And then there was Lady Godiva. She pleaded with her husband, the Earl of Mercia, to lower taxes in her town. Her husband said he would lower the taxes if she would ride naked through the town.
She took him up on his ofer. Tax Advantages Taxes may be a necessity of modern civilization, but problems arise when taxes become abusive and mismanaged. As millions of baby boomers begin to retire, they will shift from the role of taxpayers to retirees and Social Security recipients. America and other great nations will decline inancially. Individuals with money will leave in search of countries that welcome their money, instead of penalizing them for having it. I sold three pieces of real estate and put them through a Section exchange under the U.
Internal Revenue Code. I never touched the money. I just reinvested it into a much larger property. As I said, not all income is equal.
Some income is much less taxed than others. I earned my million in this quadrant. Get Rich Quickly For Kim and me to go from homeless to inancially free quickly meant earning our money in the B and I quadrants.
In these quadrants, you can get rich quickly because you can avoid paying taxes legally. And by being able to keep more money and have that money work for us, we found freedom quickly.
You need to go beyond job security and know the diference between inancial security and inancial freedom. As you know, my highly educated dad was ixated on job security, as are most people of his generation.
My rich dad never talked about job security. He talked instead about inancial freedom. Many spent years in school and years on the job gaining experience. Knowledge is power, and when an opportunity presents itself, they will be prepared to act with conidence. If we had only one leg, we would always feel wobbly and insecure. By having knowledge in two quadrants, one on the left and one on the right, we tend to feel more secure. People who know about their job or their profession only have one leg.
Every time the economic winds blow, they tend to wobble more than people with two legs. Just as we study at school to learn a job, I suggest you study to become a professional investor. Legally avoiding the taxes is easy. A second path to inancial security could be: And this is what inancial security looks like for an S: he average American millionaire is self-employed, lives frugally, and invests for the long term.
Two Are Better han One Back in chapter two, I discussed how the average rich person earns 70 percent of their income from the right side and less than 30 percent from the left side.
Both are ireighters who work for the city government. Not bad for a government employee with four kids. Again, not bad for a government employee with two kids. Both friends have enough passive income from their 20 years of investing to have retired by age 40, but they both enjoy their work and want to retire with full beneits. Money Alone Does Not Bring Security I have met many people who have millions in their retirement accounts and still feel insecure.
If that money disappears and their working days are over, what do they do then? In times of great economic change, there are always great transfers of wealth. And that means getting educated now. It is the path to inancial freedom. You are free to work or not to work. Your knowledge in these two quadrants has brought you complete physical freedom from work.
If you look at the ultra-rich, this is their pattern. A quick word of caution: he B quadrant is much diferent from the I quadrant. Just as in the case of inancial security, having two quadrants gives you greater stability in the world of inancial freedom.
Unfortunately, most people choose the path of job security. When the economy starts wobbling, they cling ever more desperately to job security and wind up spending their lives pursuing it. At a minimum, I recommend becoming educated in inancial security, which is feeling conident about your job and feeling conident about your ability to invest in good and bad times. A big secret is that true investors make more money in bad markets.
On the other hand, his employees had to look for new jobs. At the farewell party, which was illed with tears, there were also undercurrents of extreme anger and resentment. Many people realized that the owner of the company had become rich while they spent all those years collecting their paychecks and paying bills.
And that job begins the moment you receive your paycheck. My rich dad used to say to his son and me that the only diference between a rich person and a poor person is what they do in their spare time.
I realize that people are busier than ever before, and free time is more and more precious. When at work, work hard. But remember that what you do after work with your paycheck and your spare time will determine your future.
If you work hard on the right side, you have a chance of inding freedom. If you have plenty of money and lots of free time, go straight to the I quadrant. If you irst develop a solid business sense, you can become a better investor.
Cash low If you have a business that is up and running, you then should have the free time and the cash low to support the ups and downs of the I quadrant. Sometimes it takes lots of capital and requires a lot of time to gain the necessary knowledge.
