He and Robert's mom worked for the Peace Corps, training volunteers to go to Malaysia, Thailand, and the Philippines. They were always seeking more grants and budget increases so they could hire more people. For Robert, it was a challenge to work for one of the biggest capitalists in town and go home to a prominent government leader. It wasn't easy to know which dad to believe. But over time, as Robert studied the history of taxes, he saw an interesting perspective: As the government's appetite for money grew, taxes soon needed to be levied on the middle class, and from there it kept trickling down. But the rich saw an opportunity because they don't play by the same set of rules. Corporations-which became popular in the days of sailing ships-offered a way around taxes. Understanding the legal corporate structure gave the rich a steep advantage and allowed them to outsmart the intellectuals. The government ideal is to avoid having excess money. If you fail to spend your allotted funds, you risk losing it in the next budget. Business people, on the other hand, are rewarded for having excess money and are applauded for their efficiency. And as the government continued its ideal and spent more and more money, more taxes-this time on the middle class, and eventually the poor-were needed. A corporation is simply a legal document that creates a legal entity. It is not really a thing, not a factory or a group of people. But it offers a lower income-tax rate than individuals have, and certain expenses can be paid by a corporation with pre-tax dollars. If those who get up and go to work at their jobs and pay taxes could only understand the way the rich play the game, they could too. The problem is, the harder you work in a job, the more you must pay the government. Taxes end up punishing the very people who voted them in. Attempts to punish the rich rarely work, because the rich find ways to minimize their tax burden. One such way is Section 1031 of the Internal Revenue Code, which allows a seller to delay paying taxes on a piece of real estate that is sold for a capital gain through an exchange for a more expensive piece of real estate. As long as you keep trading up in value, you won't be taxed on the gains until you liquidate. Those who don't take advantage of these savings are missing a chance to build their asset column. In all the years rich dad was guiding Robert, he was trying to teach him that knowledge is power. And with money comes great power that requires the right knowledge to keep it and make it multiply. Without that knowledge, the world pushes you around. The tax man is a bully who will always take more if you let him. Don't let him by making your money work for you. Smart tax consultants and attorneys are worth their cost, as it's still cheaper than paying the government. It's expensive to not know the law. In his mid-20s, when he was just out of the Marine Corps and working for Xerox, Robert was disappointed by how much was taken out of his paychecks. It motivated him to form his first corporation in 1974 and work harder at his day job to amass as much money as possible to invest in real estate. He became one of the top salesmen at Xerox and in less than three years was making more in his real estate holding corporation than he was at Xerox. His company bought him his first Porsche, proof that the plan was working. The lessons he learned from rich dad helped him break out of the proverbial Rat Race at an early age, and he wants to help others do the same. Financial IQ, or financial intelligence, is what makes that possible. It's made up of four things: accounting (financial literacy, or the ability to read numbers and evaluate the strengths and weaknesses of any business), investing (the science and strategies of money making money), understanding markets (the science of supply and demand, and market conditions), and the law (tax advantages and protections). Understanding those legal advantages is profound when it comes to long-term wealth. For instance, a corporation can pay expenses before paying taxes, whereas an employee gets taxed first and must try to pay expenses on what is left. Board meetings in Hawaii, car payments and insurance and health-club memberships can be pre-tax expenses for a corporation. Corporations also offer legal protection from lawsuits. 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. Robert urges those who own legitimate assets to find out more about corporations' benefits and protections. Garret Sutton's books are among many that can help. In summary: Business Owners with Corporations 1. Earn 2. Spend 3. Pay Taxes Employees Who Work for Corporations 1. Earn 2. Pay Taxes 3. Spend Left-hemisphere moment: Accounting is financial literacy or the ability to read numbers. This is a vital skill if you want to build an empire. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down. Right-hemisphere moment: Investing is the science of "money making money." This involves strategies and formulas, which use the creative side of the brain. Subconscious moment: Understanding markets is the science of supply and demand. You need to know the technical aspects of the market, which are emotion-driven, in addition to the fundamental or economic aspects of an investment. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "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 who pays for the poor, especially the educated upper-income middle class." "Every time people try to punish the rich, the rich don't simply comply. They react. They have the money, power, and intent to change things. They don't just sit there and voluntarily pay more taxes." "If you work for money, you give the power to your employer. If money works for you, you keep the power and control it." "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." "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."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. Do you agree with rich dad's assessment of Robin Hood, that he was a crook? Why or why not? 2. Have taxes created a bigger problem with government spending? 3. Do you think members of the middle class and the poor realize that the burden of taxes has fallen to them? What effects of that do you see? 4. Do your beliefs fall more under the banner of capitalism or socialism? What are the benefits and downfalls of each way of thinking? 5. Are the rich right to use the advantages of corporations to avoid paying taxes? Do you think more people could follow suit if they understood the system better? 6. What are specific ways that you yourself could benefit from using a corporation for your assets? Term definitions: 1031: Jargon for Section 1031 of the Internal Revenue Code, which allows a seller to delay paying taxes on a piece of real estate that is sold for a capital gain through an exchange for a more expensive piece of real estate. CORPORATION: Merely a legal document that creates a legal body without a soul. It's not a big building or a factory or a group of people. Using it, the wealth of the rich is protected. FINANCIAL IQ: Financial intelligence that comes as a result of financial education. People with high financial IQ learn to use other people's money to become rich. FINANCIAL LITERACY: The ability to read and understand financial statements, which allows you to identify the strengths and weaknesses of any business.LESSON 5: THE RICH INVENT MONEY Often in the real world, it's not the smart who get ahead, but the bold.
