Rich Dad Poor Dad by Robert T. Kiyosaki


Well-Known Member
I recently got my hands on a book called Rich Dad Poor Dad by Robert Kiyosaki. I've already read this book about 10 or 15 years ago, but it's time for a refresher. I remember enjoying this book immensely when I was younger. Back then, I was much more wide eyed and gullible. Not that what's shared in this book shouldn't be believed, it's just that it should be looked upon with skepticism. As with everything else in life, there are good parts and bad parts. Well, I shouldn't say bad parts. What I mean to say is that at times the premise is off. I'll explain what I mean down below.

In this post, I'll cover the introduction, which was written by Sharon Lechter. I'm assuming this is or was a friend of Robert's. In subsequent posts, I'll discuss each and every topic of the book. I'll give you an overview of what's included in the book and then I'll offer some of my own opinion of what I just shared. From what I remember, I pretty much agree with everything Roberts says. It's just a few points at which I'm at odds.


The introduction begins with a story written by Sharon. She describes how both she and her husband graduated from college with incredible degrees and both work high paying jobs. They followed their parents' advice and did as they were told. And because of their training from their parents, both Sharon and her husband are putting two of their three children through school. Their youngest isn't old enough for college yet.

A conversation ensued between Sharon and one of her children. Her son claimed that he was bored with school and that what he was learning wasn't applicable to the real world. "Look at Michael Jordan, Madonna, Bill Gates," he said. "They have minimal educations and they're filthy rich." This was the basis for her son claiming that there were more important things out there than schooling. More important things that could better prepare him for real life. Surprisingly, Sharon seemed to agree with her son. She reflected upon how one of her sons had already accumulated debt while in college and was now in trouble with credit cards. She lamented upon the lack of financial education offered in schools today.

And that pretty much summarizes the first part of the intro. And to me, there are so many things wrong with it. It's the premise that bothers me. I've heard the same thing so many times from such idiots that it makes my blood boil. Let me start from the beginning. When I'm finished here, I'll continue on with the remainder of the introduction.

First off, let's remember where we came from. It wasn't so long ago that most people on earth were starving to death every single day. It also wasn't long ago that major economies globally were tiny compared to the sizes they are today. For a parent to encourage a child to remain in high school and go to college wasn't a bad thing. It's still not a bad thing. I've got an advanced degree in business and it was one of the best things I've ever done. Yes, I could have quit like famous Bill Gates did, but compared to Bill Gates, I'm stupid. The man is so much more intelligent than I am. There's an implied cause and effect already going on in this book that needs to be dispelled. It goes like this: because Bill Gates quit college, he became a billionaire. Oh wait, let's not stop there. Let's talk about all the sports stars who never went to college or the uneducated pop stars who are now rich and famous. Yes, if you're seven feet tall and can play basketball like it's nobody's business, by all means, join the NBA and make your millions. But if you're 5'7" and can't even dribble, I suggest you stay in college. If you've got a voice that can make the young girls cry, yes, by all means, set off on tour. But if you sound like a dying chicken like the rest of us do, ummm, go hit the books.

Let's not fool ourselves. College has saved so many lives it's incomprehensible. There's only so much room out there for the truly talented and clever. Most of us are neither. To suggest that high school and higher education is a waste of time because they don't teach how to use a credit card is one of the stupidest things I've ever heard or read. Just to let you know, a 15 minute YouTube video can teach you pretty much all you'd like to know about credit cards. There's no need to take a class on it. Or quit college because of it, for that matter. And furthermore, the responsibility for educating your children about finances is up to you, the parent. Don't try to lay this on the school systems or colleges. After all, if parents don't teach their kids things, what in the world do they do? I love the implication that somehow schools are responsible for teaching all the gray areas of life. Think social studies, math, band. That's what school is for.

There's also another implication I've already noticed. It has something to do with how corporations and businesses for which we work are not worthy of us. They no longer give pensions and there's no job security. Do you realize how many families live off the earnings from these corporations? If it weren't for these big businesses, we as a society would be sitting in mud huts wondering why we're so cold. So it's disingenuous to apply today's standard of living and litany of complaints to the world that brought us all this cushion.

To lighten the mood, I'll approach the rest of the book as if only extraordinary and outstanding people are reading it. Sure, most of us are nine to fivers, but there may be a few of us out there who are ambitious and outgoing. Even entrepreneurial. It's for these people this book was written. I just wish it didn't start off with implying that somehow the system that was built for us by those extraordinary and outgoing individuals is somehow not good enough. It doesn't teach us how to use credit cards? Good lord.

What's the Rat Race?

Now this is true. I'll give Robert this. He's done a wonderful job of describing the lives so many of us live. I was part of the rat race for one year of my life and I can tell you that it was abominable. Absolutely abominable. The worst thing I have ever done. Let me explain.

After grad school, I felt as though I needed to get myself a white collar corporate job. It didn't take much for me to do and after sending out a few resumes, I landed a job at a consulting firm. At first (like the first day), it seemed okay, but as time wore on, I found myself loathing the office in which I worked. I can remember back to those days, pulling into the parking lot in my car, parking, and just sitting there looking at the building. So many times, I wanted to turn around and leave. I asked myself, "How did my life turn into this?" It wasn't until I was on the train, returning from a business trip that I realized how miserable I truly was. It was raining outside in December and everyone on the train was dripping wet in their black raincoats. It was one of the most miserable scenes I've ever engaged in. That week, I quit the job and my life has been so much better ever since. Good thing too, because the business I worked for sold a few years later and everyone was fired. So much for that.

So how does Robert describe the rat race? Like this:

A kid is born, is raised well, goes to school, graduates, goes to college, graduates, goes to grad school, and graduates. The child does exactly like he or she has been programmed to do. We'll say it's a he in this case, so I don't have to keep writing he or she. Anyway, because he did so well in school, he gets a nice professional job. He works in an office, is a doctor, or a lawyer. He begins spending his earnings and the bills begin to arrive.

The child, who is now a man, finds himself a wonderful girl and marries her. She's smart too because she's got a great degree. She works and he works. They do tons of work. As the script suggests, they decide to have a child. They do, which prompts them to move from their apartment into a house. They also need a larger car. As they continue to work, they make more money, which prompts them to have another child. And because of this, they need to sell their Honda Accord and purchase a new minivan. And a new and larger house. The thing is, now that the money is flowing and the kids are here, they need to buy big TVs to entertain everyone and take vacations because, well, that's what families do. Apparently these things cost tons of money, because the happy couple realizes that they need more of it to keep up their lifestyle. So they ask for promotions at work and get them. These promotions require more of their time. The couple also seeks additional training and education, which may help make more money in the future. They continue to work and have another child. Their incomes are rather high now, which puts them into a new tax bracket, one that takes a good portion of their earnings. The house also costs a lot in taxes. Their social security taxes rise. The tax on their new cars are high as well. So much higher than those older smaller cars they used to own. And now that their children are older, daddy needs to start saving for college educations and weddings. And everything else.

It doesn't take long for these parents to learn that much of their earnings goes to other people. Their labor goes to the companies they work for to make those companies rich, the taxes they pay go to the government, to make it (and the sleazy politicians and their friends) rich, and the interest they pay on their loans goes to the banks, which makes them rich. And the harder these two work, the more wealthy they seem to make everyone else. So what do they do? They train their children to do the same exact things they did. And they start teaching those children about colleges when they're young, just to warm them up to the idea.

This, my friends, is called the rat race. Almost everyone who is in it, hates it. But hardly anyone leaves because they've spent so much time burying themselves that they've got no other choice. They'll do it until they die and along the way, they'll teach others how to do it too. I've seen this a thousand times. It's a mentality that's difficult to figure out.

How to Escape the Rat Race?

To extract yourself from the rat race, there are a few things you need to do. Sharon mentioned some of these things in her intro, but I'll add a few more. She claimed that you'll need to learn about accounting and investing. I completely agree with her. I'll add to those though, you'll also need to learn about taxes and how to lose the guilty feeling of working less while earning more. This last one is the most important, in my opinion. I was personally raised to be a mule. A worker who never quit. If I wasn't working, I felt horrible. And believe it or not, I still do. One of my greatest enjoyments is being productive. I will tell you that I make most of my money while sleeping though. It took a long time to get used to that. I've gone away for weeks on end and had done hardly any work during that time. Upon return, I found piles of money sitting in my accounts. The trouble was, I didn't think I earned it. Somehow, I was doing something wrong. The truth is, I wasn't. It was how people made money when they weren't part of the rat race.

There are some great examples from different types of people in the introduction. These people were playing Robert's new game about finance and wealth. One of the characters was a business owner who claimed that he didn't need to learn about finance, taxes, or investing. He said that he had "people" who take care of that sort of thing. You know, accountants, consultants, and lawyers. To which Robert replied, "Have you ever noticed how so many real estate brokers, stockbrokers, and accountants aren't wealthy people?" He used the example of being stuck in traffic on the way to work and looking over to see your accountant stuck in the same traffic. It's the rat race. It's got almost all of us.

The computer programmer of the group claimed that by learning the software the professionals use, he could become rich, to which Robert replied, "You can purchase and learn as much software as you want, but that won't teach you how to apply anything to the real world." I'm paraphrasing Robert's words here and above, by the way.

I agree with Robert wholeheartedly when he says that one of the greatest disservices you can do for a child is to send him off to college to learn random topics in random classes or to learn specific skills for specific professions. He believes in a much more general (and financial) approach. Now, I have to interject here because, yes, if you would like to become a computer programmer, you'll need to take classes specific to that. Or a doctor. Or an engineer. Again, this book is targeted specifically to those who are entrepreneurially inclined. And to those who would like to become wealthy. I've never heard of a wealthy computer programmer who stayed a programmer for his entire life. It's always those who break out of the programming field to join the investing or business fields who make it rich. But really, you're not doing your child any favors at all by sending him or her to college to major in the history of Budapest between the years of 1810 and 1941. This is the type of thing they can study on their own after leaving school. There's no reason in the world to waste all that money for housing and tuition and the opportunity to learn under talented instructors for something like that. Unless, of course, your child is planning on staying in academia forever. But even that is risky. There's not much of a demand for that type of person. Employment in academia is changing rapidly. Today, one professor can teach algebra to an entire nation online. There's simply no need for 3,000 different algebra professors.

Have you ever heard anyone complain about their job? I'm guessing your answer to that question would be a resounding yes. I've heard just about everyone I've ever met complain about their jobs. They complain about all different aspects of them, but when I cut through the noise and really delve into what it is exactly they're complaining about, it always ends up being the same thing. Control. These people have absolutely no control over their destinies. They have no control over their employment either. I worked for a company once for five years and every single day I entered the building, I expected to be fired. The reason for this was that I saw a lot of people fired from their jobs in the same building. About two years in, I began using the extra time I had at my desk to build out my own business. By the time I was five years deep, I was earning multiples through my business of what I was getting paid for my regular job. That's when I quit and in over 15 years, I've yet to return to an employment position. And believe me, I've made a lot of money through the years. I would never have made close to the money I've made working for myself, working for someone else. Never.

Let me ask you a question. Why is it that some parents make every effort to send their child to college while other parents don't care that much? Sure, some parents know their children aren't college material. For these kids, either no education at all is just fine or perhaps sending them to a trade school would be beneficial. But for the parents who send their children to the best colleges possible, why do they do that? What's the primary goal? If you can't figure it out, I'll tell you. It's to find a good job when they graduate. Period. There's no other reason. If the reason was merely to become educated, we all know there are many different methods for achieving that. There are online classes today, thousands upon millions of books, tutors, apprenticeships, many things. The reason parents and children alike compete like mad to get into the very best schools is to raise employment prospects after school. And the reason they're trying so hard to get a good job is for the money. Trust me when I say this, no child who just inherited a billion dollars is going to try very hard in college, or even attend at all. I don't care who they are. So we need to be honest with ourselves when we say that kids go to school for the ultimate reward of money. And that's fine for most people, but what if your child is special? Maybe they're especially gifted and ambitious. What if they've been mowing lawns and shoveling the snow off neighbors' sidewalks since they were ten years old? What if they acquired the taste of money at a very young age? What if you see promise in them that would lead them towards wealth in the future? Real wealth. What if they're a teenager and they're already earning more than you are? Would you still send them off to college or would you seek out better training somewhere else?