Many successful investors have lost many times before winning. Successful people know that success is a poor teacher. Learning comes from making mistakes and, in the I quadrant, mistakes cost money. In moving to the B quadrant, remember that your goal is to own a system and have people work that system for you. You can develop the business system yourself, or you can look for a system to purchase.
Traditional C corporations—where you develop your own system 2. Franchises—where you buy an existing system 3. Network marketing—where you buy into and become part of an existing system Each business system has its strengths and weaknesses, yet each ultimately does the same thing.
As stated before, the B quadrant requires a knowledge of both systems and people. Our decision to develop our own system meant a lot of hard work. Although it was successful for years, it suddenly went broke in its ifth year. Our system began to break down even though we had hardworking people.
We felt like we were on a good-size yacht that had sprung a leak in a location we could not determine. You May Lose Two or hree Companies When I was in high school, my rich dad told Mike and me that he had nearly lost a company when he was in his twenties. I had to build my own. Failing is part of the process of success. I had made millions and lost millions and was starting all over again when I met Kim.
Along with another partner, we built a business system with 11 oices worldwide that generated income regardless of whether we worked or not.
Building it from nothing to 11 oices took ive years of blood, sweat, and tears, but it worked. Both dads were happy for me and sincerely congratulated me. All I had to do was learn how to run it. If both the people and the system are leaky, the chances for failure are great. Before Franchises When my rich dad began teaching me about becoming a B, there was only one kind of business—big business, a major corporation that usually dominated the town.
In our town in Hawaii, it was the sugar plantation that controlled virtually everything, including other big businesses. So there were big businesses and mom-and-pop S-type businesses, with little in between. Minorities such as the Japanese, Chinese, and Hawaiians worked in the ields, but were never allowed in the boardroom.
So rich dad learned everything he knew simply by trial and error. When we did hear rumors about them, we heard they were illegal, fraudulent scams and dangerous. Rather than believe the rumors, rich dad lew to California to check out franchising for himself. His wealth skyrocketed as the idea of franchises caught on, and he began selling his rights to other people so they could have a chance at building their own businesses.
And that is the way many people learn. Most corporate management-training programs are just that—the company only trains you to be a manager. Few teach what it takes to be a B. Often people get stuck in the S quadrant on their journey to the B quadrant. Find a mentor. My rich dad was my mentor. A mentor is someone who has already done what you want to do and is successful at doing it.
An advisor is someone who tells you how to do it but may not have personally done it. Most advisors are in the S quadrant. My rich dad was a mentor, not an advisor. While you must keep your mind open, always be aware of which quadrant the advice is coming from. Managers often see their subordinates as inferiors. Leaders must direct people who are often smarter.
A traditional way of learning about systems is getting your MBA from a prestigious school and then getting a fast-track job that takes you up the corporate ladder.
An MBA is important because you learn the basics of accounting and how the inancial numbers relate to the systems of a business. You should then be prepared to leave and start your own company. Working for a successful major corporation is like being paid by your mentor. Creating your own system requires a lot of trial and error, up-front legal costs, and paperwork. Buy a franchise.
Another way to learn about systems is to buy a franchise. By buying the franchise system, instead of trying to create your own system, you can focus on developing your people. Many banks will loan money for a franchise, but not for a small start-up business, because they recognize the importance of systems and how starting with a good system lowers their risk.
A word of caution: Franchises are hard for people with an S-quadrant mentality who want to do their own thing. If you buy a franchise system, be an E. Just do it exactly the way they tell you to do it. Nothing is more tragic than the courtroom ights between franchisees and franchisors.
My highly educated dad failed, even though he bought a famous ice cream franchise. Although the system was excellent, the business still failed.
In the end, the partners fought among themselves, and the business went down. Almost daily, people come to me with business plans with the hope of raising money for their idea or their project. For a business to survive and thrive, percent of all the systems must be functioning and accountable. For example, an airplane is a system of systems.
Most of us have had a loved one die because one of the body systems failed. Professional investors tend to invest in proven systems with people who know how to run those systems.
If banks lend based only on tried-and-true systems and the person who is going to run them, then you should do the same if you want to be a smart investor. Get involved in network marketing also called multi-level marketing or direct distribution systems.