Games reflect behavior. They are instant feedback systems. The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth. The problem with "secure" investments is that they are often sanitized, that is, made so safe that the gains are less. 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. * * * Which one sounds harder to you? 1. Work hard. Pay 50% in taxes. Save what is left. Your savings then earn 5%, which is also taxed. OR 2. Take the time to develop your financial intelligence Harness the power of your brain and the asset column. I have said it before, but it's worth repeating. Financial intelligence is made up of these four main technical skills: 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.Two Types of Investors
There are two kinds of investors: 1. The first and most common type is a person who buys a packaged investment. They call a retail outlet, such as a real estate company, 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 clean and simple way of investing. An analogy would be a shopper who goes to a computer store and buys a computer right off the shelf. 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. 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 know how. It is this second type of investor who is the more professional investor. Sometimes it may take years for all the pieces to come together. And sometimes they never do. It's this second type of investor that 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 reside, 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. 1. Find an opportunity that everyone else 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 discovered that after going to the title company. After buying the house, he tore the house 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 of work. It's not a lot of money, but it sure beats minimum wage. And it's not technically difficult. 2. 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 the learned skill of raising money, more than the houses themselves, that was 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-two 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 finding the deal, took over my position, and I walked away. Total working time: three days. Again, it's what you know more than what you buy. Investing is not buying. It's more a case of knowing. 3. Organize smart people. Intelligent people are those who work with or hire a person who is more intelligent than they are. When you need advice, make sure you choose your advisor wisely. There is a lot to learn, but the rewards can be astronomical. If you do not want to learn those skills, then being a type-one investor is highly recommended. It is what you know that is your greatest wealth. It is what you do not know that is your greatest risk. There is always risk, so learn to manage risk instead of avoiding it.Summary
Robert gives two contrasting examples: First, the story of Alexander Graham Bell being overwhelmed by demand for his product and trying to sell his company to Western Union for $100,000. Western Union didn't see the opportunity and turned him down, and a multi-billion- dollar industry emerged. The second example is the TV news reporting on the downsizing at a local company, and one terminated manager begging, in front of the cameras, to get his job back. He had just bought a house and was terrified to lose it. Fear and self-doubt are in all of us. Robert has been teaching professionally since 1984 and has seen it in thousands of individuals, and in himself. We all have tremendous potential, and we all have self-doubt. Courage can make the difference in leading a successful life. Robert said that as a teacher, it broke his heart to see students who knew the answers but were afraid to act on them. Financial genius requires technical knowledge as well as courage. Take risks, be bold, let your genius convert that fear into power and brilliance-advice that will terrify some, because so many play it safe when it comes to their money. There are many changes ahead in our world. And developing your financial IQ allows you to see that future of change through the lens of excitement, not dread. You'll see the opportunities and act on them, as opposed to those who allow their fear to keep them on the sideline, watching others move boldly forward. Land was wealth 300 years ago. Later, wealth was in factories and production. Today, wealth is in information. But information flies around the world at the speed of light, and changes will be faster and more dramatic. There will be a dramatic increase in the number of new multimillionaires. There also will be those who are left behind. Some cling to old ideas and, when they struggle, blame technology or the economy. What they fail to see is that old ideas are their biggest liability. An idea or way of doing something that may have been an asset yesterday isn't today. Robert gives an example of a woman who came to a class he was teaching using a board game he had invented, CASHFLOW®. The game teaches people how money works and about the interaction of the income statement with the balance sheet. Some people love the game, some hate it, and others miss the point. The woman in his example struggled to see that things she would normally think of as an asset-such as a boat-negatively affect her cash flow. She pulled a number of challenging cards and had a terrible game. In the end, she was angry and demanded a refund, refusing to see how the game reflected her. Games are a powerful way to teach, as they reflect behavior and are instant feedback systems. Later, Robert got an update on the upset woman. She had calmed down and started seeing a slight relationship between the game and her life, a life in which she'd never paid attention to her and her ex-husband's finances and had been burned because of it. The purpose of the CASHFLOW® game is to teach players to think and create new and various financial options. Some do this easily; others struggle. Those who have creative financial minds escape the Rat Race the fastest. Some playing the game have lots of money but don't know what to do with it. That's true in life as well. Some playing the game complain that the right cards aren't coming their way and just sit there. Some get a great opportunity card but don't have the money to act on it. And others have the money, get a great card, but don't see it for the opportunity it is. All of these behaviors happen in real life, too. Financial intelligence is simply having more options, figuring out ways to create opportunities or altering situations to work in your favor. Luck is created. So go create yours. Money-which isn't real, by the way, but just what we agree it is- isn't our greatest asset. Our mind is. Train it well. Millions can be made from nothing more than ideas and agreements. Putting money away each month is a sound idea, but it can blind you to what is really going on and cause you to miss opportunities for much more significant growth. In the early 1990s, the economy in Phoenix was terrible. Robert and his wife, Kim, capitalized on that, investing in real estate. He gave an example of buying a home worth $75,000 for $20,000 using $2,000 as a down payment that a friend had loaned him for $200. While the purchase was being processed, he ran an ad advertising a $75,000 house for only $60,000 and no money down. As soon as the house was legally his, he sold it in minutes. Everyone was happy. And the $40,000 was created from money in Robert's asset column in the form of a promissory note from the buyer. At 10% interest, $4,000 a year in cash flow is added to income. Total working time: five hours. And if the buyer eventually can't pay, they'll simply take the house back and resell it. The math still beats saving after-tax money each month. It's legal, the escrow company handles the servicing of the payments, and Robert and Kim don't have to deal with fixing roofs or toilets because the buyer owns the house. A few years later, the Phoenix market strengthened and it wasn't worth their time to ferret out the deals, so they moved on. Market conditions may be different where you are, so this strategy may not work for you. But the example illustrates how a simple financial process can create hundreds of thousands of dollars, with little money and low risk. It is an example of money being only an agreement. Would you rather work hard, pay taxes and save from what's left- with any growth also being taxed-or take the time to develop your financial intelligence? Markets go up and down, and investments come and go. The world is always handing you opportunities of a lifetime; you simply need to be able to see them. Robert shares another example of buying a house for $45,000 in a depressed market in Portland, Oregon, and renting it out for very little profit. But a year later, the market picked up and he sold it for $95,000, reinvesting the capital gains into a 12-unit, $300,000 apartment house in Beaverton, Oregon. Two years later, that was sold and the profit put into a 30-unit, $875,000 apartment building in Phoenix. A few years later, an investor offered $1.2 million for the property. It's an example of how a small amount of money can grow into a large amount. The more you develop your financial intelligence-which takes time-the more opportunities will be offered to you. Robert's philosophy is to plant seeds in his asset column. Start small and plant seeds. Some grow; some don't. Some grow into millions from little investments. Robert and Kim also have a stock portfolio where they buy high- risk, speculative private companies that are just about to go public. It's a risk, but the more you develop your financial intelligence, the lower the risk becomes. The smarter you are, the better your chances of beating the odds. Some may argue that there aren't real estate bargains where they are, but Robert said there are prime opportunities everywhere that are overlooked. Most people aren't trained financially to recognize the opportunities in front of them. As you develop your financial IQ and begin to put it into practice, remember to have fun. Sometimes you win, sometimes you lose, but always have fun. Don't be afraid of losing, because failure is part of the process of success. There are two kinds of investors: 1) Those who buy a packaged investment from a retail outlet, such as a financial planner, and 2) Those who create investments; these are also known as professional investors. If you want to be the second kind of investor, you must develop three main skills. First, find the opportunities that everyone else missed. Second, raise money. And third, organize smart people and hire those with more intelligence than you. There is always risk, so you must learn to manage it rather than avoid it. Left-hemisphere moment: Small amounts of money can be turned into large amounts with astute, well-timed investments. Right-hemisphere moment: Robert always encourages adult students to look at games as reflecting back to them what they know and what they need to learn. Most importantly, games reflect behavior. They are instant feedback systems. Instead of the teacher lecturing you, the game is giving you a personalized lecture, one that is custom-made just for you. Subconscious moment: 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. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "Often in the real world, it's not the smart who get ahead, but the bold." "As a teacher, I recognized that it was excessive fear and self-doubt that were the greatest detractors of personal genius. It broke my heart to see students know the answers, yet lack the courage to act on the answer." "Old ideas are some people's biggest liability. It is a liability simply because they fail to realize that while that idea or way of doing something was an asset yesterday, yesterday is gone." "Rich people are often creative and take calculated risks." "Why would you want to increase your financial intelligence? Because you want to be the kind of person who creates your own luck." "The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth seemingly instantaneously. An untrained mind can also create extreme poverty that can crush a family for generations." "If the opportunity is too complex and I do not understand the investment, I don't do it. Simple math and common sense are all you need to do well financially." "The problem with ‘secure' investments is that they are often sanitized, that is, made so safe that the gains are less." "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." "Great opportunities are not seen with your eyes. They are seen with your mind." "It is what you know that is your greatest wealth. It is what you do not know that is your greatest risk."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. Robert says that it is not so much the lack of technical information that holds us back, but more the lack of self- confidence. What is an example in your life or someone else's where self-doubt got in the way of a great opportunity? 2. Some people have a lot of money but do not get ahead financially. Why is that? 3. As you have developed your own financial intelligence, how has it helped you see more easily whether a deal is good? 4. Robert's philosophy is to plant seed inside his asset column, starting small and seeing what grows. How are you planting seeds in your asset column right now? If you aren't, what could you do to be able to start? 5. Robert lists two kinds of investors: those who buy packaged investments, and those who create investments. Which kind are you? Is that the kind you want to be? 6. How have you seen fear of failure play out in your life, and how did it prevent you from taking advantage of opportunities? What can you do to conquer that fear in the future?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.