The Answer

I have a challenge for you. If you've got a child in elementary or high school, have them go to school tomorrow and have them ask as many of their teachers as possible how to become wealthy. See what they come back to you to tell you. If you've got a kid in college, have them ask their professors the same thing. Heck, the next time you go to work, ask your boss and your colleagues. Ask every friend you come across. See what everyone has to say. I'll bet you $10 that you won't get one piece of realistic advice that will lead your child or you toward any type of real wealth. That's striking, to say the least. Do you know what this tells you? For all the emphasis we put on money in this world, hardly anyone knows how to make any of it other than trudging off to work every day to earn theirs through a job they most likely hate. That's pathetic, in my view. So while we see millionaires sailing around on boats and flying around on private jets, we get to sit here seething with jealousy and envy. That's no way to live.

I bet hardly anyone you ask this question to even knows what tax bracket they're in. Or what an LLC is. Or what a write-off is. Or why you'd want to start a business from home even if you've got a regular full time job. Yes, you'll get answers that come close, but nothing real. People in the rat race don't know anything about business. Now, go off and ask the shop owner on Main Street these questions and you'll find very different answers. Very different indeed.

So what's the answer? To seek out and obtain financial intelligence. Did you know that most people work from January to mid-May every single year to just pay their income and employment taxes? Did you know that taxes are the greatest expense for most people working today? Do you think it would be wise to figure out a way to lessen the tax burden on the individual? If you think you have an accountant to take care of this for you, ask yourself, why isn't he or she rich? Why isn't your lawyer already retired? Why does your doctor work such long shifts? These are all great questions and these are the things Robert discusses in his Rich Dad Poor Dad book.

I'm glad I read this book in the past and I'm very happy to be reading it again. It's good to re-motivate myself in this regard. While I'm already familiar with many of the principles Robert discusses and while I've already put many of them in action, there's always room for improvement. It's true when he says that 95% of people in the world play by one set of rules and the remainder plays by another. The trick is to learn the other set of rules. I mean, they're sitting right in front of us. We can learn them at any time.

Follow the threads and posts in this forum to stay on top of what I write next. I'll be discussing the entire book.


Well-Known Member
The Tale of Two Dads

In Robert Kiyosaki's book, Rich Dad Poor Dad, he discusses having two fathers. Of course, he only had one real father; the other father was a friend. Or a friend's father. I haven't gotten that far yet. One of the things Robert focuses on in the first chapter of his book is the duality of his two fathers. How one was rigid and educated, only to focus more on his job and prestige than earning wealth, and how the other was flexible and liberal in his approach to money. Robert's fiscally conservative father actually said, "The love of money is the root of all evil." The fiscally liberal father said quite the opposite; "The lack of money is the root of all evil." Personally, I have to agree with the latter's statement. Throughout my life, I've come to learn that those who don't make good money talk to themselves in regards to how evil money is. They say that greed is ruining the world and that money can or will never make anyone truly happy. I disagree with both of those things. If you want to experience true misery, give away all of your money and never borrow a cent from anyone as long as you live. Also, be sure to quit your job and to reject any handouts from anyone. That'll teach you a thing or two about money. And while you're living on taxpayer funded streets, think about all of the wildlife rescues that have been funded by grants and donations. And about all the money that's used to set up orphanages and hospitals in developing countries. Telling yourself that money is the root of all evil is an ignorant thing to do. Money has done a lot of good around the world. Just ask the Roman Catholic church. They're asking for it all the time. And they do charity work often.

Robert's story about his two fathers reminds me of a personal experience I've had myself. I have a father who has worked hard and who was quite entrepreneurial in his own right. I also have an older friend who was an entrepreneur through and through. Of the two, I have to say that it was my friend who taught me more about money. Or actually, more about how to earn money. Real money. How to approach earning it. How to handle it. How to love the effort put into acquiring it. Believe it or not, making money is something that needs to be gotten used to. If you ask someone who's used to their 9-5 job to do some work for you for pay, believe it or not, they'll likely reject the offer, no matter how much you're willing to pay them. With their limited view of getting paid, they, for some reason, think that the only source of money need come from their employer. Both my father and my friend made money from individuals. Clients and customers. When an offer of getting paid came about, they both jumped at the chance. It was my father who initially got my friend into the money making thing. My friend took the bull by the horns and ran with it farther than my father ever had. That's why I say it was my friend who taught me more about money.

My father's view of money had more to do with preserving it. He didn't like to use electricity or drive around in cars wasting gasoline. I don't want to say he was cheap because he wasn't. It was just that he didn't splurge very much. When he made money, he held onto it. My friend, however, would take his friends out to dinner many times a month. When we asked why he wanted to take us out, he'd say, "Because I made $2,500 today. Why wouldn't I?" My friend loved his earning potential. He loved thinking of money in a big way. He wanted more and more of it and he was willing to take on much more risk to get it than my father ever was. After hanging around my friend for a number or years, I began to view money the same way as he did. No more nickels and dimes. I began to think in the thousands and the tens of thousands. I would brush off small quantities and think big as well. That put things into perspective and it truly helped me make more money on my own. Instead of working at a business, I'd want to own the business. It changed my life.

What I enjoyed most about spending time with both my father and my friend was the same thing that Robert enjoyed about spending time with his two fathers; opposing financial perspectives. It wasn't so much about listening to and taking advice from one or the other. It was more about listening to the both of them and then making the decision that was best for me. I enjoyed learning that certain opportunity was out there to be had and those types of ideas came from my friend. My father was always far too safe to think that way. Granted, he had a family to take care of, so he may not have been in the position to take certain risks. My friend was single. But then again, so was I. Risk it was.

I sometimes wonder how I would have turned out if I didn't think the way my friend taught me to think about money. Today, my father has a good chunk of change sitting in his retirement account. That's true. My friend, however, is a millionaire many times over. He never thought about retirement. I don't know if that was a good way to think or not, but that's the way he did things. He told me that he could fill my father's retirement accounts in a month if he wanted to. And that he'd do the same for himself when the time came. Talk about risk! When I was young and when I was being raised by my father, something felt wrong about what my friend was telling me. It wasn't until I became older and made nearly $40,000 in one month with my own business that I became comfortable with his philosophies. Small money thinkers would always be small money thinkers. It's not until these people break free from those chains that they'll go after the more lucrative opportunities in life. To make money in this world, a person needs to think of opportunity at every turn. They need to work hard and to take many risks. No one ever said it was going to be easy, but if someone has a work ethic and an entrepreneurial mind, they'll go far.

Like Robert, I remember my father telling me that we couldn't afford this or that. That we shouldn't splurge on that thing because he worked too hard for the money that was necessary to purchase it. He was right, in a way. When it came to times like those with my friend though, he'd say things like, "You want it? Go get it. And then think of a way to pay for it ten times over. Do it!" There was no resting on my laurels with him. It was all action. He had a hustle and everyone knew it. I'm just glad I was along for the ride.

When it came to views, my father and my friend were very different. For instance, my father loved the fact that he was going to get a pension after he retired. He loved entitlements. To this day, he loves his social security check. He goes out to the mailbox every month to find it in the mail and he tells me about it when he does. He likes "systems." He likes fighting for the little guy. He likes unions and protection. He liked taking it easy after he got home after after work. As Robert mentioned in the first chapter of his book, his father didn't like talking about money at the dinner table. Mine didn't either. He did tell my mother about his day though. Every day.

Conversely, my friend only talked about money pretty much all the time. He was doing financial mental gymnastics on a daily basis. He never talked about the day that passed. He always talked about the day yet to come. I first began discussing business and making money with him when I was 18 years old and he was 22. By 24 years old, he had already made his first million. I think my father had been making $30,000 per year forever. It was a mindset, I learned. My friend used to tell me that people had a certain mentality about money that they'd never be free from. He was certainly right. My friend told me that unions did nothing but hold people back from their full potential. He told me that no one in the world other than me was going to make me my money. No one was going to hand it to me. That I needed to come up with ideas and to seek out opportunities. He was correct about all of those things. I have yet to find anyone approach me with an offer to get rich. That sort of thing simply doesn't happen.

One of the best lines from chapter one of Rich Dad Poor Dad is, "Broke is temporary, poor is eternal." I love that line. Robert explained that his rich dad said that to him once after a tremendous financial setback. Robert also mentioned his rich father's mentality when it came to money. About how his rich dad often referred to himself as a "rich man." And how rich men do or don't do certain things. Personally, I adore that way of thinking. I so very much dislike the entitlement mentality. I love entrepreneurs. I like the fact that his rich dad perceived himself to be something, whether or not he truly was. It was almost as if he was laying the groundwork for the day he'd finally arrive. Whether it would be the first time or again. It reminds me of how my friend often thought. He'd bring me places where the wealthy went. He so very much wanted to be one of them. I could see the desire in his eyes. Those people and those places were what drove him. He eventually became one of them and he loved every minute of it. And he worked hard to get there, that's for sure.

The thing is, his body didn't get him there. His mind did. It was the way he thought. Have you ever wondered why some of us are stuck in our situations and blame others for it while others are hustling around us succeeding? Both types of people look relatively similar, so what's the difference? It's their thoughts that differ. For whatever reason, one type of person thinks they're a loser and the other thinks they're a winner. Even entrepreneurs who have failed so often try, try, try again. I have another friend whose father tried and failed at a number of businesses. It wasn't until he got it right later in life that he succeeded. Perhaps it's something in our culture, perhaps it's something else. Perhaps parents teach their children how to become only marginally educated about money. We need to do better than that. Especially when so many of us are fully capable. We can't have talented and educated people walking around completely oblivious to how money works. Can we?

I enjoyed reading chapter one of Robert's book. It was a great introduction into how he thinks and how he developed into the person he is today. What a great read.

Here's a question for you. How do you perceive money? Do you like it? Do you think it's the root of all evil? What would you do if someone offered you an opportunity to make $1,000,000? Are you a hustler? Who taught you what you know about money? I guess that was more than one question. You get the idea. Share your thoughts below!


Well-Known Member
The Rich Don't Work for Money

A Partnership is Formed

I take issue with the title of this post. I'm reading Rich Dad Poor Dad by Robert Kiyosaki and I'm up to Chapter 2, Section 1. I have a feeling Robert will explain what he means by the rich don't work for their money, but as it stands right now, I've heard this argument before and I don't like it. I had a friend once who claimed that CEOs sat around all day with their feet up on their desks. He actually thought they did no work at all. If that's true, I wondered, how did they make it to the positions they made it to? People don't just give things away. Even fathers who found businesses will fire their children if they don't produce. And boards of corporations would trash a CEO after the first quarter if nothing came of his tenure. Shareholders...the big ones - not the friendliest of people when you start messing with their money. I do have to tell you that my friend was one of those types of people who didn't respect the brain. If it wasn't done with muscle and backbreaking labor, it wasn't done at all. So I'm not sure there was any arguing with him.

Anyway, I just finished the section where Robert asks his father how to become rich. He explained that he wasn't invited to go on a trip with some friends because he was one of the "poor" kids at school. After he asked his father the question, his father answered with some sort of riddle that went nowhere. If I had asked that very same question to my father when I was nine years old, he'd have yelled, "Get a job!" He was a simple man. Not a rich man, but a simple one. He worked hard and made decent money, but I have to say, he knows nothing of wealth, just like Robert's father knew nothing of it either. I'm not sure if it's a lack of willingness to learn with these people or just a stubbornness about what wealth is and what it means. Perhaps it's so out in left field that fathers of yesteryear didn't spend any time thinking of such things. Wealth was for those other people.