Just as with franchises, the U. It has been banned and restricted in some countries. Any new system or idea often goes through a period of being classiied as strange and suspicious. At irst, I also thought that network marketing was a scam.
After I dropped my prejudices and began researching network marketing, I found many people who were sincerely and diligently building successful network-marketing businesses. I began to truly appreciate the value of the network-marketing system.
Due to the technological advances in the computer industry, these organizations are totally automated, and the headaches of paperwork, order processing, distribution, accounting, and follow-up are almost entirely managed by the network-marketing software systems. New distributors can focus all of their eforts on building their business instead of worrying about the normal start-up headaches of a small business. One of my old friends who did more than a billion dollars in real estate business in one year, recently signed on as a network- marketing distributor and began building his business.
When people ask me how I became so rich, I tell them about the multimillion- dollar real estate transactions I do and the hundreds of thousands of dollars in passive income I receive each year from it. I then notice that some of them withdraw or shy away. We both know that their chances of doing multimillion-dollar real estate investments like I do are slim to none.
So I began to look for a way I could help them achieve the same level of passive income I developed from real estate without going back to school for six years and spending 12 years investing in real estate. By developing their own business, they have the free time to learn, and the capital to invest with me in my bigger deals.
At the irst meeting, he teaches people about business systems and people, or how to develop into a successful B. His class sizes are growing rapidly. Many famous franchises cost a million dollars or more to buy. I know much of network marketing is hard work. But success in any quadrant is hard work. I personally generate no income as a network-marketing distributor.
I researched several network- marketing companies and their compensation plans. While doing my research, I did join several companies, just because their products are so good and I use them as a consumer.
From my research into network marketing, I found two important things you can learn through their programs that are essential to become a successful B: 1.
To be successful, you need to learn to overcome your fear of being rejected and to stop worrying about what other people say and think about you. I know, because I was the same way. Coming from a small town, everyone knew what everyone else was up to.
What is most important is what I think about myself. To be successful, you must also learn to lead people. Working with diferent kinds of people is the hardest thing about business. So I endorse any network-marketing organization that is primarily committed to developing you as a human being, rather than developing you into a salesperson.
I would seek organizations that: 1. Are proven, with a successful track record, a distribution system, and a compensation plan that have been successful for years. Have a business opportunity you can succeed with, believe in, and share conidently with others. Have ongoing, long-term educational programs to develop you as a human being. Have a strong mentor program.
You want to learn from leaders, not advisors. You want to learn from people who are already leaders, who are on the right side, and who want you to succeed. Have people you respect and enjoy being with.
Too many people look at the product instead of the business system and the organization behind the product. A friend and colleague of mine who is knowledgeable in this industry reminded me about the value of time, one of our most precious assets.
A true success story in a network-marketing company is when your commitment of time and hard work in the short term results in signiicant long-term passive income. Yet for Kim and me, the experience was priceless. Today, freedom and security are found, not so much in what we have, but in what we know we can create with conidence. Since that time, we have created or helped develop a real estate company, an oil company, a mining company, and two education companies.
So the process of learning how to create a successful system was beneicial for us. Until only a few years ago, the possibility of a person becoming successful in the B quadrant was only available to those who were brave or rich. Many people stay stuck on the left side because they feel the risks involved in developing their own system are too great. Today, primarily due to changes in technology, the risk in becoming a successful business owner is greatly reduced, and the opportunity to build your own or leverage an existing business system is available to virtually everyone.
Franchises and network marketing took away the hard part of developing your own system. You acquire the rights to a proven system, and then your only job is to develop your people. Learning to invest is important because investing is the key to inancial freedom. Five things happen to people who do not invest, or who invest poorly: 1.
Learning to invest is learning how to have money work for you. Always remember the formula: four green houses, one red hotel. More green houses and more red hotels mean more cash low, less work, less taxes, and more freedom.
A simple game—but an important lesson. Rich dad played Monopoly in real life. He would often take his son and me to visit his green houses—green houses that would one day become a big red hotel, right on Waikiki Beach.
As I grew up and watched my rich dad play the game of Monopoly in real life, I learned many valuable lessons about investing. Your cash low would increase automatically with inlation and, at the same time, allow you to pay less in taxes.