The main management skills needed for success are: 1. Management of cash flow 2. Management of systems 3. Management of peopleSummary
Robert was interviewed a few years ago in Singapore by a journalist who, over the course of their conversation, revealed that she wanted to become a best-selling author like him. But her novels, which everyone said were excellent, never went anywhere. Robert suggested that she take a course in sales training. That offended the reporter, who said she had a master's in English literature and didn't see how learning to sell would help her. In fact, she hated salespeople. When Robert pointed out that he's a best-selling author, not a best-writing author, she replied she would never stoop so low as to learn to sell, and left the interview. There are talented people all around us who struggle financially, just like that reporter. In the words of one business consultant, "They are one skill away from greatness." What that means is that too many of us specialize. If we would learn and master just one more skill, our income would jump exponentially. When it comes to money, the only skill most people know is to work hard. If that reporter took some courses in ad copywriting as well as sales, then got a job at an advertising agency, she would learn how to get millions in free publicity-a skill she could put to use turning her next novel into a best-seller. When Robert came out with his first book, If You Want To Be Rich and Happy, Don't Go to School, a publisher suggested he change the title to The Economics of Education. But Robert knew that title wouldn't sell. Even though he is pro-education, he chose a title that was controversial because he knew it would get him on more TV and radio shows. And it worked. When he graduated from the U.S. Merchant Marine Academy in 1969, he was hired as a third-mate on a Standard Oil tanker fleet. The pay was OK, but it came with five months of vacation a year. It could've been a good career, but after six months Robert quit to join the Marine Corps and learn how to fly. Rather than specialize-as so many do, including poor dad- Robert sought out new skills. Rich dad encouraged that, telling him to learn a little about a lot. That's why Robert and his friend, Mike, had worked so many jobs growing up, to gain a variety of experiences. Poor dad didn't understand the decision to leave the Standard Oil job. He thought Robert had gone to school to become a ship's officer. But what rich dad knew was that Robert went to school to learn about international trade. And he joined the Marine Corps to learn how to lead troops. That leadership skill would serve him well in whatever business lay ahead. In 1973, Robert resigned his commission and took a job at Xerox in sales, even though he was a shy person. In fact, it was because he was a shy person that he took the job. Xerox had one of the best sales- training programs in the country, and there Robert overcame his fear of knocking on doors and being rejected. When he became one of the consistently highest-producing salespeople there, he left. Robert launched his first company in 1977, selling wallets manufactured in the Far East and shipped to a New York warehouse. It was time to test his wings. Today, he still does business internationally. Most people work hard to get a secure job, focusing on pay and benefits in the short term. What they should do is seek work that will teach them the skills they'll need. Are people looking to where they're headed or just until their next paycheck? In his book The Retirement Myth, Craig S. Karpel writes of the many challenges awaiting most people in retirement, and the frightening picture of what most people's reality will be. Robert recommends a long view: Instead of simply working for money and security, take a second job to learn a second skill. Many will resist this, because they aren't ready for change. But it's like going to the gym. You might have to talk yourself into starting, but you'll be so glad you did when the workout is over. If you are unwilling to work to learn something new and instead insist on becoming highly specialized within your field, make sure the company you work for is unionized. Your specialized skills may be useless outside your field, otherwise. Robert asks his students how many of them can make a better hamburger than McDonald's. Most raise their hands. But the reason McDonald's is making millions and they aren't is because McDonald's is excellent at business systems. The world is full of talented poor people. They must take the time to learn more skills, like McDonald's business systems, to succeed. Poor dad wanted Robert to become specialized, even though that didn't work out well in his own life. He never understood that the more specialized you become, the more you are trapped and dependent on that specialty. Rich dad, on the other hand, encouraged Mike and Robert to groom themselves and learn about a lot of different areas of business. For the World War II generation, it was considered bad to skip from company to company. Today, it is considered smart. It enables you to learn more and will pay dividends in the long runs. The main management skills needed for success are: 1) Management of cash flow, 2) Management of systems, and 3) Management of people. And the most important specialized skills are sales and marketing. Communication skills such as writing, speaking, and negotiating are crucial to a life of success. These are skills Robert works on constantly, attending courses or buying educational resources to expand his knowledge. 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. Being technically specialized has its strengths and weaknesses. People in this category must expand their communication skills. We all must learn to be good teachers as well as good students. To be truly rich, we must be able to give as well as receive. Teaching was one of the ways both rich dad and poor dad gave to others. But rich dad also gave money to his church, to charities, and to his foundation. He knew that to receive money, he also had to give it. Poor dad always said he'd give money if he had extra-but he never had that extra. Rather than, "Give, and you shall receive," he believed in, "Receive, and then you give." Robert became both dads, both a hard-core capitalist who loves the game of making money, and a socially responsible teacher who is deeply concerned with this ever-widening gap between the haves and have- nots. He holds the archaic educational system primarily responsible for this growing gap. Left-hemisphere moment: It may not make immediate mathematical sense to leave a promising job for another, but the skills you will gain will lead to greater numbers in the long run. Right-hemisphere moment: Learning skills outside what you think of as your profession will benefit you. Subconscious moment: The situation you fear most is the skill that you need to learn and conquer. And you may have to force yourself to do it, though-like going to the gym-you'll be glad you did. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "Job security meant everything to my educated dad. Learning meant everything to my rich dad." "I am constantly shocked at how little talented people earn." "There is an old cliché that goes: ‘Job is an acronym for "Just Over Broke."' Unfortunately, that applies to millions of people." "I recommend to young people to seek work for what they will learn, more than what they will earn." "Life is much like going to the gym. The most painful part is deciding to go. Once you get past that, it's easy." "The world is filled with talented poor people. All too often, they're poor or struggle financially or earn less than they are capable of, not because of what they know, but because of what they do not know." "Being technically specialized has its strengths as well as its weaknesses." "Giving money is the secret to most great wealthy families."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. Do you know extremely talented people who make very little money? What could they be doing differently? 2. How have you sought additional skills beyond your specialty? What was the result? 3. Was there a time you stayed in a secure job rather than strike out into a new position that might've gained you more in the long run? What was the basis of your decision? 4. If someone were to ask you advice on what the most important skills are for them to learn in their working life, what would you tell them? 5. What role does giving play in your life? Do you see it as an important part of your success? 6. What are different ways you could give that you aren't currently?Chapter Seven: OVERCOMING OBSTACLES The primary difference between a rich person and a poor person is how they manage fear.