Believe it or not, I actually planned on being rich when I got older. I used to fight with my parents for not being able to afford certain items when I was younger. They'd say things like, "You think money grows on trees?" To which I'd reply, "I'm not going to have these types of problems. I plan on being rich when I grow up." I kid you not. I said that. I really did. It never occurred to me that being rich and not being rich was more than a decision someone made. It actually required the desire, the brains, and the stamina. I really think that most people who aren't rich don't have the desire. Even if a friend of theirs laid out the perfect plan to follow and guaranteed success after a few years, I bet they'd still not go ahead with it. We're a nation of lazy people here in the U.S. We really are. Obviously, there are many wealthy individuals among us, but why is it that first generation immigrants to this country make up so much of the business force and wealth creation? And why is it that second generation immigrants don't match the success rates of their parents when it comes to wealth creation and entrepreneurship? Those kids can't hold a candle to their parents. They call it Americanization. They say the kids have become Americanized. It's not that the kids are lazy, per se, it's just that their standards are higher. Those who were born in this country don't want to own a dry cleaning company, an Italian restaurant, or a home remodeling company. These kids want to be computer programmers, academics, and doctors. That's fine, but it's just those very types of jobs that will lead you straight into the rat race. You really need to work in those jobs. Work, work, work. It takes a lot to make a paycheck and those paychecks aren't as big as you think they are.

Let me give you one quick example. I was reading about Chinatown in New York City last night. If you aren't aware, it's become quite gentrified over the past few decades. The last time I visited Canal Street in Chinatown, it was thriving with small business. The entire area was run by moms and pops. The people owned the businesses and the buildings the businesses were housed in. They were extremely shrewd. What do I mean, you ask? Well, let me tell you. Apparently, Chinatown is a hot spot in NYC. A run down and dilapidated building I used to frequent for chachkies recently sold for $24 million. Yes, you read that correctly. So I'd say the people who first bought the real estate and worked hard their entire lives made out like bandits. The same thing is going on all over the place in that area. The first generation Chinese immigrants are walking away from their businesses multi-millionaires. How are their children faring? Probably just fine. They're most likely hard working doctors and lawyers. They work for big firms, make decent money, but own nothing. Does the doctor own the building he or she works out of? Probably not. It's most likely some sort of cooperative or hospital and they get a paycheck that will help put their kids through college. They're not going to walk away millionaires. Not even close. As a matter of fact, at the rate things are going in this country, there's a good chance they'll still be holding their mortgage until the day they die. It's not good.

When Robert Kiyosaki was nine years old, he and his friend Mike tried to get rich. They started up a small business making counterfeit nickels. It ran just fine until they were informed by Robert's father that what they were doing was indeed illegal. While the two young boys were certainly disappointed, Robert's father suggested they talk about money with Mike's father. Robert's father admitted that as a school teacher, he knew nothing about wealth creation, but that Mike's father had businesses all over town. He'd be the one to discuss these types of things with. Armed with this knowledge, they set up an appointment for the next Saturday.

It's fine if your life goal isn't to make as much money as you can. And to be honest, I think there's something a little different about those super rich types up in their heads. We're all obviously wired differently and making tons of money isn't in some of our DNA. It just isn't. I do think that you should consider different avenues of making money and at least educate yourself about how to become wealthy. I'm always astounded by how important money is to every single one of us, yet very few of us ever take the time to actually learn about it.

If you'd like to learn about money, I suggest you to begin by picking up a book like Rich Dad Poor Dad and start reading. I'll continue this post down below very soon.


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The Lessons Begin:

I just finished reading a section in Chapter 2, Lesson 1 of Robert Kiyosaki's book titled, Rich Dad Poor Dad. Robert and his friend Mike asked Mike's father how to make money. They wanted to learn how to become rich. Mike's father agreed to see them and when he did, he made them an offer. He'd pay them $.10 per hour for them to work three hours each Sunday at his superette, otherwise known as a deli in some parts of the country. After some hesitation, both boys agreed to Mike's father's terms. It's a good thing they agreed too, because Mike's father's deal was of the take it or leave it sort. He told the boys that he could teach them, but not in classroom style. There'd be "on the job" learning. If they didn't agree to his terms right then and there, the deal was off the table. Even though it was Sunday and even though Robert had a softball game that afternoon, he agreed to work. He did note that the pay was ridiculously low though, but what do you expect to pay a kid who's got virtually no experience and who you're doing a favor for. It was they who came to him, after all.

Arguments Against a $15 Minimum Wage

This section of the chapter (especially the low pay part) got me thinking about the minimum wage debate we're currently experiencing in this country. Back when I was a kid, I was paid $3.35 an hour at my first job. I didn't know if that was good or bad, so I took it. I was one of many children in my town who was looking for a job and if I didn't agree to the pay, they'd find someone who did. It wasn't a difficult concept to grasp. I'm not sure if I ever got paid that low again. I can remember other jobs that paid me $4 and $4.50 and then I remember getting a job about eight years later that paid me $7 per hour and then $9 per hour after I was promoted to a leadership position. I was never paid that much money subsequently until I landed my very first "real" job as an adult. And even then, I started at $29,000 per year, which added up to about $14 per hour. I was happy with that. Again, I had no professional experience, so I was in no position to negotiate. What did I have? A college degree? Who cares. Everyone has one of those.

As a kid, all of the businesses I worked for were small businesses in my home town. None of these businesses had very much money. For my first job, I was a cashier. For the second, I peeled onions. For the third, I vacuumed a floor. Nothing I did was critical, but it was nice to have me around so the owners could focus on other aspects of their jobs. They needed to sell things and strategize how to stay afloat. The last thing they wanted to do was vacuum or run the register.

I know that making more money per hour is nice. We all know this. If someone offered me $15 per hour back then to peel onions, I would have taken it in a heartbeat. If they had though, they would have gone out of business. No business back then could have afforded that. I'm not even sure the managers or owners made that much money. Times have changed though. The value of the dollar has dropped due to inflation and perhaps it's a good time to discuss raising the minimum wage to $15. I guess it is a good time because that discussion is actually occurring. Is $15 a lot? Is it not enough? I'm not sure.

Before I begin, I've got a story for you. It's a quick one. When I was a teenager, I lived in a town that was chock full of residents who worked blue collar jobs and who were primarily entrepreneurs. They ranged from electricians to landscapers to carpenters. The folks in my town did it all and we as children learned a heck of a lot of skills from friends and neighbors. Because of all the entrepreneurial spirit and a strong need for laborers, my town was a magnet for illegal immigration. Many men from Latin America traveled to the town to look for work. Early on, they came from Mexico, but as the years passed, they were all primarily from Guatemala. The houses close to downtown were virtually all inhabited by these Guatemalans. Rumor had it that there would be anywhere from 15-20 of them per house. It was crazy, but the owners of all the blue collared businesses loved it. The owners would get very hard workers to perform all sorts of labor and they'd get to pay them cash at the end of the day. The going rate was $80-$100 per day, no matter how many hours they worked. And boy did they work. These guys worked a lot and at the end of the week, they actually had a lot of money, tax free. No one was the wiser. The government never knew. No one knew, except the workers and the owners of the businesses. Back then, I can remember driving by a few different groups of immigrants standing at each corner, waiting to be picked up. When a truck stopped to pick one or two up to go to a job, all of them would swarm the passenger side door trying to get in. Only the strong survived and made it inside the truck.

Now, I may have been young, but I wasn't stupid. I can vividly remember driving by with my father one time. I said, "Hey dad. Check it out. All of the workers are out again, waiting to be picked up to work." He didn't like the idea very much. He just nodded and kept on driving. He thought they were being taken advantage of by their "employers." I said to him, "What do you think these Guatemalans will be doing in ten years? I mean, aren't they basically being trained to do the jobs of their bosses?" My father paused at that question. Apparently, he had never given that sort of thing much thought.

I can remember hearing stories about how certain workers were eventually being sought after because they had gotten so good at what they were doing. And then I remember hearing stories about how some of the workers stopped working for their "employers." I also remember hearing stories about how the Guatemalans were beginning to compete with the blue collared workers who were once their bosses. And then about how they were getting the jobs their bosses used to get. And then about how their bosses were going out of business because of all the added competition. Apparently, I was right. It didn't take long for these "apprentices" to catch on to what they were doing, learn a little English, and then steal a whole heck of a lot of jobs. As you can imagine, the town didn't like this at all because so many of the immigrants were living in each house and none of them were paying anything in tax. Real businesses were going under and families were forced to leave town, which created a hole in the tax base for schools, roads, and other things, but that's a story for another time. My point here is, just because these laborers may have seemingly been taken advantage of at one point, they treated their experiences as learning opportunities. Back in their own countries, there were no opportunities like the ones they found in my home town. They took those opportunities and made the best of them. And then they made some good money.

I'm not all in on the minimum wage debate. I think raising the minimum wage will have negative consequences. I do think there should be a minimum wage, but I really do think it should be kept to a minimum. Many jobs here in the U.S. are great for learning. I don't think many of them are meant to be careers for people. I've never heard of a person taking a $7 per hour job and intending to work it for the rest of their life. Granted, it does happen, but life is long and if someone works a $7 per hour job for 55 years, it's not far fetched to say that they bear some responsibility for that. Opportunity abounds and upward mobility can be found around every corner. I've had many adults in many of my college classes. These people were training themselves for better jobs and ultimately, better lives. It is possible. No one is "stuck" for 55 years.

Let's get into a few of the reasons I'm against raising the minimum wage to $15 per hour.

1. It would force small businesses to fire people, which would raise unemployment levels. There is no disputing this. It's what I like to call a fact. I know that word is thrown around a lot, but it doesn't take a rocket scientist to watch as a small business down the road from them fires two of their five employees because they can't afford the labor costs anymore. Labor costs are very real and for most businesses, it's their largest expense. Many businesses around this nation are mom and pop shops. Can you imagine owning one of these businesses and having your labor costs virtually double? What would you do? From what I hear, you can either close down completely or fire some of your workers to pick up the slack yourself. Many of the people gunning for these wage hikes have never owned a business. I dare you to find one business owner who would advocate for this type of thing. The reasoning for not wanting something like this isn't because the business owners are greedy and evil, it's because it doesn't make economic sense for their own store and the economy as a whole. And the trouble is, the wage hikes have already had very negative consequences. Many businesses have had to either fire some employees or close down completely.

2. It causes more poverty. I forgot to mention a few other negative consequences for raising the minimum wage above. There is actually another option for those business owners who are being forced to raise wages for their employees. They needn't fire them. They can always cut their hours. So someone who used to work all day can now work a meager two hours per day. So someone who used to be full time is now part time. Yes, they'll make more per hour, but they'll work less, which will ultimately reduce their paychecks and most likely, benefits. Also, because of the increased production costs as a whole, due to higher labor costs, products will cost more. The politicians didn't think businesses wouldn't pass on the expense, did they? Now, when the employee goes to the store to buy a new pair of pants or a gallon of milk, they'll spend more than they ever have. Their wallets will thin out rather quickly.

3. It would cause businesses to close. Some businesses simply can't operate with fewer people. They also can't bear the costs of a more expensive labor force. If a shoe factory employees 100 people at $10 per hour each and is forced to raise each employee's pay to $15 per hour, they may very well go under. This is another one of these pesky facts. Dollars and cents don't lie. Of course, the factory could always increase their product cost by the same rate, which will most likely force their buyers to look for sellers overseas. With cheap goods pouring in from China and India, I'm not sure whose idea it was to price the American market right out of competition. I'm also not sure whose idea it was to create ghost towns out of areas where factories used to be.

I've never liked the idea of having a high minimum wage, but that's just the business side of me talking. I invite you to prove my argument wrong. I actually welcome it. If you've got information that I'm missing, please share it down below. I'm on the fence with many of these types of issues, so I'm completely not against some form of enlightenment.