I am not saying real estate is the only way to invest. I use the game of Monopoly simply as an example of how the rich get richer. A person can earn income from stocks via dividends, from bonds via interest, or from oil, books, and patents via royalties.
In other words, there are many ways to inancial freedom. Most are employees in the E quadrant working for a paycheck, or self-employed inancial advisors in the S quadrant working for fees and commissions. Remember, all con men are nice people. If they were not being nice by telling you what you want to hear, you would not listen to them. We all have something to sell. Interestingly, the vast majority of investors never meet the person taking their money.
Many workers in America simply allow their employer to deduct their money and put it into their k retirement plan, possibly the worst way to invest for retirement. I say the k may possibly be the worst way to invest for retirement for the following reasons: 1.
TIME magazine is on my side. TIME has been predicting that millions will not have enough money to retire after a lifetime of turning their money over to strangers. A typical k plan takes 80 percent of the proits. Taxes work against you with a k. You have no insurance if there is a stock-market crash. To drive a car, I must have insurance in case there is a crash. When I invest in real estate, I have insurance in case of ire or other losses.
Yet the k investor has no insurance to prevent losses from market crashes. If, on the other hand, you are rich when you retire and you have a k , you could pay even higher taxes at retirement. Smart investors understand taxes before investing. Most are employees in the E quadrant. One reason why so many government pensions and union pensions are in trouble is because these employees are not trained to be investors.
Most do not have any real-life inancial education. Only amateurs park their money. I am not saying k -type plans are bad, although I would never have one. For me, they are too expensive, too risky, too tax-ineicient, and unfair to the investor. What Is the Best Investment? Most investors invest for capital gains, hoping and praying the price of their stock or home goes up.
As long as you have more cash lowing in than lowing out, your investment is a good investment. Are you a good investor? Success or failure, wealth or poverty, depends solely on how smart the investor is. A smart investor will make millions in the stock market.
An amateur will lose millions. Tragically, most people do not think learning to invest is important. Five Diferent Levels of Investors here are ive types or levels of investors found in the I quadrant. Simply said, they have nothing to invest. I have a friend who looks very rich. He has a good job as a real estate broker, a beautiful wife, and three kids in private school.
He and his wife drive expensive European cars. When his son and daughters were old enough, they too drove expensive cars. Now, they are homeless. When the real estate market crashed, they crashed. When we were younger, this same friend made a lot of money. Unfortunately, it was his low inancial-intelligence level—zero—that caused him be a zero over the long run.
In fact, he is so deeply in debt that he is really a sub-zero investor. Like many people, everything he buys loses value or costs him money. Nothing he buys makes him richer.
Today, people are saving counterfeit dollars, money that can be created at the speed of light. In President Nixon took the U.
Today, savers are the biggest losers. Since , the U. It will not take another 40 years to lose its remaining 5 percent. As the Federal Reserve Bank and central banks throughout the world print trillions of dollars at high speed, every printed dollar means higher taxes and more inlation.
It used to be smart when money was money. Treasury bonds, corporate bonds, municipal bonds, and junk bonds. For years, it was assumed that U. As many of you know, the crisis was caused by mortgage bonds such as mortgage-backed securities or MBS, also known as derivatives.
Millions of these mortgage bonds were made up of subprime mortgages, which were loans to subprime or high-risk borrowers. You may recall that some of those borrowers had no income and no job.
Yet, they were buying homes they could never pay for. That's why you really get no tax breaks for saving money, but you do in real estate! In his mind, it's all about who owes who. The goal is to become the person that money is owed to instead of owing other people, including the banks! For most people, money is about survival. For the wealthy person, money is a game. A game that is much like Monopoly in that you want to control the assets and be the person to whom others are indebted.
This is shown in some of the common words we see on advertisements today. Things like "low-down payment" or "easy monthly payments" are immediate signs that others are trying to put you into debt. It is your responsibility to recognize these signs and not fall into the debt trap. This chapter was a little tricky to follow at first because most of us have been raised on the left side of the quadrant. We see our parents and grandparents and all of our friends in debt their entire lives and assume "that's just the way that it is..