Once people have studied and become financially literate, they may still face roadblocks to becoming financially independent. 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 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. Failure inspires winners. Failure defeats losers. Rich dad believed that the words "I can't afford it" shut down your brain. "How can I afford it?" opens up possibilities, excitement, and dreams. If I pay myself first, I get financially stronger, mentally and fiscally.Summary
The five main reasons financially literate people may still not develop abundant cash flow are: 1) fear, 2) cynicism, 3) laziness, 4) bad habits, and 5) arrogance. Let's look at each of those in detail. Overcoming fear No one likes to lose money. The only people who have never lost money investing are those who haven't done it. Everyone has the fear of losing money; the difference is how you handle fear and losing. The primary difference between a rich person and a poor person is how they manage that fear. It's OK to be fearful. One way to overcome that is to start early and allow the power of compound interest work for you. There is a staggering difference between a person who starts saving at age 20 versus age 30. But what if you don't have much time left to invest or want to retire early? Rich dad recommends thinking like a Texan. Win big, lose big-it's your attitude toward that loss that matters. Texans are proud when they win and brag when they lose. In Robert's life, winning has often followed losing. He has never met a rich person who hasn't lost money. But they don't let the fear of that take them out of the game. The fall of the Alamo was a tragic military defeat, but Texans have turned that into a rallying cry-"Remember the Alamo!"-to spur them on to great victories. Just like the Texans, don't bury your losses. Be inspired by them. For winners, losing inspires them. For losers, losing defeats them. John D. Rockefeller, once said, "I always tried to turn every disaster into an opportunity." Even Pearl Harbor was turned from one of America's greatest losses to what propelled the nation into becoming a world power. Winners know that failure inspires winning-so why be afraid of failure, when it can lead to greatness? Understand that not being afraid of failure doesn't mean you can't still hate failing. Most people play not to lose, when they need to be playing to win. And that's why so many people struggle financially. They might have a safe, sensible and balanced portfolio, but it's not a winning portfolio. They're playing not to lose. A balanced portfolio isn't a bad thing. But it's not going to help you win big. It's not how successful investors play the game. You must be a little unbalanced in the beginning – but you must be focused. Put your eggs in a few baskets and focus. Building your asset column doesn't take hard math, but it does take courage and the right attitude toward failure. Overcoming cynicism Whether it's our own self-doubt or the doubts of other people in our lives, often we allow that doubt to keep us from acting. We play it safe, and opportunities pass us by. It often takes great courage to not let rumors and talk of doom and gloom affect your doubts and fears. But a savvy investor knows that the seemingly worst of times is actually the best of times to make money. When everyone else is too afraid to act, they pull the trigger and are rewarded. Robert shared the example of a friend who was about to buy an investment condo for a great price but backed out at the last minute when a neighbor-who wasn't an investor-told him it was a bad deal. Had he stayed in it, he would've doubled his investment and started to get out of the Rat Race. Robert holds a small portion of his assets in tax-lien certificates instead of CDs. Others tell him he shouldn't do this, but they're coming from a place of doubt. They've never done it, and they're telling someone who's doing it why they shouldn't. The lowest yield Robert looks for is 16 percent, but people who are filled with doubt are willing to accept a far lower return. Doubt is expensive. Doubts and cynicism keep most people poor. Rich dad liked to say, "Cynics criticize, and winners analyze." Winners keep their eyes open and see opportunities everyone else missed. Real estate is a powerful investment tool for anyone seeking financial independence or freedom. It is a unique investment tool. Yet every time Robert mentions real estate as a vehicle, he often hears, "I don't want to fix toilets." They focus on toilets, and it keeps them poor. Many people stay out of the stock market because they don't want to lose money. But they're keeping themselves from making money by closing their minds to that investment vehicle. Overcoming laziness One of the most common forms of laziness is staying busy. Too busy to take care of your wealth, or your health, or your relationships. What's the cure? A little greed. That can be hard to hear because so many of us were raised to see greed or desire as a bad thing. Rather than saying, "I can't afford it," change your mindset to, "How can I afford it?" That opens the brain and forces it to think of solutions. "I can't afford it" is a lie. The human spirit knows it can do anything. By saying you can't do something, you're creating a conflict between your spirit and your lazy mind. "How can I afford it?" creates a stronger mind and a dynamic spirit. When Robert decided to exit the Rat Race, he asked, "How can I afford to never work again?" His mind started kicking out solutions, but the hardest part was fighting against the old dogma that tried to instill guilt to suppress such "greed." Without that little greed, the desire to have something better, progress is not made. Our world progresses because we all desire a better life. New inventions are made because we desire something better. We go to school and study hard because we want something better. Too much greed is bad, but a little can help spur you on. Overcoming bad habits To be successful, you must develop successful habits. Poor dad always paid everyone else first and himself last, but he rarely had any left over. Rich dad always paid himself first, even if he was short of money. He knew that creditors and the government would make a big enough flap if he didn't pay them that it would motivate him to seek other forms of income to pay them. If he paid himself last, he wouldn't feel that kind of productive pressure. Forcing himself to think about how to come up with the extra income to pay the creditors made him fiscally stronger. Overcoming arrogance Rich dad said every time he had been arrogant, he had lost money because he thought that what he didn't know wasn't important. Many people use arrogance to hide their own ignorance. Robert has found in discussions with accountants and other investors that they will try to bluster their way through the discussion, and it becomes clear they don't know what they're talking about. Ignorance isn't a bad thing, if you react to your own ignorance by educating yourself by finding an expert in the field. Left-hemisphere moment: Choose to analyze instead of criticize. Cynics criticize, but winners analyze and spot overlooked opportunities that others have missed. Right-hemisphere moment: Overcome bad habits by putting new ones in place, such as paying yourself first instead of last. Subconscious moment: Fear of failure keeps too many people out of the game. Instead, use failure as inspiration to succeed, as Texans do with the memory of the Alamo. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "The primary difference between a rich person and a poor person is how they manage fear." "I've never met a golfer who has never lost a golf ball. I've never met people who have fallen in love who have never had their heart broken. And I've never met someone rich who has never lost money." "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." "Rich dad knew that failure would only make him stronger and smarter. It's not that he wanted to lose. He just knew who he was and how he would take a loss. He would take a loss and make it a win." "Texans don't bury their failures. They get inspired by them. They take their failures and turn them into rallying cries." "We all get a little chicken when fear and doubt cloud our thoughts." "Getting out of the Rat Race is technically easy. It doesn't take much education, but those doubts are cripplers for most people." "‘I can't afford it' causes sadness, a helplessness that leads to despondency and often depression. ‘How can I afford it?' opens up possibilities, excitement, and dreams." "If I pay myself first, I get financially stronger, both mentally and fiscally." "There are many people in the world of money, finances, and investments who have absolutely no idea what they're talking about."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. How have you experienced the fear of failure in your life? Were you able to conquer that fear? How? 2. Rich dad recommended we have the attitude of Texans: Win big, but if you lose big, shout about it and use it as a rallying cry. What's the biggest challenge for you in taking on that attitude? Does it excite you or frighten you? 3. How do you handle the cynics in your life who try to discourage you from taking risks that you believe have a good chance of winning? 4. Have you avoided certain investment vehicles because of "I-don't-want-to" (such as, I don't invest in real estate because I don't want to fix toilets)? How might you react differently next time? 5. Do you agree with the statement that a little greed is the answer to curing laziness? Why or why not? 6. How has greed or desire driven you in your life? 7. Do you pay yourself first, or your bills? If you pay yourself last, what are steps you can take to change that? 8. Has arrogance ever cost you an opportunity? What did you learn from that? 9. What's an area of financial knowledge that you are ignorant in? What are some resources you could seek out to educate yourself on that topic? Term definition: STOP: A stop is simply a computer command that sells your stock automatically if the price begins to drop, helping to minimize your losses and maximize some gains.Chapter Eight GETTING STARTED There is gold everywhere. Most people are not trained to see it.