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Waiting in Line on Saturday

We've got a real problem in this country. I'd called it being entitled. Do you know what entitled means? It means that someone believes they are inherently deserving of privileges and special treatment, merely for being them. Entitled people come in all shapes and sizes. Rich kids who inherit their parents' fortune somehow think they're better than everyone else, even though they did nothing to create the fortune. People of certain nations think they're inherently special, merely because their government borrows so much money, there's an illusion of wealth. Union workers think they're important to management, just because there's an organization behind them that will stand up for them during a dispute. For each of the examples I just gave, no one individual was deserving of how they felt. Like leaches or parasites, they derive their feeling of importance from others. They walk around with head held high, saying, "Look at me. Notice how important I am." Meanwhile, as individuals, they've done very little to contribute anything of consequence. They were replaceable. Expendable. Do you want to know who really is special? The parents who earned the fortune. The banks who created a system of national debt, and the individuals or very small group who thought of and followed through with creating something called the union. It was never the little guy. The worker bee. No matter how much he or she thinks it was.

In this section of Rich Dad Poor Dad, Robert met with Mike's father in regards to his meager pay. Mike's dad was only paying Robert $.10 per hour to work three hours each weekend. By the third weekend, Robert had had enough and was ready to quit. That's when Mike's father met with him. When they met, Robert explained how he was being exploited and how he'd quit if he wasn't being paid better. That there were child labor laws and that he deserved more. Robert called Mike's dad a cheapskate and a thief. He said he abused people. Robert blamed Mike's dad for all of these problems. He said that he was ready to walk if he wasn't treated better. That Mike's dad hadn't even taught him anything, as was promised.

"Oh, didn't I?" he asked. During this conversation, Mike's father explained that most lessons in life aren't learned by lecture or by reading. They're learned by life itself. He said that life "pushes us around" and that all types of people react to that pushing in different ways. Some people blame and fight with those who they perceive as the pushers and some slink away in shame. Some fight to change the system while others create a new system. The point of the entire conversation was that Robert had fallen for what most people fall for. He perceived abuse so he looked towards the closest person or thing he felt was abusing him and he argued with it in an effort to change it. The fact is, he should really have been trying to change himself. It's a mindset he fell into. A mentality. It's a negative cycle of playing the victim that leads to an unsatisfying life. Mike's father tried to teach Robert how easy it was to fall into this trap. Robert fought him on this lesson for a while, but ultimately agreed that by changing himself instead of the situation he was in, he could avoid similar types of situations that were sure to spring up for the rest of his life. Once a complainer about circumstances, always a complainer. Don't fall for it. Snap out of it. Be better than it. Sure, there are many organizations around the earth that would love to keep you an unsatisfied complainer, but that's how they derive their power. Ignore them and move on. Political groups and unions are two such organizations. I've never met a happy union worker or political constituent.

Would you care to learn who broke away from the mundane existence of normalcy to become extraordinary? Ask yourself, did any individuals in the list of people below quit one lousy job they felt didn't pay them enough to jump into another they'd eventually complain about? I don't think so. These people are winners who didn't try to change their bosses or ask for raises, they became the bosses and gave raises. These are the types of people Mike's father was referring to in this section.

Peter Thiel
Elon Musk
Bill Gates
Henry Ford
Walt Disney
Richard Branson
Steve Jobs
Larry Page
John D. Rockefeller
J.P. Morgan
Andrew Carnegie
Cornelius Vanderbilt

This is obviously a very short list of extraordinary people. These and those like them are the ones who shaped the world we live in. These are the people who created the systems that benefit us so much. Some will look at the names in this list and say, "These are selfish and greedy men." The folks who say something like that have fallen for the negative mentality. They're the victims. Whether it's been taught or inherited, who knows. Depending on how old they are, there may be no return from that way of thinking. If they're young enough though, they can still be educated to say something quite the opposite. Something like, "Wow. How do I become great like these people?"

I'm looking forward to the next section of this wonderful book. I like the way Mike's father thinks and how Robert writes. It's an entertaining spin on an otherwise boring topic.


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"The poor and the middle class work for money." "The rich have money work for them."

I will tell you that it's uncanny how this book makes me feel so many years after I read it the first time. Back then, I was younger and I read it because I wanted to learn its lessons. Today, I'm older and as I go through line by line, I find how true rich dad's words truly are. It's so crazy how so many people absolutely refuse to learn anything other than what they already know about money, which isn't much. I've got family and friends who plod along every day working for the man. Doing their best to make ends meet. Just bouncing from job to job to job, pretending that that's what life is about. I get so frustrated when I think of people like this because I know they'd all like to work less and earn more. Frustrated indeed. But they'll never change because that's just the way they are. It takes a special type of person to break free. Some try, but they almost always fail. People really are destined to complain for the rest of their lives. I've heard it so many times. They wish they can change, but for some reason, they can't seem to get there.

Just this morning, I was talking about a guy I know who recently told me that he didn't have enough money to invest. I said, "Yeah, but all you need to do is put a set amount into your account weekly or monthly. Put it on your calendar or set it up so it gets done automatically." He replied, "I would, but I just don't have the money right now." His response made me want to scream. For the life of me, I can't understand why he refuses to comprehend how investing works. I suggested a high dividend ETF for him to purchase and to keep on purchasing. For every dollar he puts in, he receives a quarterly dividend. If he began investing a decade ago, he'd probably be making more money from dividends right now than he would be making pay from his job. But no, he just can't see it. Yet, he's more than happy to go on vacation and pay for random junk he doesn't need on a daily basis.

Anyway, in this section, Robert continued talking with Mike's father, also known as Rich Dad. Mike's father explained that making real money takes energy, passion, and a real desire. And that if Robert had been happy with the $.10 he was getting paid, he'd be a lost cause. He explained that for most people, fear guides their financial decisions. I don't know about you, but I can't remember the last time I saw someone who was scared of losing money, make a lot of it. For most people though, the fear of getting fired or losing money in the market or in a business venture all but paralyzes them. Part of this is because they've overspent so much that they've left themselves little wiggle room for when they might need it. If the bills are piling up and if terrible and catastrophic things will happen if they're not paid, then I'd say there's a problem. Being in that type of a situation is terrible for learning about financial freedom.

Another conversation I had recently was about a man from my home town who won millions in the lottery about 20 years ago. I remember the story well. He won so much money that he went on multiple shopping sprees, bought a new house, new cars, and pretty much anything else he could get his hands on. Guess what happened. About ten years later, he had to file for bankruptcy. It's maddening to think about something like that happening and to be honest, I'm not even sure how it can. You have to be a real genius to be forced into bankruptcy after winning the lottery, but believe it or not, it occurs often. It. seems that the more money certain people make, the more they go broke. I've seen this sort of thing out there too.

I'll tell you one thing; it's pretty easy to get a job and work for money. You see almost everyone do it on a daily basis. The mantra is, graduate high school, go to college, get your education, get married, buy a house, buy a car, have kids, send them to college, rinse and repeat. And all the while, train those kids to do the exact same thing you're doing. And also all the while, complain the entire time about job security, how the job is terrible, and about the lack of funds you have. I don't even need to write this sort of thing here because it's such a popular lifestyle. I dare you to tell me everyone you know isn't doing this. You can't because they are. We all know this.

Let me give you a taste of what a sliver of financial education feels like. Did you know that right now, you could buy an ETF that will pay you 4% per year in dividends? It's a very stable and risk averse ETF that's full of blue chip stocks. I know what you're thinking. "Okay, that's fine, but what's that going to do for me?" I'll tell you what it's going to do. When it pays you the dividends, you'll have more money in your pocket that you didn't have to work for. Also, that money from dividends is considered what the IRS refers to as unearned income, meaning, you don't need to pay payroll tax on it. You know the 15% tax that comprises social security, medicare, and FICA. Also, did you know that if you hold on to this ETF for more than 60 days, all of the dividends are considered qualified, meaning, until you make $40,000 per year, you don't pay any tax on them at all. So here's the situation: you work for a good number of years, all the while building up the number of ETF shares you own. A day comes where you make $40,000 in dividends per year. You quit your job and live off of those dividends. At the end of each year, you file your taxes and your tax bill is $0. You don't pay one dime in taxes. Not even payroll tax. Crazy? Surprising? Yes. I learned this after about ten minutes of reading a few years ago. People, this stuff isn't rocket science. You just need to have a bit of financial curiosity. Will you take action on what I just informed you of? I bet not. No one does and I've told multiple people the same thing. This is why I get so frustrated. People want money and after I tell them how to get it, they give me blank stares.

I have to tell you that probably the best way to learn about money is to start your own small business. That'll get you out of the rat race and into the field of business and financial education. The moment you do this, you'll also change as a human being. You'll begin to realize how badly others are running their lives and you'll understand what it took for your bosses and other entrepreneurs to get things going. Other things you should dive right into learning are taxes and investing. These two things can save and make you enormous quantities of money down the road. Owning a business will hopefully put the brakes on your spending too. You'll have a renewed appreciation and respect for money and paying taxes. You'll learn that your taxes are actually your biggest bill every week, month, and year. You'll come to loath them and you'll watch as they're wasted by our local, state, and federal politicians. Until you write a check for payroll and estimated taxes that come right out of your bank account every month, you won't appreciate any of this at all.

What's the worst part of everything that I've just shared above? It's the fact that not one iota of it is taught in grade school or college. Not one iota of it. Wait, actually, that's not true. I had an accounting professor in college once who said, for about a minute and a half, that we should all open small businesses out of our houses because there are tax benefits for doing so. He seemed to be eager to teach us about that, but because no one gave any sort of a hint of interest, we continued on with our curriculum lesson. Honestly, when taxes are pulled out of a paycheck, you don't feel the loss. It's only when you have to actually write a check for them that the concept hits you right in the heart.

Okay, back to the story. Towards the end of the section, Mike's father asked Robert if he wanted to continue working and learning. Robert said yes and then Mike's father said, "Good, but I'm not going to pay you anymore." Of course, Robert was appalled by this and complained about how horrible it would be to do the same work, but now for not even the measly $.10 per hour. Mike's father was steadfast though and claimed that he would teach Robert how to not work for money. He said that Mike was already working, so Robert better get going. He said that if Robert got used to the paltry pay, he'd be looking for that sort of thing for the rest of his life and that was exactly what he should try to avoid. Mike's father explained that money, and especially more money, was never the answer. That it was a frame of mind or a mindset. The lesson of the section was that if you'd like to make real money in your life, you'll need to learn about it and use your head. I wholeheartedly agree.


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Lesson #1: The Rich Don't Work for Money

This section was a short one. It basically described how Robert and Mike continued working for three more weeks without pay. At the end of the third week, Mike's father arrived and brought both boys across the street into the baseball field. There, he asked if they had learned anything yet. Neither of them replied in the affirmative. And that was pretty much it.

As I read this book, I keep trying to think back to what it was about. I suspect I recall the big picture, but I forget the details. It's been decades after all. Having Robert and Mike work for free to learn a lesson does bring something to mind though. I'd like to mention that here briefly.

Do you find it odd that parents will spend inordinate amounts of money to send their kids to college and during or after the child's graduation, that child (or young adult) will hope to land an unpaid internship to gain experience, but once the time comes to get a paying job, all anyone cares about is how much money will be made? It's rather remarkable how the tracks are shifted so quickly, as if the child has learned as much as there is to know and from that point on, they're worth every penny that they'll ever get paid.

In many blue collar fields, younger and newer workers get paid peanuts. For instance, when it comes to being an electrician, an employee must begin as an Apprentice and work in that position for years. Usually around six years. They get paid less than a Journeyman would and certainly less than a Master would. The goal of an Apprentice is to learn. To gain the necessary knowledge to become a Journeyman. They know the pay is lower, but they continue on in hopes of brighter years ahead. And on top of the lower pay, they get stuck with doing the grunt work that no one else wants to do, such as digging ditches and working in frigid temperatures.

Back in the old days, this is the way things would work. Life was an experience builder, where workers would learn under others to one day become one of those "others." It was all about continuous learning and the more learning a person could get under their belt, the better.