That's cheap! I can afford that. They got the monthly cashflow into their account each month while it left mine, never to return.
The balance sheet below middle is how most I live month-to-month. My job pays me a salary. Then I pay my liabilities and then my expenses. I am starting to slowly incorporate some of the things from the balance sheet below right. I am starting to accumulate some stocks that are growing and paying some dividends.
I am also looking for real estate that will pay me rental income. As this starts to happen, I will begin moving more into the I-quadrant! Remember, this does NOT happen overnight. I have definitely made my mistakes as a speculator instead of an instead. I am continuing to work on using my mind more consistently. It sure sounds easy, but the allure of a fast dollar is very appealing to most people! Moving from the left side to the right side of the Cashflow Quadrant requires you to change internally.
Kiyosaki believes " for some people the process is easy. For others, the journey is impossible. Rich dad always told him that money was a drug. People are addicted to the way that they EARN money. Once you have become accustomed to working at a job for money, it's very hard to break away from that pattern. Today, money is necessary for survival. Food, shelter, and even water cost money. When you begin the process of trying to "switch sides", the E-quadrant part of you will fight back because the part of you that wants security will fight the part of you that wants freedom.
Kiyosaki continues by stating that if you are working to move to the B quadrant, you must build that system around your passion. Your passion will allow you to move past your fear. If you don't possess the passion or lose it before your system is created, the fear part of you will drive you back to the left side of the quadrant. Most people believe that the left side of the quadrant is more secure, but that is actually not correct. On the left side, you are at the mercy of your company or profession.
Your job could be cut or down-sized at any time. Your compensation is determined, not by you, but by someone else. The fact is that the right side of the quadrant is more secure, BUT it requires you to be able to read numbers and understand finances. Even during a market crash, a smart stock investor still knows how to make money. The inexperienced or uneducated person panics and loses most of their invested money.
Next, Mr. Kiyosaki points out that people on the left side pay to take risks while those on the right are paid to take risks. It sounds strange, but think about a person that invests money in a business by buying their stock. The person that pays for the stock is taking the risk of the stock going down. They are paying to take a risk. Now think of a health insurance company insuring you. They don't pay you to take that risk, you actually pay them when they are taking the risk. Understanding numbers is the key to moving to the right side and acquiring freedom.
The phrase "Get Rich Quick" is both true and false. You can move quickly on the right side to get rich, BUT you can't take shortcuts. You must study and learn about the ideas and concepts of the right side to grow your wealth. This chapter didn't make much sense to me when I first read it.
Like young Mr. Kiyosaki, when "Rich Dad" told him that people on the left side pay to take risks and those on the right get paid to take risks, it wasn't clear to me.
I completely fit his narrative of being afraid to move from the left to the right side of the quadrant. The thought of leaving the security of my job is terrifying thinking about all of the bills and people that are dependent on me for my income. But t he more I thought about it, the more I realized that I have to pay to take risks all the time! The TA and I have talked about our investing on this site quite often. I felt like we were at the Level 4 investor stage, but now I think we might be more at Level 2!
When he talks about true investors make money even when the market goes down, not us We are at the mercy of the market because we don't truly know how to take advantage of when a market turns and starts to drop. I took this to heart and am starting to learn about how to make money in a falling market.
Maybe the toughest pill to swallow in this chapter was Mr. Kiyosaki's points on teachers. I didn't include these in the "official" review above, but I wanted to include them here. He feels that our current education system strongly discourages people from going into the right side of the quadrant.
We stress rule following, job security, and structure in our current educational model. He strongly believes that schools should focus more on creativity, problem-solving, and cooperative tasks. I believe that we are moving in that direction, but change never comes as quickly as people would like.
He even believes that teachers can be rich. Kiyosaki really compares this to the childhood game of Monopoly.
In that game, the best way to win is by building four green houses on a property and "trading up" for a red hotel.
This is how he made his fortune. He bought small properties with his money and then "traded up" for a bigger property for the cash flow. He believes that doing what rich people do is easy.