The three most important management skills necessary to start your own business are management of: 1. Cash flow 2. People 3. Personal time To successfully pay yourself first, keep the following in mind: 1. 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. 2. 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. The sophisticated investor's first question is: "How fast do I get my money back?"Summary
It is easy to find great deals. It's just like riding a bike. After a little wobbling, it's a piece of cake. But when it comes to money, it takes determination to get through the wobbling. You must awaken the financial genius sleeping within in order to find these great deals. Our culture has told us that the love of money is the root of all evil, that we just need to find a profession and work hard and the government will take care of us when we're old. The message is still to work hard, earn money, and spend it, and when we run short, we can always borrow more-and that is why, for so many of us, our financial genius within is asleep. But we must awaken that financial genius in order to find million- dollar deals of a lifetime. It's far easier to simply find a job and work for money, but that is not the path to wealth. If you want to go against the masses, Robert offers the thought process he goes through every day: 10 steps that you can use to awaken your financial genius. Follow the ones you want, or make up your own-your financial genius is up to the task. 1. Find a reason greater than reality: the power of spirit Many want to be rich or financially free, but they turn away because the road seems too difficult to get there. Like a future Olympic swimmer who sacrifices time and social engagements in order to put in hours at the pool and studying hard, people need a strong, clear goal or reason in order to push through the obstacles. A reason or a purpose is a combination of "wants" and "don't wants"-just like Robert's reason for wanting to be rich. First, his "don't wants," as those create the wants. He didn't want to work his whole life. He didn't want job security and a house in the suburbs, unlike his parents. He didn't like being an employee and didn't want to stay busy working on his career-to the detriment of time with loved ones-only to have the government take most of what he worked when he dies, as happened with his father. What does he want? Robert wants to be free to travel the world while young and live the lifestyle he loves. He wants to be free and have control over his time. He wants his money to work for him. Like Robert, you must have strong enough emotional reasons behind wanting to be rich to sustain you through setbacks. Robert has lost money many times, but he kept going because his reason was strong enough. He wanted to be free by 40, but it took until he was 47. Becoming rich wasn't easy, but it wasn't that hard, either. But if Robert hadn't had a strong reason behind it, it would've been incredibly difficult. If you don't have a strong enough reason, Robert urges you to not read further as it will sound like too much work. 2. Make daily choices: the power of choice You have the choice every day whether to be rich, poor or middle class. Your spending habits reflect who you are. The poor have poor spending habits. Long ago, Robert chose to be rich. His friend Mike, after inheriting a healthy asset column, chose to learn how to keep it-which is not the default situation when rich families pass on their assets to the next generation. Most people choose not to be rich. They tell themselves they're not interested in money, or that they're young and don't need to worry about it yet, or myriad other excuses. But those excuses rob them of time (their most precious asset) and learning. We all have the choice every single day what we do with our time and money, and what we put in our heads. Robert chooses to be rich and makes that choice every day. He urges people to invest first in education, as our mind is our most powerful tool. Once we are old enough, we all have the choice of what to put in our brains. But instead of choosing to invest in learning, most people simply buy investments. To continue his own learning, Robert goes to at least two seminars each year. In 1973, he went to a three-day seminar on buying real estate with nothing down. He spent $385 on the seminar, and it made him at least $2 million and enabled him not to have to work for the rest of his life. Robert also likes CDs and audio books so he can review what he just heard. One time, he was listening to an investor he disagreed with, but after listening to the talk 20 times, he finally understood why the man said what he said. He was able to grasp that because he kept his mind open, even though he originally disagreed with the investor. And now he has two ways of analyzing problems, which is priceless. Robert has chosen to read or listen to what a number of people think, from Donald Trump to George Soros, and that gives him access to their mental power. When you learn something new, you often must make mistakes to fully understand it. Arrogant or critical people are afraid of taking risks, so they often won't listen to experts. It is not a question of intelligence. Intelligent people can be ignorant if they combine their smarts with arrogance. A truly intelligent person, on the other hand, welcomes new ideas. New ideas can combine with already accumulated ones and result in something great. Listen. Learn. Take a long view of wealth, not a get-rich-quick mentality. Invest in your greatest asset-your mind-before investing in stocks or real estate. 3. Choose friends carefully: the power of association Robert learns from all of his friends, both those who have money- seeking their knowledge-and those who struggle financially. The latter group teaches him what not to do. He says several of his friends who have generated more than a billion dollars all report the same phenomenon: Their friends who have no money never ask them how they did it. They just ask for a job or a loan, or both. Robert warns us not to listen to poor or frightened people. To them, when it comes to investments, the sky is always falling. They can always tell you why something won't work. Any panel of experts will have one who says the market is going to crash and another who says it is going to boom. Listen to both, because both have valid points. Be true to yourself and don't go along with the crowd. This can be one of the hardest parts of wealth-building. The crowd usually shows up too late to a great deal. Instead, look for a new deal-a prospect that can be frightening. Don't try to time the market. Get in position for the next wave. Wise investors buy an investment when it's not popular. They know their profits are made when they buy, not when they sell. It's all about "insider trading" (the legal forms of it): being close to the inside, having rich friends who have information on where the money is being made. You want to hear about the next boom, get in, and then get out before the next bust. That's what friends are for, and that's what financial intelligence is. 4. Master a formula and then learn a new one: the power of learning quickly Be careful what you learn, because you become what you put in your head. The masses have one basic formula: Go to work, earn money, pay bills, balance checkbooks, buy some mutual funds, and go back to work. If you're not making enough, you need to change the formula. Years ago, Robert took a weekend class called "How to Buy Real Estate Foreclosures." He learned a formula and put it into action, making several million dollars in the process. So he went in search of new formulas. He didn't always directly use the new information, but he was always learning. Many colleges have classes on financial planning and buying traditional investments. It's a good place to start, but Robert is always searching for a faster formula. He says that's why he can make more in a day than many will make in their lifetime. And it's not just about faster formulas, but learning new formulas faster. 5. Pay yourself first: the power of self-discipline Of all the steps, self-discipline may be the most difficult to master if it's not part of your makeup. But personal self-discipline is the No. 1 delineating factor between the rich, the poor, and the middle class. The world pushes you around and puts pressure on you. And if you don't have the tolerance for financial pressure, you'll never become rich. Robert teaches students in his entrepreneurship classes that the three most important management skills to starting a business are management of cash flow, people, and personal time. These apply to everyone, not just entrepreneurs, and each of these skills is enhanced by the mastery of self-discipline. Though many repeat the statement, "Pay yourself first," few have the discipline to put it into practice. Compare these two diagrams. Follow the flow of money and see how these individuals pays themselves first (via investing in the asset column) before paying bills. This doesn't mean you don't pay your bills responsibly; it just means to pay yourself first. You can see how paying someone else first leaves little or nothing left to invest in the assets column. It has happened to Robert and to others that there were times when the cash flow wasn't enough to cover paying themselves first and the bills. They paid themselves first anyway. It takes internal fortitude when bill collectors are screaming, but it makes investing in assets a priority and leads to becoming rich. To successfully pay yourself first: 1. 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. 2. 