Rich Dad Poor Dad

Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth.

• The Road Not Taken

  Two roads diverged in a yellow wood,
  And sorry I could not travel both
  And be one traveler, long I stood
  And looked down one as far as I could
  To where it bent in the undergrowth;

  Then took the other, as just as fair,
  And having perhaps the better claim,
  Because it was grassy and wanted wear;
  Though as for that the passing there
  Had worn them really about the same,

  And both that morning equally lay
  In leaves no step had trodden black.
  Oh, I kept the first for another day!
  Yet knowing how way leads on to way,
  I doubted if I should ever come back.

  I shall be telling this with a sigh
  Somewhere ages and ages hence:
  Two roads diverged in a wood, and I—
  I took the one less traveled by,
  And that has made all the difference.

• 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.
  • Opportunities come and go. Being able to know when to make quick decisions is an important skill.
  • Life pushes all of us around. Some people give up and others fight. A few learn the lesson and move on.
  • So much of life is out of our control. I’ve learned to focus on what I do have control over: myself. And if things must change, first i must change.
  • Buying or building assets that deliver cash flow is putting your money to work for you. High-paying jobs mean two things: you’re working for money and the taxes you pay will probably increase.
  • People’s lives are forever controlled by two emotions: fear and greed.
  • It is ignorance about money that causes so much greed and fear.
  • Learn to use your emotions to think, not think with your emotions.
  • By not getting paid for our work at the store, we were forced to use our imaginations to identify an opportunity to make money.
• Lesson 2: why teach financial literacy?
  • 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.
  • 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.
  • Cash flows tells the story of how a person handles money.
  • 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?
• Lesson 3: mind your 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.
  • To become financially secure, a person needs to mind their 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.
  • Real assets:
    • Business that do not require my presence
    • Stocks
    • Bonds
    • Income-generating real estate
    • Notes
    • Royalties from intellectual property such as music, scripts, and patents
    • Anything else that has value, produces income or appreciates, and has a ready market
  • An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first.
  • There is a big difference between your profession and your business.
• Lesson 4: the history of taxes and the power of corporations
  • My rich dad just played the game smart, and he did it through corporations – the biggest secret of the rich.
  • The rich will never be taxed.
  • The rich created the corporation as a vehicle to limit their risk to the assets of each voyage.
  • If you work for money, you give the power to your employer. If money works for you, you keep the power and control it.
  • Each dollar in my asset column was a great employee, working hard to make more employees and buy the boss a new Porsche.
  • Financial IQ is made up of knowledge from four broad areas of expertise:
    • Accounting: Accounting is financial literacy or the ability to read numbers, and evaluate the strengths and weakness of any business.
    • Investing: Investing is the science of “money making money.”
    • Understanding markets: Understanding markets is the science of supply and demand, and market conditions.
    • The law: tax advantages, protection from lawsuits
  • Corporation: A legal document that creates a legal body without a soul. It’s not a building, a factory or a group of people. Using it, the wealth of the rich is protected.
• Lesson 5: the rich invent money
  • Often in the real world, it’s not the smart who get ahead, but the bold.
  • Land was wealth 300 years ago. Later, wealth was in factories and production. Today, wealth is in information.
  • Financial intelligence is simply having more options. It is how creative you are in solving financial problems.
  • Few people realize that luck is created, just as money is.
  • If the opportunity is too complex and I do not understand the investment, I don’t do it.
  • The problem with “secure” investments is that they are often sanitized, that is, made so safe that the gains are less.
  • There is always risk. It is financial intelligence that improves the odds.
  • Sometimes you win and sometimes you learn. Most people never win because they’re more afraid of losing.
  • Failure is part of the process of success.
  • You need to develop three main skills:
    • Find an opportunity that everyone else missed: You see with your mind what others miss with their eyes.
    • Raise money: The average person only goes to the bank. There are many ways that don’t require a bank.
    • Organizing smart people: Intelligent people are those who work with or hire a person who is more intelligent that they are.
  • There is always risk, so learn to manage risk instead of avoiding it.
• Lesson 6: work to learn – don’t work for money
  • Job security meant everything to my educated ada. Learning meant everything to my rich dad.
  • Most people need only to learn and master one more skill and their income would jump exponentially.
  • When it comes to money, the only skill most people know is to work hard.
  • “You want to know a little about a lot” was rich dad’s suggestion.
  • “Workers work hard enough to not be fired, and owners pay just enough so that workers won’t quit.”
  • The more specialized you become, the more you are trapped and dependent on that specialty.
  • The main management skills needed for success are:
    • Management of cash flow
    • Management of systems
    • Management of people
  • The most important specialized skills are sales and marketing.
  • In addition to being good learners, sellers, and marketers, we need to be good teachers as well as good students.
  • To be truly rich, we need to be able to give as well as to receive.
• Overcoming obstacles
  • The primary difference between a rich person and a poor person is how they manage fear.
  • Overcoming fear
    • “If you hate risk and worry, start early.”
    • 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 winner. Failure defeats losers.
    • If you have little money and you want to be rich, you must first be focused, not balanced.
    • Put a lot of your eggs in a few baskets and FOCUS. Follow One Course Until Successful.
  • Overcoming cynicism
    • It often takes great courage to not let rumors and talk of doom and gloom affect your doubts and fears.
  • Overcoming laziness
    • That’s the most common form of laziness: laziness by staying busy.
    • So what is the cure for laziness? The answer is — a little greed.
  • Overcoming bad habits
    • If I pay myself first, I get financially stronger, mentally and fiscally.
  • Overcoming arrogance
    • “What I know makes me money. What I don’t know loses me money.”
• Getting started
  • There is gold everywhere. Most people are not trained to see it.
  • Find a reason greater than reality: the power of spirit
  • Make daily choices: the power of choice
  • Choose friends carefully: the power of association
  • Master a formula and then learn a new one: the power of learning quickly
  • Pay yourself first: the power of self-discipline
  • Pay your brokers well: the power of good advice
  • Be an Indian giver: the power of getting something for nothing
  • Use assets to buy luxuries: the power of focus
  • Choose heroes: the power of myth
  • Teach and you shall receive: the power of giving
• Still want more? Here are some to do’s
  • Stop doing what you’re doing.
  • Look for new ideas.
  • Find someone who has done what you want to do.
  • Take classes, read, and attend seminars.
  • make lots of offers.
  • Jog, walk, or drive a certain and once a month for 10 minutes.
  • Shop for bargains in all markets.
  • Look in the right places.
  • Look for people who want to buy first. Then look for someone who wants to sell.
  • Think big.
  • Learn from history.
  • Action always beats inaction.
• Final thoughts: Using financial intelligence
  • Money is only an idea. If you want more money, simply change your thinking.
  • In the world of accounting, there are three different types of income:
    • Ordinary earned
    • Portfolio: paper assets such as stocks and bonds
    • Passive: real estate
  • The key to financial freedom and great wealth is a person’s ability to convert earned income into passive and/or portfolio income.
  • “Ordinary earned income is money you work for, and passive and portfolio income is money working for you.”