It's not always the people that work the hardest that get rich. It's about thinking independently and doing things differently than everyone else. It's not what you do that needs to change, it's how you think. He compares it to the idea of a person setting the goal of achieving the "perfect body". They start out by going on a diet and going to the gym. That lasts for a few weeks and then they fall back into their old ways because they focus on what they have to do instead of changing their thinking.
The answer always lies within you. People always try to change everything external instead of focusing on the internal. Instead of working hard to "pay the bills", work hard to accumulate assets. Too many people work hard and buy things that make them look rich, but they aren't really rich.
They are only trying to play the part. The Cashflow Quadrant is not about being, but doing. It's about taking the action necessary to move from the left to the right side. It's getting over the fears from the left side. An E's biggest fear is leaving the security of a steady paycheck. For an S, it's them needing to give up some control to others to expand their business. Fear of losing money is the biggest cause of financial struggle for most.
Most people are afraid of taking any kind of financial risks because they don't know how to manage that risk. That is why people who make mistakes and learn from them do better than people that are afraid to even make those mistakes. He claims that this is why so few teachers are rich because they work in an environment that punishes mistakes.
He claims that people's emotional intelligence overwhelms their rational side and keeps them from taking those chances that can turn into huge successes.
So moving from one quadrant to another requires you to be aware of your internal dialogue. You must make sure that you are controlling the emotional side of your brain by using your rational side to make your money decisions. You have to move past the idea of "playing it safe" and moving to the doing. There is going to be winning and losing. That's part of life.
It's being able to handle that losing and learning from it to improve your chances next time that will help you in your journey to riches. This was another hard chapter to swallow because again Mr. Kiyosaki points out how our current education system punishes those that take chances.
He also shows how many of the most successful people in history struggled in traditional educational setting and flourished once they got into the real world. As a teacher, the biggest point most of us make about being an E is our job security.
We are still fortunate enough to have a pension once we retire, and that carrot in the future makes it VERY difficult for the emotional side of our brain to let go.
It's secure. It's safe. It's a "can't miss". But is it really the thing preventing us from taking calculated risks with our money and becoming financially free? That's a question I ask myself on a regular basis As much as the previous chapter focused on the "be", or mental part of building wealth, this chapter focused on the "do". The chapter starts out talking about the Wall Street Crash of Many people forget that the lead up to that crash was the Tax Reform Act of that caused many E and S quadrant people to lose the tax breaks that they used by investing in real estate and other limited partnerships.
The government took away from those quadrants, but the B and I quadrants were largely left untouched. Individuals on the left side of the quadrant were hurt badly in that crisis and many on the right gathered in much of that wealth when real estate prices plummeted and companies downsized increasing the prices on their stock.
He claims it was the "best of times" for the B's and I's, and the "worst of times" for the E's and S's. Those on the left side of the quadrant reacted with their emotions and fears of not having enough money and didn't have the financial knowledge or systems set up to take advantage of the huge opportunities. E's and S's are always looking for someone to blame or conspiracies as to why they "system is rigged against them. The key idea he points out is that it's on us to use that system the same way that a B or an I uses it to their advantage.
At that time, Mr. Kiyosaki decided to invest in real estate. There are five reasons he lists, but the one that he describes in detail goes along with the title of this chapter. It gave him the chance to be the bank.
It was a fairly simple process. Then he would advertise the house for sale at its appraised price and use the magic words, "Low Down Payment. No bank qualifying. Easy monthly payments. They collect the payments, which are then sent to him.
Now, if that customer defaults on their payments, he forecloses and then sells it to the next person who wants those "easy monthly payments. He created with his mind by finding a great deal! One of Mr. Kiyosaki's biggest lessons that "Rich Dad" taught him was, "Be careful when you take on debt.
If you take on debt personally, make sure it's small. If you take on large debt, make sure someone else pays for it. You invest in a property and then your tenants pay off your mortgage. He recommends that people start in the B quadrant before moving to the I quadrant. It teaches you the business sense to make smart decisions. He believes that people should start small. Kiyosaki says that while lower-, middle-, and even upper-middle-class parents teach their kids the out-of-date financial path we just outlined, rich parents teach their kids the income generation strategy of the B usiness owner B and I nvestor I categories.