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. Remember that this rule does not encourage self-sacrifice or financial abstinence. It doesn't mean pay yourself first and starve. Life was meant to be enjoyed. If you call on your financial genius, you can have all the goodies of life, get rich, and pay bills. 6. Pay your brokers well: the power of good advice Many people try to save a few dollars by using discount brokers or selling their house on their own. But not only do good professionals save you time, they make you money. Information is priceless. A good broker should provide you with information, as well as making you money. Learn from them. In truth, what you pay them is tiny in comparison with what kind of money you can make with the information they give you. Not all brokers are created equal. Interview them and find out how much property or investments they own. Find one who has your best interests at heart, and treat him or her fairly. Companies have a board of directors because they know the value in having people smarter than they are around. You should have a board of directors, too. 7. Be an Indian giver: the power of getting something for nothing The term "Indian giver" arose out of a cultural misunderstanding when the first European settlers came to the New World. If a settler was cold, an Indian would give the person a blanket. The settler mistook it for a gift and was offended when the Indian asked for it back. The Indian got upset when the settler did not want to give it back. It was a misunderstanding of what the transaction was. In terms of investing and the asset column, it's key to be an Indian giver; that is, getting your initial investment back, and quickly. One example is a condo Robert bought with cash for $50,000. It rented in the high season for $2,500 and for $1,000 the rest of the year. Within about three years, it paid for itself. In essence, Robert's original $50,000 was back in his pocket. And the asset continues to make him money, month in and month out. Some don't like the risk and prefer to keep their money in a savings account, but there it's not making anything. And they also don't get anything for free with it. For each of his investments, Robert says there must be an upside, something for free-like a mini storage, a piece of free land, stock shares, a house. And there must be limited risk. 8. Use assets to buy luxuries: the power of focus Robert loves luxuries as much as the next person. But he won't borrow money for them, instead focusing on the asset column to create the money to buy those luxuries. He shares the example of a friend whose teenage son wanted a car. Rather than buy it himself or have the son use his savings for it, the father gave him $3,000 and some information on the stock market and told him he couldn't use that $3,000 directly to buy a car. He had to invest it, and when he'd made $6,000, he could use that for a car and the original $3,000 would go into his college fund. Although the son had yet to realize that profit, his interest and learning grew sky-high. He was learning a lesson that would serve him well in life: growing assets in order to pay for the things he wanted. Developing cash flow from an asset column is easy in theory- what's hard is the mental fortitude to direct money to the correct use. Borrowing money is easy in the short term but harder in the long run. 9. Choose heroes: the power of myth One of the most powerful ways we learn as children is pretending to be our heroes. Robert continues that as an adult, though his heroes have changed. Instead of pretending to be Willie Mays at bat, he channels the bravado of Trump while negotiating a deal or the analytical skill of Warren Buffett when looking at trends. By having heroes, we tap into their genius, and because they make it look easy, the inspire us to try. 10. Teach and you shall receive: the power of giving Robert learned from rich dad to give money as well as education. He would say, "If you want something, you first need to give." When he was short of money, he gave to his church or to his favorite charity. Whenever you feel in need of something-whether that's money, a smile, love or friendship-give it first and it will come back in buckets. This is also true in teaching. The more you teach, the more you learn. Both of Robert's dads proved that. Be generous with what you have, and make sure you are giving for the joy that giving itself brings, not giving simply to receive. Left-hemisphere moment: Use self-discipline to pay yourself first, in order to protect the priority of growing your asset column. Right-hemisphere moment: Keep your mind open to new ideas and new ways of doing things. These can add to the synergy of other accumulated ideas. Subconscious moment: Harness the deep-seated emotional reasons you want to become rich. Make them strong. They will help you weather the obstacles along the road to wealth. What Was Robert Saying Now it's time to reflect. Ask yourself, "What is Robert saying in this quote?" And, "Why does he say that?" In this section you do not need to agree or disagree with Robert. The goal is to understand what Robert is saying. Remember, this curriculum is designed to be cooperative and supportive. Two minds are better than one. If you do not understand what Robert is saying, do not shy away from it. Ask for help in understanding. Take the time discuss each quote until you understand it: "There is gold everywhere. Most people are not trained to see it." "Without a strong reason or purpose, anything in life is hard." "Financially, with every dollar we get in our hands, we hold the power to choose our future: to be rich, poor, or middle class." "Ninety percent of the population buys TV sets, and only about 10 percent buy business books." "Each of us knows people who are highly educated, or believe they are smart, but their balance sheet paints a different picture." "I've noticed that my friends with money talk about money. They don't do it to brag. They're interested in the subject. So I learn from them, and they learn from me." "If you're tired of what you're doing, or you're not making enough, it's simply a case of changing the formula via which you make money." "People who lack internal fortitude often become victims of those who have self-discipline." "I have lost money on many occasions, but I only play with money I can afford to lose." "The easy road often becomes hard, and the hard road often becomes easy."Additional Questions
Now it's time to take the stories in this chapter along with the understanding of what Robert was saying and apply them to you and your life. Ask yourself the questions below and discuss them with your study partner. Be honest with yourself and your partner. If you do not like some of the answers you are giving, ask yourself if you are willing to change and accept the challenge to change your thoughts and mindset: 1. What are the reasons you want to become rich, your "wants" and "don't wants"? Would Robert think they are strong enough? 2. Are your spending habits reflecting the life you want? If not, what can you change? 3. What are you choosing to put in your head every day? When was the last time you took a seminar or read a business book (other than this one)? 4. What have you learned from your friends about finances, good or bad? 5. Would you say your self-discipline muscle is in shape or needs a good workout? 6. Do you have a board of directors-brokers and other professionals you pay well for their excellent information and ability to make you money-in your life? 7. Did you understand the concept put forth in step 7? If not, discuss it with your study partner. 8. The last time you purchased a luxury, how did you pay for it? 9. Who is your financial hero? How do you emulate this person in your actions? Term definition: ROI: Return on investmentChapter Nine STILL WANT MORE? HERE ARE SOME TO DO'S
Many people may not be satisfied with my 10 steps. They see them more as philosophies than actions. I think understanding the philosophy is just as important as the action. There are many people who want to do instead of think, and then there are people who think but do not do. I would say that I am both. I love new ideas, and I love action. So for those who want a to-do list on how to get started, I will share with you some of the things I do, in abbreviated form. •Stop doing what you're doing. In other words, take a break and assess what is working and what is not working. The definition of insanity is doing the same thing over and over and expecting a different result. Stop doing what is not working, and look for something new. •Look for new ideas. For new investing ideas, I go to bookstores and search for books on different and unique subjects. I call them formulas. I buy how-to books on formulas I know nothing about. For example, in the bookstore I found the book The 16 Percent Solution by Joel Moskowitz. I bought the book and read it and the next Thursday, I did exactly as the book said. Most people do not take action, or they let someone talk them out of whatever new formula they are studying. My neighbor told me why 16 percent would not work. I did not listen to him because he's never done it. •Find someone who has done what you want to do. Take them to lunch and ask them for tips and tricks of the trade. As for 16 percent tax-lien certificates, I went to the county tax office and found the government employee who worked in that office. I found out that she, too, invested in the tax liens. Immediately, I invited her to lunch. She was thrilled to tell me everything she knew and how to do it. After lunch, she spent all afternoon showing me everything. By the next day, I found two great properties with her help that have been accruing interest at 16 percent ever since. It took a day to read the book, a day to take action, an hour for lunch, and a day to acquire two great deals. •Take classes, read, and attend seminars. I search newspapers and the Internet for new and interesting classes, many of which are free or inexpensive. I also attend and pay for expensive seminars on what I want to learn. I am wealthy and free from needing a job simply because of the courses I took. I have friends who did not take those classes who told me I was wasting my money, and yet they're still at the same job. •Make lots of offers. When I want a piece of real estate, I look at many properties and generally write an offer. If you don't know what the right offer is, neither do I. That is the job of the real estate agent. They make the offers. I do as little work as possible. 