Knowing this, I oftentimes ask myself why so many people these days is so hell-bent on getting paid. Yes, they need money, but what they need more is knowledge. And if knowledge is so important and so linked to future success, why aren't more people willing to put the time in to get it? If money were the only object, I suppose that getting the cashier's job at the local Dollar Tree or Walmart would be fine. Don't expect anyone to listen when these people start complaining about the lack of pay a few years down the road though. When that happens, someone is bound to ask, "Well, how much time did you put in?" When the answer is, "None," everyone is going to walk away from the complainer. And as they walk away, they'll likely say something such as, "Get a life. Stop complaining. Go learn something new that can make you more valuable to someone else."

I don't know. This and the preceding sections of this chapter made me think about how people are so willing to fork over a fortune to learn something at college, yet are so adamant about their level of pay after graduation. Especially since everyone knows that recent college grads are pretty useless. Right after I graduated from college, I didn't even know how to handle my first real business call. I was pathetic.


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Avoiding One of Life's Biggest Traps

Fear and greed. The beginning of this section covers Mike's father offering the two boys $.25, $1, $2, and finally $5 per hour to do the same work they had initially done for $.10 and then nothing per hour. Weeks earlier, Robert had complained to Mike's father (rich dad) about how little he was getting paid. After that, he agreed to work for no money at all. And now, he was being offered $5 an hour to do the same thing, yet both Robert and Mike turned the offer down. Mike's father was testing the two young boys and they passed because neither of them accepted the money.

Mike's father claimed that their denial was a good start. That they had turned their focus from making an hourly wage to learning about how money works. About how they could free themselves from the trap so many others had fallen into. Mike's father said that fear was the primary motivator for people to wake up every morning and trudge off to a job they hated. Fear of being penniless. And then once these workers began making a bit of coin, they became greedy and wanted more. More money to go out and buy all the stuff they lust after. Mike's father described the cycle of making money to buy stuff to making more money to buy more stuff as the rat race. He said that so many people are trapped in the rat race and they hardly any of them knew how to get out.

The next part of this section I found very interesting. Mike's father said that fear of not having money is what keeps people going to the jobs they hate. That fear paralyzes them and makes them do things they wouldn't ordinarily do. And what's worse is that many people lie to themselves about it. They say things like, "Well, I have to do it for my kids." Or, "Well, this is the way life is. There's nothing I can do about it." Or, "My parents made good lives going to work for someone else like I am." They never acknowledge their fear of going broke, so their emotions keep them running on autopilot.

Have you ever met anyone who felt like they didn't have enough money, yet they refused to change how they behave? They kept doing the same thing that put them in their position and if someone gave or lent them some cash, they'd treat it like a fix. As if someone just gave some drugs to a drug addict. These people are all over the place. They absolutely refuse to think about anything other than making that next buck and because of that, they never see the paradigm they're stuck in. And because they can't see, they don't change. Yet, if they learned a bit about how money and taxes work, they actually make more money. It's frustrating to see.

Neurotic. That's now Mike's father described those who have amassed giant fortunes born out of fear, only to fear losing their fortunes more than they ever feared losing their money when they were poor. He said that more money doesn't necessarily calm or sooth one's soul. More money can actually make their fear worse than ever.

So basically, he's saying that the fear of being poor is the primary motivator of a person getting off their duff to go out and make some money and that greed or desire is what keeps people coming back for more. It's these two emotions that essentially turn a free human being into a slave of money. They find that they can't live without it because it's those two things that control them. Obviously, people need money to survive, but if emotions control the earning of that money, the chasing of the money will always control the person. Mike's father simply wants the boys to learn how to control their emotions and not let their emotions control them. Because, as you may have noticed, people make horrible decisions when they're based on emotion.

Mike's father continued on talking about how desire is just as bad as fear. That it's what keeps people motivated to make more money - so they can buy more things. Whether they be nice houses, fast cars, or beautiful furniture. Money can easily control when those people do a lot of shopping in their minds. If they continue to think about all the wonderful things money can buy, they'll likely do whatever is necessary to earn their money, even if that means a slow degradation of values and pride. You may have seen this type of thing out there. An employee begins a job and is perfectly content being a simple worker. One day, they're offered a raise and a promotion. They gladly accept both, but come to realize that their new position requires them to fire some of their once colleagues. They don't like doing that, but they do it because they've already purchased a new bedroom set and plan to send their child to a better college than they anticipated. Time goes on and they accept another raise and promotion, but this time, it involves closing an entire division, costing thousands of jobs. They go along with it. The cycle continues because of where they put themselves with their spending. There really comes a point where the company would be able to make that employee do whatever they asked. This is the power than the fear of being broke has. It's also the power that desire has. If there's no control over these things, people will do pretty much anything.

Now, this isn't to say that fear and greed/desire shouldn't exist; they absolutely should and must. We can't get rid of those two things. A person should realize what those two things are though and realize when they're getting out of control. When a person thinks with their mind as opposed to their heart, they can make better decisions. They can ask themselves if there's a better way to live than they're currently living. If there's a better way to make money. To sleep at night. To pay their bills. To take back control of their finances and emotions.


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Seeing What Others Miss

I think once a person begins to see opportunity, he or she never really stops. It's just part of the entrepreneurial spirit. This used to be the way it was before the internet arrived, but since, it's spread like wildfire. People who would never have become business owners are now just that. They look at money completely differently than they ever have and they see ways to monetize almost anything. Writing a story (or a post like this) can eventually be turned into a profit making machine. Taking pictures, videos, playing video games - doing almost anything. We were all destined to be employees at one time, but ever since the concept of being an "internet professional" rolled around, small business has been humming along and a fast pace.

This is the last section of this part of the book. Mike and Robert continued to work at Mike's father's store for nothing. Mike's father told the boys that once they stop thinking of only working for money, their focus would change. That they'd see opportunities like that never had before. And sure enough, a few weeks after that conversation, Robert saw an opportunity.

One day, Robert noticed that the woman behind the counter of Mike's father's store was cutting the covers off the comic books that didn't sell the previous week. She was removing the covers to give them back to the comic book dealer for credit. When Robert asked the dealer if he could have the coverless books, the dealer agreed, but only if Robert promised not to sell them. Robert promised and a venture began.

For weeks afterward, Robert and Mike collected hundreds of comic books from the store. Once in hand, they kept them in a room at Mike's house and charged kids around the neighborhood a small fee to come in and read them. Since they weren't selling any of the books, they were abiding by Robert's promise. And since the service was becoming popular, Robert and Mike were making money. They were averaging around $9.50 per week, which was big bucks back then. Robert was happy with this because they were using Mike's sister as an employee and neither he nor Mike had to be there all the time. They were essentially making money for no work.

Eventually, a fight broke out in the comic book room between some kids from another neighborhood and some local kids, so Mike's father suggested the two boys shut down their business, to which they agreed. I guess things were getting too hot. Mike's father had new lessons to teach anyway, so Robert and Mike were allowed to stop working at the store as well. On to bigger and better things.


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Why Teach Financial Literacy?

Do you know what an asset is? I mean, do you really know? Would you say that your house is an asset? I would. I'd be wrong though. Houses are actually liabilities because they earn no income. Now, if you own a house and rent it out for profit, then it'd be an asset, but not before. All houses are, in general, are bills to be paid. Most of them are giant money pits.

Many people don't know much about money or finances. It's actually a wonder they ever get by. I suppose many of them don't, considering how many bankruptcies are filed each year in the United States. On average, there are about 750,000 non-business bankruptcies filed in this country annually. In 2004, there were just over 2,000,000. To me, this is an absolute shame. I'm tempted to say the reasons for this all have to do with the mismanagement of finances, but I know better than that. It's also because of the addiction to spending. Some people spend every last dime they own, no matter how much money they make or have. And no matter how much they know about money. They could be financial geniuses; it wouldn't matter. Money burns very large holes in the pockets of these types of people. For the rest of them though, going broke really is a product of ignorance. And not becoming wealthy is an even bigger product.

I'm reading Chapter Three, Lesson Two of Robert Kiyosaki's book called Rich Dad Poor Dad. I just made it through the very first part. This section is called Why Teach Financial Literacy?, so it'll be getting into a more nuts and bolts approach to this type of education. Enough of the railing on almost everyone out there for not doing enough or learning enough about wealth and poverty.

This short section talks about how Robert's friend Mike took over his father's empire and how Robert retired from real work in 1994. He uses a tree as an analogy for his wealth. He says that in the beginning, he had to water the tree and tend to it to make it grow, but now, the tree has rooted far enough down to grow on its own. He says that his retirement doesn't really mean he's not working at all; it just means that he can either work or not work, depending on what he wants to do. I guess that's what you call financial freedom. If you asked anyone on the planet if they'd like that type of freedom, I can guarantee that 99.9% would say yes. And that other .1% is just crazy. Of course we all want financial freedom. Who wouldn't? Personally, I wouldn't want to stop working, because I actually love it, but just knowing that if I wanted to take a day off to mess around, I could, without any serious financial consequences. Can you imagine how great that would feel?

I'll be discussing every section in this lesson down below. Beware, there will be a lot of discussion about assets, liabilities, income, and expenses ahead, so brace yourself. If you've ever taken any accounting classes in college, this should be a breeze. Unlike those accounting classes though, what I'll discuss will be much more reality based. Onward and upward.


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The Richest Businessmen

I'm at a mental impasse here. I'm reading the next section in this chapter and while I appreciate Robert's sentiments when it comes to the importance of financial education, I honestly don't think it's that easy to change people's behavior. You can train someone to understand how money works until you're blue in the face, but they'll hop right back in their $70,000 Chevy Suburban and drive off to grab a Whopper from Burger King when you're finished. Sometimes, it really doesn't matter how educated a person is about their finances. Because they're addicted to spending, they'll always remain on that hamster wheel of working to earn. Earning to spend. Rinse and repeat. They'll never get ahead because they really don't want to badly enough.

I've come to conclude that there are very different types of people in this world; those who love to work and those who don't. Those who covet their money for the pure joy of coveting it and those who want money because of what it can buy. First off, if you don't love to work, you'll eventually spend every last dime of any amount of money you manage to obtain, no matter if it's from an inheritance, lottery winning, or job. If you're lazy and you don't see the value of being productive, you'll be the cause of your own undoing. However, if you're a hard worker and you do see the value in productivity, then you'll also value your earnings, no matter where they came from. There's a link between those two things.

I happen to be one of those types of people who likes to sit in the dark and count my gold. I don't have an appreciation for what money can buy, I have an appreciation for the fact that it merely exists. I'm on the production side of things. Work to earn and that's it. Set up a passive income structure, make my money, and that's it. Once I have it, I like to keep it. Hide it. Store it in the walls. I'm very miserly in that regard. When I make money, I don't run out to the mall to spend it. I don't run down to the car dealership to throw my money at them. When I need to buy something, I think about that purchase for far longer than someone normally would and then I hesitate again and again. This type of thinking usually gets in the way of the actual purchase, which is exactly what I want. I don't want to spend. I like to keep what I make.

Not many people are like me. There are far too many folks out there who hear the whistle blow on Friday afternoon, grab their paycheck and hightail it off to the bars. They spend all their money and are left penniless, again.

My point is, no matter how much Robert says that financial education is key, it really isn't. What's key is the motivation and the drive to be productive and miserly. Those two things lead to wealth. Don't believe me? When was the last time you spoke to someone who said, "Yeah, I don't do any work and I spend everything I get my hands on." and they were wealthy? How about never. And combinations of these options aren't any better. Someone can be totally productive, yet spend all their money. Big houses, vacations, cars, husbands, wives, kids - all these things eat up anything and everything a person makes. On the flip side, someone can be lazy, yet cheaper than anyone else out there. They're still broke because they don't want to produce, which doesn't translate very well into making money. It's only when someone is productive and cheap. That's it.

Okay, let's forget about the non-productive spenders for a moment and just focus on those who are like me. For us, is financial education the key? In this case, I'd say yes. For people like me, we may already be productive and cheap, but we're not getting very far because we don't know how the system works. And in this case, Robert's book titled, Rich Dad Poor Dad is instrumental.