While in the E and S categories you generate income in exchange for the work you do , in the B and I categories income comes primarily from assets you own. According to Kiyosaki, this is the surer path to financial freedom. People in the B category control not only a business, but a business system. If they leave, the work still gets done.
People in the B category own their business and generate income by its profit, though they no longer do the day-to-day labor of making it function. For example, when a tutor sells her expertise and teaching abilities, she is her own product and her own business, which puts her in the S category. However, when the tutor becomes the owner of a tutoring company, she owns the system that finds and trains tutors, connects students to tutors, markets the service, and takes care of logistics.
The tutoring company owner profits from the work and time of the E category tutors she hires. In the I category, investors commit money called capital to something and expect to make a profit. Instead, their livelihood comes in the form of assets that generate passive income. Examples of passive income include dividends from stocks, interest on bonds, and rental income.
Kiyosaki says the best path to wealth is to make a significant amount of money in the B category and then use that capital as an investor in the I category.
The kind of wealth that provides financial freedom is almost always generated in the I category, where it compounds without your labor. The reason B and I income is a much surer bet for generating wealth than E and S income is, as we previewed, the fact that assets are the way to compound your money without your labor.
The income you generate from assets is called passive income. While in the E and S categories, your income minus your expenses and liabilities equals the money you have to live on, in the B and I categories, your income equals passive income from your ever-compounding assets minus your expenses and liabilities.
Success in the B and I categories requires understanding a different kind of logic and adopting a different value system than the logic and value system of the E and S categories. In the B and I categories, you:.
Many people, usually on the political left, believe people in the B and I categories should make the government rich, so the government can help those who need it. Between and , about 30 Fortune companies paid nothing in U. As of fall , Republicans and Democrats in the U. Congress are debating the size of a post-Covid spending bill that Democrats, who want to spend a larger sum than Republicans, say will be paid for primarily by increasing the tax burden on the rich.
Kiyosaki argues that succeeding in the B and I categories is as much a matter of skill in business and investing as it is about cultivating the mental fortitude to stick with a long-term and challenging task: generating wealth. On the other hand, people who are fluent in money know that the best way to wealth is to be in the B and I categories, and they end up making money for themselves. Financialization of the U. Email newsletters can be a great way to learn about investing or a particular industry , or develop your financial knowledge in general.
They can also help you cut through the seemingly endless advice on the internet. Kiyosaki offers five strategies for breaking into the B category, all of which are also ways to increase your financial knowledge:. Shortform note: Research shows that having a mentor makes you better at your work, happier doing your work, and more likely to move up in your career. Strategy 2: Work for a company in the field you want to own a business in for years.
Shortform note: The company you work for today could be your competition in the future. Winning and losing are just part of the game. Intelligence is also knowing when to quit. Too often people are stubborn about pressing on with projects that clearly need to be dumped. The reason things look so risky on the right side of the Quadrant to people on the left side is because the emotion of fear is often affecting their thinking.
The Tax Reform Act of took away many of the tax loopholes that, on the left side of the Quadrant depended on. On the flip side, while folks on the right side of the Quadrant were affected, many of their tax avoidance mechanisms were left intact. Many people will look for some one to blame for their financial plight, usually this ends up being wealthy people.
If you want to be a leader on the right side of the quadrant, a historical view of economic history is important.
Add to this studying the great leaders of capitalism such as Ford, Rockefeller, Morgan, etc. Reasons Kiyosaki Invests in real estate in a depressed market:.
Financing — The banks will loan on real estate but not on stocks or many other forms of investment. Taxes — Profit from real estate transactions can be rolled tax-free into your next real estate transaction. On top of that, the property can be depreciated for even greater tax advantages.
Rent — If rent prices maintain amidst the depressed home prices you will be ensured a steady cash flow stream. Why Use Corporations? Most wage earners earn, get taxed and then spend. Whereas if you pass your income through a corporate entity first, you can earn, spend and then get taxed on the remainder.
Plan on meeting resistance when you try and structure deals custom to you needs.
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