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 was rude, and would 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 asks a price that is less than something is worth. Moral of the story: Make offers. People who are not investors have no idea what it feels like to try to sell something. I have had a piece of real estate that I wanted to sell for months. I would have welcomed any offer. They could have offered me 10 pigs, and I would have been happy-not at the offer, but just because someone was interested. I would have countered, maybe for a pig farm in exchange. But that's how the game works. The game of buying and selling is fun. Keep that in mind. It's fun and only a game. Make offers. Someone might say yes. I always make offers with escape clauses. In real estate, I make an offer with language that details "subject-to" contingencies, such as the approval of a business partner. Never specify who the business partner is. Most people don't know that my partner is my cat. If they accept the offer, and I don't want the deal, I call home and speak to my cat. I make this ridiculous statement to illustrate how absurdly easy and simple the game is. So many people make things too difficult and take it too seriously. Finding a good deal, the right business, the right people, the right investors, or whatever is just like dating. You must go to the market and talk to a lot of people, make a lot of offers, counteroffers, negotiate, reject, and accept. I know single people who sit at home and wait for the phone to ring, but it's better to go to the market, even if it's only the supermarket. Search, offer, reject, negotiate, and accept are all parts of the process of almost everything in life. • Jog, walk, or drive a certain area once a month for 10 minutes. I have found some of my best real estate investments doing this. I will jog a certain neighborhood for a year and look for 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 some thing 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. • Shop for bargains in all markets. Consumers will always be poor. When the supermarket has a sale, say on toilet paper, the consumer runs in and stocks up. But when the housing or stock market has a sale, most often called a crash or correction, the same consumer often runs away from it. When the supermarket raises its prices, the consumer shops somewhere else. But when housing or the stock market raise their prices, the same consumer often rushes in and starts buying. Always remember: Profits are made in the buying, not in the selling. • Look in the right places. A neighbor bought a condominium for $100,000. I bought the identical condo next door for $50,000. He told me he's waiting for the price to go up. I told him that profit is made when you buy, not when you sell. He shopped with a real estate broker who owns no property of her own. I shopped at the foreclosure auction. I paid $500 for a class on how to do this. My neighbor thought that the $500 for a real estate investment class was too expensive. He said he could not afford the money, or the time. So he waits for the price to go up. • Look for people who want to buy first. Then look for someone who wants to sell. A friend was looking for a certain piece of land. He had the money but 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 said 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 big. • Think big. Retailers love giving volume discounts, simply because most business people love big spenders. So even if you're small, you can always think big. When my company was in the market for computers, I called several friends and asked them if they were ready to buy also. We then went to different dealers and negotiated a great deal because we wanted to buy so many. I have done the same with stocks. Small people remain small because they think small, act alone, or don't act all. • Learn from history. All the big companies on the stock exchange started out as small companies. Colonel Sanders did not get rich until after he lost everything in his 60s. Bill Gates was one of the richest men in the world before he was thirty. • Action always beats inaction. These are just a few of the things I have done and continue to do to recognize opportunities. The important words are "have done" and "do." As repeated many times throughout the book, you must take action before you can receive the financial rewards. Act now!
Wednesday, April 26, 2023
Summary of the book 'Rich Dad Poor Dad'
Friday, April 21, 2023
Demo of splitlines and split (Problem on Strings)
Tags: Technology,Python,myfile.csv
student_id,student_name,percentage 1,Ram,50 2,Jim,60 3,Jack,70 4,Jones,80 5,Rahim,90Code
with open("myfile.csv", mode = 'r') as f: data = f.read() print(data) print(type(data)) # <class 'str'> data = data.splitlines() # Splits the string at line breaks and returns a list print("List of strings") print(data) print(type(data)) # <class 'list'> # Using list comprehension # data = [x.split(',') for x in data] output = [] for i in data: output.append(i.split(",")) print("List of list") print(output)
7 Problems on Operators and Variables
Python is flexible about variable declaration. You do not need to give data type of a variable at the time of it’s declaration. a=5 (We can say here that “a” stores the integer 5.) Valid:defined a variable ‘a’ and passed a value of 5 to it. This statement has three parts: 1. Variable name 2. Assignment operator 3. Variable value A program is essentially a manipulation of data. The logic is what you code. The variables hold the data. Operators act on variables.Tags: Python,Technology,Perimeter of a circle
Input: Radius (int or float) Logic: 2 * Pi * Radius Output: float Lessons: 1. How to declare a variable? 2. How to use operators on it?In Code
# Variable declaration. r is holding the radius. r = input("Enter the radius: ") # input() gives you a string r = float(r) # Type casting builtin for getting the float value of r perimeter = 2 * 3.14 * r # Computation print(perimeter)Problems
# 1 Declare two integer variables. And perform arithematic operations on them. # 2 Take two user inputs: dividend and divisor. Now perform division on them. #3 Take input. Name: Radius Calculate: Perimeter of the circle. Area of the circle. HINT: Step 1: declare a variable to take user input Step 2: declare a second variable Pi. Step 3: use the above two variables in formula to find the perimeter. #4 1. Take two integers as input. 2. Show if they are equal or unequal. #5 1. Take three inputs. Name them length, width and height 2. Find the volume of the cuboid. 3. Find the area of this cuboid. = 2*l*w + 2*w*h + 2*l*h #6 1. Take an integer as input. Name it 'side'. 2. Print the volume of the cube. 3. Print the surface area of the cube. #7 Find the area of the equilateral triangle.Solutions
x = 4 y = 9 x + y x - y dividend = 8 divisor = 2 dividend / divisor import math radius = 5 perimeter = 2 * math.pi * radius area = math.pi * radius * radius a = 7 b = 8 print(a == 8) l = 5 w = 7 h = 9 v = l * w * h print(v) 315 2*l*w + 2*w*h + 2*l*h 286 side = 5 area = math.sqrt(3) * pow(side, 2) / 4 print(area) 10.825317547305483
Thursday, April 20, 2023
Ch 2 - Operators in Python
Python divides the operators into the following seven groups:
- Python divides the operators into the following seven groups:
- Arithmetic operators
- Assignment operators
- Comparison operators
- Logical operators
- Identity operators
- Membership operators
- Bitwise operators
Arithmetic operators
Floor Division
+ And * Operators Can Act on Strings
String Concatenation using + Operator >>> x = 'johanth' >>> y = 'yada' >>> x + y 'johanthyada' String repetition using * Operator >>> x*3 'johanthjohanthjohanth' This phenomenon is over-loading of operator. >>> a = 5 >>> b = 6 >>> a + b 11 >>> a = "rakesh" >>> b = "vikash" >>> a + b 'rakeshvikash' >>> >>> a = 5 >>> b = 6 >>> a*b 30 >>> a = "rakesh" >>> b = 'vikash' >>> a * 3 'rakeshrakeshrakesh' >>> b * 2 'vikashvikash' >>> >>> l = ['rakesh', 'vikash', 'ashish'] >>> l * 3 ['rakesh', 'vikash', 'ashish', 'rakesh', 'vikash', 'ashish', 'rakesh', 'vikash', 'ashish'] >>>+ And * Operators Can Act on Lists
>>> l = ['rakesh', 'vikash', 'ashish'] >>> l * 3 ['rakesh', 'vikash', 'ashish', 'rakesh', 'vikash', 'ashish', 'rakesh', 'vikash', 'ashish'] >>> k = ['johanth', 'sonia'] >>> l + k ['rakesh', 'vikash', 'ashish', 'johanth', 'sonia'] >>>
Assignment Operators
Python does not have ++ (as in i++) operator.
If you want to increment a variable:
x += 1
Assignment Operator (Problem)
- What is the output of this program?
- x = 5
- y = 10
- x = y
- print(x)
- print(y)
Assignment Operator (Solution)
- What is the output of this program?
- x = 5 # x is the variable name. Explicit value being passed is 5.
- y = 10 # y is the variable name. Explicit value being passed is 10.
- x = y # Variable which is taking the value is on the left. X is taking the value. And value being passed is 10 through y.