There are a few concepts Robert discusses in this short section. First, he says that it's not how much money a person makes that counts, it's how much money they keep that matters most. I have to agree with him. Again, we've all heard stories of that guy who drives around in a brand new Corvette because he's making an insane amount of money one day, yet, for some reason or another, he's going bankrupt a short time later. People who make a lot of money and spend a lot of money have a tendency to live just on the edge of their earnings. And more than likely, they enjoy borrowing money. So really, no matter how much they make, they'll never be satisfied and once their expenses catch up and overtake their income, they're dead in the water.

Another concept Robert discusses has to do with building a strong financial foundation. If a person has a strong foundation, they can weather the ups and downs of life, the market, their income, anything. But they need to put the work into earning, knowing where to invest, knowing how to save, and remaining well diversified. Robert talks about the Empire State Building. In order to build that building, construction workers had to dig multiple stories down into the earth. They had to hit bedrock. The foundation needed to be sound. Once the foundation was set, it could have supported almost anything. If the construction workers had poured a thin concrete slab on regular soil and tried to build the Empire State Building on top of that, it was have sunk or fallen over or both. It wouldn't have been pretty.

My opinion is that you need to build a strong foundation, such as the Empire State Building's, and then a tiny house on top of it. If you do that, you'll be set for life and ready for anything.


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Rule 1

What's the rule to become wealthy? It's this: you first need to learn the difference between an asset and a liability and you then need to spend the rest of your life purchasing assets. Now, I know what you're going to do right now. First, you're going to disagree with the rule and then you're going to look up the definitions for assets and liabilities. That's what I did when I first learned this. Really though, it's that simple. This is the only rule you need to follow to become rich. And the longer you have in life to follow this rule, the better the chances are that you'll stand out from the rest of humanity. Just ask anyone who invested in an index fund in 1990. They've got plenty of money today.

I'll tell you right now that if you do happen to search for the definitions of assets and liabilities, you'll most likely find the "accounting" definitions, which, if you dig far enough into them, are somewhat accurate. For for the purposes of this book though, I'll break down what Mike's father used as definitions compared to the accounting definitions. I'll list the accounting definitions next and then in another post, we'll discuss the much more simplistic "get rich" definitions.

Asset: In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be utilized to produce value and that is held by an economic entity and that could produce positive economic value. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset).

Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

To accountants, a company's logo is an asset because it, if it's been marketed and branded well in the past, holds value. A piece of machinery is an asset. A building is an asset. As far as liabilities go, bank and mortgage debt are good examples. So are wages payable, taxes payable, and accounts payable. To Mike's father though, these aren't exactly helpful definitions and if, as an average person, you use them in your attempt to become wealthy, you'll likely go broke. Again, I'll get to those other definitions below.

So let me ask you something. If learning a few definitions and a simple rule can make you tons of money over a lifetime, why don't more people simply follow the rule to become rich? I'll tell you why and this comes from personal experience. First, a lot of people really aren't that intelligent. They try to follow the rule and the definitions, but get themselves in trouble because they default back to what they originally knew the definitions to be. Simply put, they end up buying a lot of liabilities and they lose all their money. They actually put themselves in a worse spot than they were in when they began. Second, many people don't have a good business sense. Yes, there are many assets someone can purchase that would make them money just by sitting there, but there are also many assets that require you do something with them. And since the person who purchased the asset that needs tending to has no idea of the necessary next steps, they fail in their endeavor. And finally, some people are so smart, they get in their own way. They over analyze the entire thing, consult attorneys and accountants, purchase their neighbor's house to use as a rental property, and go broke doing it. It's supposed to be simple, not drive you up a wall. I've witnessed all three of these types of people do stupid things though my entire life.

In this section of the book, after Robert questions Mike's father about what I just explained above, Mike's father indicates that people need to follow the numbers more. And not only that, they need to follow what the numbers mean. They need to comprehend them. Just as if someone were reading something (literature). Yes, we can read a bunch of words in a book when we're half asleep, but those words will have no meaning because there was no comprehension behind them. If someone reads numbers on financial statements, but has no idea how they relate to profitability or loss, they'll be in just as bad a position as when they began. so in order for people to become wealthy in life, they not only need to follow rule number 1, they also need to become financially literate.


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"This is the Cash Flow Pattern of an Asset."

Mike's father (rich dad) explained it perfectly when he said, "Assets put money in your pocket." Forget about all of those fancy definitions, if you aren't an accountant. Accountants need to know the nuts and bolts of a lot of irrelevant things. That is, irrelevant when it comes to real life. If you're not dealing with corporate accounting, don't concern yourself with the book definition of what an asset is. Just remember, if you buy a car for your own personal use, you haven't purchased and asset. If you purchased a house for your family to live in, you haven't purchased an asset. If you purchased a piece of land, you haven't purchased an asset. If you've done all these things, you can't say to your friend, "Boy, I've got a lot of assets." You don't. These things don't make you any money. Actually, they do quite the opposite.

So what is the cash flow pattern of an asset? It's like this:

Assets ---> Income

If you bought a car to rent out to people and those people pay you more than what you're paying for the car, you have purchased an asset. If you have purchased a home to use as an Airbnb, rental, or lease and you're making more money on it than you spend on it, you have purchased an asset. If you have purchased a piece of land that's being rented by a local farmer and you're making more money on it than you spend, then that's an asset too. Even if you buy an ETF that's earning you dividends and capital appreciation, that's an asset.

Assets aren't merely things that have worth. This is where people get it wrong. Assets are actually things that earn you an income. I'd even venture to say that the asset doesn't need to earn you more than you spend, if you're waiting for a large payoff in the future. For example, let's say you bought a house to rent out to people. You may break even on the income part of it, or perhaps lose a bit of money, but those renters will likely be paying for a large portion of the mortgage and other bills. If this is happening, you'll be able to pay the house off completely just with the rental income and then sell it for a lump sum in the future. So just because the money isn't coming in today, that doesn't mean it won't come in tomorrow.

Bottom line: think about income when you think of assets. Don't just think about things that have worth today, but are depreciating every minute.


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"This is the Cash Flow Pattern of a Liability."

I find this section of Robert's book very interesting. He talks about how assets are things that put money in your pocket and liabilities are things that take money out. It's pretty simple, really. So if you buy a house to live in, it's a liability. If you buy a house for others to live in and they pay you rent (more than your expenses), it's an asset. He then goes on to talk about how understanding definitions and numbers as they pertain to financial knowledge is critical. He says that by not understanding these things, you're essentially limiting your wealth potential and will stay in either the lower or middle class your entire life.

Here's what I say. You can teach someone about money until you're blue in the face and they'll still want to go out and spend it. If you give a shop-a-holic a credit card that's got no limit and then attempt to educate them about how to make more money throughout their life, the minute you turn around, they'll disappear and will be on their way to the mall. You just can't stop some people. Unfortunately, more and more people here on earth are just as I describe them. The world is full of people who don't care about making money. All they want to do is spend it. They would love to receive a gigantic inheritance or win the lottery. All they want to do is go shopping. They don't have the love of work like others have. The old school folk. Most of my friends are financially lazy and don't want to learn about how to make and keep money. I do have other friends, though, who are like me, who love to work for the joy of it. And they also love to make money, just to count it. These are the people I'm assuming this book was written for.

Okay, back to Robert's section. Before I continue on though, let's just agree that, yes, being financially literate is important. Even for those people who are only interested in spending any money they get their hands on. We'll assume that one day they'll come around a grow up.

What's the cash flow pattern of a liability?

Liabilities ---> Expense

So, in the simplest terms, if you buy a liability, such as a car, house, or land, you'll be paying for it and it won't make you any money.

Have you ever wondered why people who seemingly make so much money end up having very little of it? If you ever get the chance to look at someone's books, someone who you think is well off, I think you'll be surprised. We would assume they've got tons of money in the bank and invested. Surprisingly, many "well off" people have neither. Why is that? I'll tell you why it is. It's because these types have spent their lives purchasing liabilities instead of assets. According to Robert, examples of common liabilities are:


Let's think of it this way. If a teenager buys a lawnmower just to have or maybe to ride around for fun, he just bought a liability. He's got less money in his pocket than he had before and that money is never going to come back. If he bought it to mow his neighbor's lawns though and will make a profit doing so, he just bought himself an asset. Knowing this, ask yourself which one of these things makes a person who earns a lot of money more wealthy:

Big house
Brand new Porsche
Dinner out at restaurants
Private schools
Loans (mortgages, car loans, home equity loans)

If you guessed none, you'd be correct. Now just imagine someone who earns a lot of money spending on these types of things over his or her entire life. These kids of liabilities and expenses accumulate until one day a blip in the income stream finds its way to the surface and the money stops flowing. The only place to go from there is bankruptcy. It's remarkable how a small disruption in someone's income stream and cause grave issues. Just look around. Since COVID began, people have gone belly up by missing just one paycheck. That's not good.

Let's take a look at a few cash flow patterns.

Poor Person

Job > Income > Expenses (Taxes, Food, Rent, Clothes, Fun, Transportation)

Middle Class Person

Job > Income > Liability (Mortgage, Loans, Credit Cards) > Expense (Taxes, Mortgage, Fixed Expenses, Food, Clothing, Fun)

Wealthy Person

Asset (Stocks, Bonds, Notes, Real Estate, Intellectual Property) > Income (Dividends, Interest, Rental Income, Royalties)

Now, we obviously all need to spend money to live, so take the above cash flow patterns with a grain of salt. Take a bird's eye view, if you will. It's obvious that wealthy people behave very differently than poor people do after they receive money in their hands. It's what they do with it once they get it that matters. The wealthy invest and the middle class and poor spend. And they spend like it's going out of style.

Let's analyze the above cash flow patterns for a moment to see if we can learn anything. Most poor people work to earn money. It's not much money, so they can't purchase large ticket items, such as houses and cars. Instead, they'll rent apartments and take public transportation to get around. Either way, it's money in and money out. They never seem to get ahead.

As far as the middle class go, to me, this is the most dangerous class to be in. These people make enough money to borrow and spend lots. Because the salary of the average middle class worker is pretty good, they'll apply for and obtain credit cards. They'll also be given mortgages by banks. They may even start soon to fail businesses. They'll finance vacations and they'll borrow to drive nice cars. In some respects, middle class people are much more poor than poor people are. If you make $100,000 a year, but are in $1,000,000 of debt, are you better or worse off than a poor person who makes $10,000 per year, but has no debt? You tell me.

Wealthy people, somewhere along the lines, began investing their money so that money works for them and bears more money, which they can reinvest and make even more money from there. Wealthy people are generally cheap. They don't drive nice cars and don't live in fancy houses. They do own a lot of things behind the scenes though, such as ETFs, mutual finds, CDs, and businesses. You'd never know it if your neighbor is a millionaire. Their house would be the same as yours and they may even drive a clunker. You might think they're not that well off, but you'd be wrong. They'd have much more money than you and they wouldn't even have to work for it.

I want to interject here for a moment to put the kibosh on those who complain that poor people just can't get ahead. They say that some people live paycheck to paycheck and they don't have any extra money to invest. Let me tell you something - do you want to know who I see out there in the bars? Poor people. Do you know who smokes cigarettes the most? Poor people. Drinks alcohol the most? Poor people. Goes to Dunkin' Donuts the most? Poor people. Has big fabulous smart phones? Poor people. Drugs? Poor people. Lots of kids? Poor people. Likes to turn the heat up nice and hot? Poor people. Air conditioning? Poor people. Subscribes to HBO? Poor people. Goes on vacation? Poor people. You get the idea.