- print(x)
- print(y)
10 10
Comparison Operators
Logical Operators
“and” in C++ is: &&
“or” in C++ is: ||
>>> x = 6 >>> y = x < 7 >>> y True >>> not y False >>> not(y) False >>>Truth Table For ‘and’
If both expressions are True, then it will return True.
Left Side Exp | Right Side Exp | Overall Result |
True | True | True |
False | True | False |
True | False | False |
False | False | False |
Identity Operators
Membership Operators
>>> l ['rakesh', 'vikash', 'ashish'] >>> 'rakesh' in l True >>> 'sonia' in l False >>>
Bitwise Operators
Tags: Python,Technology,Tuesday, April 18, 2023
Ch 1 - Python's builtin functions
The most commonly used Python builtin function: print()
“print()” function displays the value of argument passed to it. print(5): prints 5 print(“hello world”): prints the message “hello world” Some other built-ins that come in handy are: input(), len(), type() etc. first_name = input(“Enter your first name: ”) len(“Rakesh”) --> 6len()
It tells you the number of characters in the string. >>> len("rakesh") 6 >>> len("vikash") 6 It is also able to tell you the number of elements in a list / sequence. >>> len([1, 2, 3, 5, 7]) 5 >>> len(['rakesh', 'vikash', 'ashish']) 3
Some Numbers Related Builtin Functions
- abs() Returns the absolute value of a number
- bin() Returns the binary version of a number
- complex() Returns a complex number
- divmod() Returns the quotient and the remainder when argument1 is divided by argument2
- max() Returns the largest item in an iterable
- min() Returns the smallest item in an iterable
- pow() Returns the value of x to the power of y
- range() Returns a sequence of numbers, starting from 0 and increments by 1 (by default)
- round() Rounds a number
- sum() Sums the items of an iterator
Some Examples
Exaplanation of seeing 36 in binary form:First: quotient
Second: remainder
Return the value of 4 to the power of 3 (same as 4 * 4 * 4):
Some more examples
>>> l = [5, 6, 2, 0, 9] >>> max(l) 9 >>> min(l) 0 >>> sum(l) 22range()
Range takes three arguments: start, stop, step But start and step are optional. What does that mean? They can some default values, like: Start: 0 Step: 1 Note: Range is exclusive of 'stop' >>> list(range(1, 11)) [1, 2, 3, 4, 5, 6, 7, 8, 9, 10] >>> >>> >>> list(range(2, 20, 2)) [2, 4, 6, 8, 10, 12, 14, 16, 18] >>> >>> list(range(10)) [0, 1, 2, 3, 4, 5, 6, 7, 8, 9] >>> >>> >>> list(range(0, 10)) [0, 1, 2, 3, 4, 5, 6, 7, 8, 9] >>> >>> list(range(0, 10, 2)) [0, 2, 4, 6, 8] >>> >>> list(range(0, 10, 3)) [0, 3, 6, 9] >>>pow()
>>> pow(2, 5) 32 >>> 2 ** 5 32 Python is very flexible. In most situations, it gives you more than one way to do things.
Some Type Casting Related Builtin Functions
- bool() Returns the boolean value of the specified object
- dict() Returns a dictionary (Array)
- float() Returns a floating point number
- int() Returns an integer number
- list() Returns a list
- set() Returns a new set object
- str() Returns a string object
- tuple() Returns a tuple (tuple is an immutable list)
- type() Returns the type of an object
Type Casting Built-ins: bool()
>>> 0 0 >>> True True >>> bool(0) False >>> bool(-1) True >>> bool(1) True >>> Extra Information: Q1: Trick question about a set. >>> {True, False, True} {False, True} >>> {True, False, 0, 1} {False, True} Q2: Trick question about if-else: var = 0 if(True): print("Got True") if(var): print("In If") else: print("In Else")int() and list()
>>> int("5") 5 >>> int("5XYZ") Traceback (most recent call last): File "<stdin>", line 1, in <module> ValueError: invalid literal for int() with base 10: '5XYZ' >>> age = input("Enter your age: ") Enter your age: 20 >>> type(age) <class 'str'> >>> salary = int(input("Enter your salary: ")) Enter your salary: 5000 >>> type(salary) <class 'int'> >>> age '20' >>> salary 5000
Some Examples of Type Casting Related Builtin Functions
- We saw this in code for building a calculator:
- num1 = float(input("Enter the 1st num:"))
- Use of list() when you want to reverse a list:
Finding volume of a cube
# Variable declaration. s is holding the side length. s = input("Enter the side: ") # input() gives you a string print(type(s)) s = float(s) # Type casting builtin for getting the float value of r volume=pow (s,3) # Computation print(volume)
Some Builtins For Processing a List
- enumerate() Takes a collection (e.g. a tuple) and returns it as an enumerate object
- filter() Use a filter function to exclude items in an iterable object
- iter() Returns an iterator object
- map() Returns the specified iterator with the specified function applied to each item
- range() Returns a sequence of numbers, starting from 0 and increments by 1 (by default)
- reversed() Returns a reversed iterator
- sorted() Returns a sorted list
- slice() Returns a slice object
- zip() Returns an iterator, from two or more iterators
Some Examples of Builtins For Processing a List (Part 1)
>>> l = [5, 1, 9, 2, 4, 7] # Here, your list is a sequence of integers. >>> max(l) 9 >>> min(l) 1 >>> sum(l) 28 >>> >>> sorted(l) [1, 2, 4, 5, 7, 9] >>> >>> l [5, 1, 9, 2, 4, 7] >>> >>> list(reversed(l)) [7, 4, 2, 9, 1, 5] >>> >>> list(range(10)) [0, 1, 2, 3, 4, 5, 6, 7, 8, 9] >>> >>> l = ["alpha", "beta", "gamma", "delta", "epsilon"] # sequence of strings >>> max(l) 'gamma' >>> >>> ord('a') 97 >>> ord('b') 98 >>> ord('g') 103 >>> min(l) 'alpha' >>> >>> sorted(l) ['alpha', 'beta', 'delta', 'epsilon', 'gamma'] >>> list(reversed(l)) ['epsilon', 'delta', 'gamma', 'beta', 'alpha'] >>>
Some Examples of Builtins For Processing a List (Part 2)
Ref: https://www.w3schools.com/python/python_ref_functions.asp
Tags: Technology,PythonSaturday, April 15, 2023
Orasore Mouth Ulcer Tablet
# Provides complete treatment for mouth ulcers # Reduces inflammation, redness and swelling of mouth ulcers # Supplements vital vitamins for metabolism and digestion-aid Orasore Mouth Ulcer Tablet contains Riboflavin, Folic acid, Niacinamide and Lactic Acid Bacillus. These are essential prebiotics and probiotics that are vital for metabolism and digestion. This tablet protects, heals and relieves painful and troubling mouth ulcers. Besides, it is a safe and proven combination. It supplements the dietary requirements of the respective nutrients in the body and prevents their deficiencies and associated symptoms. Key Ingredients: Riboflavin Folic acid Niacinamide Lactic acid Bacillus Key Benefits Provides complete treatment for mouth ulcers Reduces inflammation, redness and swelling of mouth ulcers Supplements vital vitamins for metabolism and digestion-aid Good and recommended probiotic bacteria for improving gut flora Provides safe and proven action with an advanced formula Recommended by healthcare professionals worldwide Directions For Use Adult - 1 tablet in morning and evening for 3 to 5 days Children (6-12 Yrs) - 1 tablet in a day for 3 to 5 days Safety Information Read the label carefully before use Store in a cool and dry place away from direct sunlight Keep out of reach of the children
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