If every time a poor person had the urge to run down into town to grab a coffee at the local coffee house resisted that urge and drank water instead, they'd have the extra cash to transfer into their Charles Schwab account to purchase an investment. Wait - Charles Schwab? That sounds fancy. Poor people can't afford to invest with Charles Schwab! Really? They can't? How much does it cost to open and transfer money into a Schwab account? $0. What's the minimum amount allowed to be transferred in? $1. How much do transactions cost? Commissions? $0. How much does each stock or ETF charge to make a purchase? $0. How much does it cost to do taxes at the end of the year to account for any income that's made? $0. Is there any knowledge necessary to do any of this? If you can read the back of a can of beans, you can figure out how to invest your money online. It ain't rocket surgery.

There are literally no boundaries to becoming wealthier than you are these days. Literally. And I am personally offended by the word "literally."

Okay, back to business. Let's focus on the middle class for a moment. It appears to me that the more money someone in the middle class makes, the more they need to make to maintain their lifestyle. If someone who earns good money buys a big house in a nice neighborhood, the fun doesn't stop there. Once the house is purchased, they've got to maintain and pay for it. So not only do they need to pay the principle on the mortgage, they also need to pay homeowner's insurance, upkeep, mortgage interest, utilities, and improvements. And both you and I know that the minute a couple of average middle class people move into a house, the first thing they need to remodel is the kitchen. That's thousands of dollars. And not only that, they also need to appear as middle class as their neighbors do, so they'll need to entertain, drive nice cars, and pay for Lawn Doctor to come to their homes to fertilize their lawns. As you can see, the more money someone makes in the middle class, the more they'll ultimately spend because human nature is to go to the limits. If a middle class couple inherits a large sum of money, you can't tell me that this couple won't move into a nicer neighborhood and buy nicer cars. We all know they will. And from there, the fall will be even harder if something bad happens, such as one of the primary earners getting laid off or fired.

I'll leave you with this little nugget of wisdom from Robert. This is great.

What is financial aptitude?

It's what you do with your money once you earn it. It's how you keep people from taking it from you and how long you keep it. It's how hard your money works for you.

If you earn a good salary, yet find yourself not able to freely pay your bills, you need to work on your financial aptitude. If you don't make much money, but find that you buy a lot of stuff you don't need and barely make it by each week, you need to work on your financial aptitude. If you have no investments and if your money does nothing for you other than burn a hole in your pocket, you need to work on your financial aptitude.

Okay, until next time!


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The story of how the quest for a Financial Dream turns into a financial nightmare

Tell me is any of this sounds familiar.

Two highly educated people find each other and get married. Each of them rents an apartment, but since they're now married, they move into only one of them. They save money by letting the other one go. The problem is, the apartment was never intended for two people, so it's uncomfortable and tight to live in. Because of this, the couple searches for their first home to buy. After all, their plan is to create a family, so to do that, they'll need to buy a house. They find one, buy it, and all seems okay.

Both people of this couple are working high paying jobs. They decide to furnish their new home and to enhance it so it becomes more aligned with their personalities. Their expenses begin to climb. They both get raises at their jobs, so their incomes rise as well. The problem is, so do their taxes. With higher incomes come higher taxes. With the purchase of a home, another tax was added to their already high taxes - property tax. With the addition of new appliances, new cars, and new children, this couple's liabilities begin hovering near the red zone. They're too high. But because this couple makes good money, they don't really feel the threat.

The spending continues through the years and as they continue to earn more money through their jobs, their income tax brackets increase. So instead of paying a low percentage of their earnings in taxes, they're now paying a much higher percentage. They're also using credit cards to purchase both small and large items alike. Their debt gets to the point of discomfort, so the couple seeks out a bank to refinance their home. And in doing so, they'd like to consolidate their credit card debt into their home mortgage, essentially spreading the credit card debt out over 30 years. They accomplish this task and have a zero balance on all their credit cards. They're comfortable once more, until they begin using the credit cards again. They didn't want to at first, but since they had them close by, they decided to go ahead with it. They continue using the credit cards until their balance is too high. It's at this point the couple seeks help in the way of financial advice. They want to know how they can make more money. That's what they think will cure them of their blues. If only they could make more money, they could make their financial problems disappear. The issue with this way of thinking is that the couple isn't realizing that making more money was the cause of the situation they find themselves in. Their thinking was like this: Since we're making more money, we can spend more money. Well, they did and they spent. And they got themselves in trouble. I'm not sure how amplifying the cause is going to help.

There's an old saying that goes like this: If you've found that you've dug yourself into a hole, stop digging. It isn't additional earnings that can help this all too common couple. It's the way they're spending their money that's the trouble. they're spending on the wrong things.

Robert talks about how the Japanese are aware of three powers. His father used to tell him about them when he was a kid. They are:

The sword: Symbolizes the power of weapons. He who has the weapons can win any fight. The problem is, weapons cost a lot of money.

The jewel: Symbolizes the money. He who has the money makes all the rules. He can even control he who has the weapons.

The mirror: Symbolizes self-knowledge. He who knows things as well as he knows himself, doesn't do stupid-ass things his entire life.

The goal is self control. They say the power of self-knowledge is the most sought after of the three powers. If you let the other two control you, you'll find yourself walking down a dark path. Both of the first two powers have to do with money and those powers can easily overwhelm the untrained. It's he who knows how to think rationally and ask himself if what he's doing makes any sense who will prevail. All he needs is a small amount of training to wake up from his financial slumber.

Let's talk about fear for a moment. Did you know that it's been said that public speaking is the greatest fear some people have? It's true. It's greater than anything else. The reason certain people are susceptible to this fear so much is because they feel that as they speak all alone, in front of everyone else, they'll be singled out. Completely accountable for what they say, how they act, and how their presentation is interpreted. Obviously, as a person gets more used to speaking in public, the more comfortable they become with it. But for those who have never experienced the full attention of an audience, the idea can be unnerving. They have no interest in being so alone. They don't want to be singled out and to have all that attention payed to them. They spend their lives hiding behind others, whether they know it or not.

Have you ever thought about the true motives of advertising? Yes, it's to get a business' message out to the masses. It's also much, much more. I remember taking an advertising course in college and in that course, I learned that there are two different types of advertising. First, there's regular advertising that's meant to tell you there's a sale going on somewhere. Regular businesses that you and I have never heard of may engage in this type. The other type is called branding. This is the type of advertising that aims to make a business' name and message part of regular household dialog. Think Geico, Coca-Cola, IBM, Google, Facebook, and the rest. Back around 2005, I recall Google spending tons of money trying to make their brand a household name. They engaged in something called banter branding, where they'd pay radio DJs to incorporate their brand name into an otherwise innocuous conversation. Something like, "Hey Beverly, I was searching Google the other day and found this great web page..." This would be one DJ talking to another while on the air. The goal isn't necessarily to make the brand more well known; it's already very well known. The goal is to make the listener believe that everyone else is using the product or service. It's to make the listener believe that if they use the product or service, they won't be alone. That they'll be in good company. I'd say Google did a fantastic job with their branding. Think about the last time you heard someone say, "I just Googled it." Remarkable.

Finances work the same way. Only a few select individuals are comfortable with feeling alone when dealing with money. As for everyone else, well, they like to be part of the herd. If all the neighbors on the block take out loans to buy new cars, most everyone will feel just fine about doing the same. If every friend a person has talks about going to a financial adviser, that person will have no reservations about going to see one too. Heck, we all know how powerful word of mouth is. It's exactly what I'm talking about here. Mortgages, college loans, car loans, shopping at Christmastime, buying a boat, sending kids to private schools - if everyone else is doing it, it must be okay, right? I mean, everyone else can't be wrong, could they be? It's actually gotten to the point of someone feeling extremely uncomfortable if they stray from what the crowd is doing. I remember a friend telling me once that he prefers to "hold a mortgage." I could never quite wrap my head around that one. He preferred to have the deed of his house held by a bank and to pay a bank monthly payments, plus interest, for a house he's living in? I still don't get it, but I'm sure he heard something that made him believe what he believed along the way. Messaging is powerful like that.

Have you ever watched as someone from the Baby Boomer generation tried to handle their investments. It's one of the most outlandishly expensive activities I've ever witnessed. I know people who could have bought second and third homes with the money they've spent on professional fees and commissions. I actually once wanted to become a financial adviser, just because I watched how much my father was spending on fees. He once told me that he spent over $30,000 in commissions in one year. That's utterly insane, especially because a person can handle his or her investment for free today. But tell me - do you know one Baby Boomer who manages his or her own investments? I don't know one. Not one. Talk about following the crowd. And if you bring the idea of saving a bit of money by handling investments in-house up to one of these people, they'll turn you down faster than you can blink. "I've known John for years and he's always taken very good care of me," they'll proclaim. And you've taken very good care of him too, I'm sure.

I performed terribly in school while growing up. Today, when I think about how poorly I did back then, I wonder if something was wrong with me. For some strange reason, I persistently wanted to look outside through the window, rather than listen to what my teacher had to say. And when the time for recess rolled around, I shot out of that classroom like a rubber band. I always thought there was something bigger and better for me out there. I didn't see the value of me being cooped up all day as opposed to talking with real people, doing real things. Of course, today I do know that what I was doing was of value. I wouldn't be sitting here typing right now if I never learned how to spell - or to think, for that matter. It's just that I always felt I was a hands on type of guy, rather than someone who thought theoretically or someone who would work for someone else. I was a self starter, not an employee. I always knew that.

It's important to have good exposure to the reality of how the financial world works at a young age. I've always believed that. The sooner you can show your children how much things cost and how much money you make per year, the better. They'll learn to have a healthy respect for the dollar. I don't believe in shielding children from the truth. Kids who are shielded grow up to become spoiled, lazy wimps. I also think that kids should begin mowing lawns and shoveling neighbors' sidewalks after it snows as early as possible. I did this beginning at around eight years old. I was making decent money by the time I was 13 years old. I can remember counting my earning from one week back in my childhood bedroom. I was in my early teens and I was earning approximately $45 per week mowing lawns. That's not bad. Even today, that's not bad for a 12 year old. I was doing well, learning to have a respect for money, and learning about entrepreneurship. I was teaching myself how to eventually one day become an employer as opposed to an employee. Most importantly, I was teaching myself not to fear hard work and how to get used to earning money. Believe it or not, a person really does need to get used to taking money from someone else after it's earned. It's not the easiest thing to do.

Let me ask you something. Is a house an asset? Most people would say yes. I would say no. Here's why.

Let's pretend that you're a single man and you purchase your first home. It's a one bedroom/one bathroom house that's 400 square feet in size. It cost you $100,000 to buy. Do you remember the rule? Assets put money in your pocket while liabilities take money out. Ask yourself if the house is going to put money in your pocket or take it out. I can tell you right now that by purchasing the house, money wasn't put in your pocket. What if you paid cash for the house though? What if you paid for it in one lump sum? Is it an asset then? I still say no. Think about insurance and property/school taxes. Think about maintenance and upkeep. If you didn't pay cash, you'd have a mortgage to pay as well. Are any of these things putting money in your pocket? Absolutely not.

Here's the common argument I hear when I say things like this. "But, but, but...everyone has to live somewhere, right? And a house holds value, so of course it's an asset!" Okay, fine. Let's dissect these two arguments.

Everyone has to live somewhere: In the example above, you, as a single man, purchased a very small home for 100k. To you, it's an asset. What if you sold that home tomorrow and purchased one for 200k? You have to live somewhere, right? Hey, wait. Why stop at 200k? If we're buying assets and that's a good thing, why not go straight to $1,000,000 or even 10x that amount? Now, we all know that a single man purchasing a 10 million dollar house because he believes the house is an asset is ridiculous. If it weren't, we'd all be finding the owners of all the mansions in American and congratulating them on their brave and wise financial decisions. Have you ever heard any of the torrid tales of the British aristocracy? Most of those people went broke in the early 1900s because their "assets" become too expensive to own. And according to the logic of a home being an asset, I suppose all those people who owned multiple homes before the financial crash of 2008 were sitting pretty. They could easily sell their assets if need be and make tons of money. Oh wait - that didn't happen. Most of their homes fell into foreclosure because the "owners" couldn't pay for them anymore. Trust me, homes aren't assets. If buying homes because you need to live somewhere and because homes are assets, people would be buying bigger and more homes every day. True, that may be happening, but bankruptcies and foreclosures are happening every day as well. Even restaurant owners have learned that their restaurants can be money pits. Many of them have moved over to driving food trucks around town to lower their costs. No property tax, school tax, less maintenance, etc...

A house holds value: Does it? Sure, in a good market. During times of inflation and demand, it can be very beneficial to own a house, if you plan on selling it when the market is hot. I know a lot of people who made tons of money by selling at the right time. I also know a lot of people who have lost their shirts by selling at the wrong time. House prices go up and down and counting on your home holding its value is foolish. As an example, let's turn to money making businesses. Let's pretend that your home is a business for a moment. The business is the exportation of ice from the state of Maine in the United States to India during the 19th and early 20th century. Back then, this type of business boomed and made tons of money for the business owners. They owned land here in the U.S. with beautiful freshwater ponds from which they'd harvest their ice. They owned ships on which to transport that ice. They had employees whom they paid to haul the ice. They had everything and were becoming rich from their endeavors. And the Indians were happy as well. Their food was staying fresh because it stayed cool. They enjoyed many benefits.

So here's the question. Where is the ice trade today? I'll tell you where it is - gone. With the onset of electricity and the refrigerator, the ice trade was decimated. All the employees had to be fired and all the ships had to be sold. Those lakes with the ponds? Useless. My point is, don't count on things holding their value. It's a stupid thing to do. Think your house is holding value? What if high tension power lines are built next door? What if a highway is built in the back yard? What if low-income housing is built across the street? Each of these things can utterly destroy a property's value overnight. I think you get my point. An "asset" can turn into a "liability" rather quickly. But really, the primary reason a house isn't an asset is because it costs so damn much money to buy and to keep. They're crazy expensive and getting worse everyday.
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Well-Known Member
Truths of Owning a House

If you've never owned a house, all you have to go on is what other people say. That's fine, but when listening to these people, make sure they're telling you the truth and not covering up some hard facts to make themselves feel better. In fact, do this with everything. Talk to a wide variety of people and determine who you can trust. It'll be worth your time. Also, when it comes to money, it helps to talk to the most boring and unemotional person you can find. Think Ben Stein. The dude is monotone and that's exactly what you're looking for. He'll make you feel stupid for wanting to do something stupid when appropriate. Don't go running off talking to your mother about money. All she wants is grand kids and she'll tell you anything to get you into a big house with lots of bedrooms. This is the last person you want to talk to.

Here's what you'll likely hear from an old curmudgeon:

1. You'll work all your life to pay for a house you'll never actually own. Think about that. Many couples get together in their early 20s and then purchase their first home in their late 20s. For the sake of argument, let's say they buy that first home when they're 25 years old. To buy the house, they acquire a 30 year fixed rate mortgage. That's something even grandpa would say is okay. The only difference between you and grandpa is that grandpa lived in his first house his entire life and you're planning on moving at least every ten years. Probably a lot more frequently. So you get yourself a 30 year mortgage when you're 25 years old. If everything goes well, you'll have that paid off when you're 55 years old, right? But wait, if you sell your first house when you're 35 and buy another one that's got another 30 year mortgage, you'll now be out of home debt when you're 65. And if you sell that house when you're 45 and get yourself another 30 year mortgage, you'll have it paid off when you're 75. Do you see where I'm going with this? What's worse is that it's rare for a young couple to purchase a smaller and more economical home. The principle reason a couple decides to move is because they need a bigger house for their growing family. So that mortgage they need to pay off when they're older is actually larger then their first.

2. Tax deductions only go so far. An accountant once told me to buy a big expensive house because I'd be able to write off the high property taxes. I followed his advice and it was one of the stupidest things I've ever done. My accountant's job was to save me money on my taxes. He achieved his goal. Unfortunately, I was young and got hosed in all other aspects of my financial life. Yes, there's a good possibility that you'll receive some tax savings by owning a home. I believe you can write off your mortgage interest as well as your taxes. The only problem is, everything else you pay will be with after tax dollars, meaning, there are no more tax savings after what I described above. And those other things, such as a new porch, homeowner's insurance, and driveway repaving can really add up.

3. Property/school taxes and homeowner's insurance is getting expensive. Have you ever seen the property and school tax bill of someone who is living in New Jersey, New York, Massachusetts, or Connecticut? If not, I don't advise is. You'll likely faint. Be prepared to see people who are paying over $1,000 per month, just for those taxes. My grandfather used to live in Scarsdale, New York. His annual property and school tax bill was $27,000. He lived alone and hadn't had children going to the local schools - ever. I went to college with a girl who had parents who lived in New Rochelle, New York. Their tax bill was $18,000 per year and that was over 25 years ago. I'm sure they've gone up. They never go down. Think moving down south is a good way to save on property taxes? Think again. Yes, you may save on taxes, but will likely make up for that with your homeowner's insurance. The insurance companies in the south like to break up insured areas by different types of zones than they do up north. Your neighbor may pay $500 per year while you'll pay $3,500.

4. Houses may drop in value - by a lot. Back in 2005, at the height of the housing craze, people were purchasing sheds in California for over a million dollars. I mean, these houses were tiny and they were garbage. When the market dropped out from under them, they were stuck holding the bag. I know people who are still living in their houses they bought back then and are paying their million dollar mortgages. That's fine; the only problem is that their house is only worth $300,000. Try thinking of a way out of that one.

5. Think of all the missed opportunities. While you're off working like a dog to make money to pay your big mortgage, you're not buying investments that can make your life so much easier later on. Imagine buying a few hundred thousand dollars of the S&P 500 back in 2002, when it cost only $86 per share. Today, it's $417 per share. You'd have more than quadrupled your money over the past 19 years and that's not even accounting for dividends and reinvestment. Also, think about all the time you'll spend working for something you'll perpetually worry about defaulting on. It's not fun. It's better to buy yourself a small house that's easily affordable that'll loosen up the rest of your life. All too often, people consider their home equity as some sort of value in and of itself, to acquire more loans to make their financial lives more difficult to manage.

Remember, if you do plan on purchasing a house, the smaller, the better. And the more people you can live with, the better. The rest of the world can do it. Why can't we? Financial stress is a huge cause for divorce and health issues. It's better to avoid it altogether.


Well-Known Member
Why Investing Early is Better Than Buying a Home Early

If you ask anyone over the age of 40 what they wish they did earlier in life, I bet most of them would say they wish they began investing heavily back in their 20s. I sure wish I did. Reviewing stock market returns over the past 25 years, I kick myself when I think about what I missed out on. What's worse is that, not only didn't I invest, I spent like a fiend! What did I spend on? A house. I bought a house that I didn't really need and I sunk every last dollar I had in paying for it, paying for insurance, taxes, and improvements. I honestly thought what I was doing was investing in one one of my assets. I said to myself, "The more money I put into this house, the more it'll be worth. Then, the more I'll be able to sell it for when I move." Well let's see what happened. I purchase the house for $205,000 in 2005. This was the height of the real estate market. My interest rate was around 5% and the taxes I paid on it were $4,500 per year. The insurance was around $1,000 per year. I remodeled the entire house, including a brand new front porch, back screened in deck, kitchen, bathroom, floors throughout, and brand new paint everywhere. The improvements were in the area of $60,000. Three years later, I sold the house for $225,000. You do the math. Sometimes houses can be big fat losers.

I oftentimes wish I had just remained in the house I was renting before I bought the house I fixed up. I was only paying $950 per month in the rental. It was small, but if I had remained there, I could have begun investing and earning returns a lot earlier than when I eventually began investing in my 40s.

So, the question is, what are the risks with purchasing a home that's too expensive? I don't think anyone would argue with you over buying a really inexpensive house. It's the houses we want that can get us in trouble, not the houses we need. Think about this:

1. You lose investment growth time. Every dollar you spend paying for a new kitchen in your new home, you don't use to grow with investments. You don't get that time back. Once a year of investment growth is gone, it's gone forever.

2. Your capital disappears. Directly above, I meant to refer to time, but I sort of conflated my point with the point I'd like to make here. Basically, when you buy a new home, you'll find yourself in Home Depot and Lowe's more often than you think. And you'll probably want to buy some new furniture. And after that, you'll surely want to remodel your bathroom. If you're like most American's, the only thing holding you back from making improvements will be cash. Once you get that cash though, you'll spend it on the house and not investments. You'll truly be making your home the liability it really is instead of paying into assets that will pay you back.

3. You'll lose valuable investment experience. Whether you want to believe it or not, if you have no money to invest, you won't invest. And trust me when I say that when you don't invest, you don't look into the finer details of investing. Basically, what happens is that when you finally get around to investing some spare cash you've got, you'll be in your 40s. You'll be hunting around the internet for education. You'll also make many mistakes; mistakes you should have made in your 20s. If you had gotten over the learning curve back in the early days, you'd be sitting pretty in your not so early days.

I am definitely not saying that you shouldn't buy a house. I'm merely attempting to educate you on how much of a money pit a house can be. I'm also trying to impress upon you the difference between liabilities (houses) and assets (investments). If you want to buy a house, go small and cheap, not big and expensive. I don't think anyone has ever claimed that they've felt good falling asleep the night before the local sheriff knocked on their door to escort them from the property due to foreclosure. If you want a nice big house, invest first so those investments can pay for it. It's that simple. A bit of patience can be a very prudent ally.


Well-Known Member
Educated Dad's Financial Statement

This is interesting. In this section, Robert offers an illustration of his real (educated) father's financial statement. At the top, there are two equally sized boxes with labels of Income and Expense. Basically, this means that every penny that educated dad makes, he spends. Below these boxes are two additional boxes with labels of Asset and Liability. The Asset box is about one-fifth of the size of the liability box. This means that Robert's educated dad doesn't have much in the way of assets, but has a lot of liabilities. I'm guessing the assets are his retirement and the liabilities are his credit card bills, mortgage, insurance, car loans, etc... The way things are currently set up with his father, he'll never accumulate any wealth. Sure, if he retires and has his house paid off, he can downsize and move to Florida or something. He can also live off his retirement, which is what it was intended for. The question is, what did this man have to do to get to that position? He struggled, that's what. He was forced to fully entrench himself in the rat race, to work every day, to live on the edge, all the while, never accumulating any real wealth.

Rich Dad's Financial Statement

As for Robert's rich dad, the picture is quite different. Again, there are two boxes up top, but this time, the Income box is at least four times larger than the Expense box. Obviously, this means that the man spends much less than he earns. For the bottom two boxes, rich dad's Asset box is about five times larger than his Liability box. From what I've written above, this can be translated as a situation where rich dad's earning potential from his assets far outweigh any liabilities on which he owes. Robert says that the second illustration is a perfect example of why the rich get richer. It's not a bad thing. Certain people choose to invest their money, which pays them back, as opposed to burning it away on junk food and loans for things they can't afford. As a result, that invested money pays all of their bills, with some left over. Because of their frugal lifestyle, any leftover money gets reinvested, which makes even more money. Eventually, they become wealthy because of their good habits.

Why the Rich Get Richer

If you look at the income flow pattern of a wealthy person, you'll find that they spend most of their income on income producing assets, which, in turn, creates more income with which to purchase more income producing assets. What they've essentially created is a virtuous circle. Their money begets money. Their continued actions are making matters better. On the other hand, a poor or middle class person spends most of their money on liabilities; things that actually cost them more money in the future. What these people have essentially created is called a vicious circle. Their continued actions are making matters worse.

Why the Middle Class Struggle

Debt is like a cancer that can easily hallow out any person's financial well-being. As people work and get older, they tend to make more money. With those greater earnings comes higher taxes and an increase in spending. Since the poor and middle class tend to spend on things that cost them money, not only up front, but well into the future, they'll need to either make even more money later on or borrow it to cover their expenses and liabilities. Whether we want to admit it or not, we all know this is true. The very first thing someone does after they get a raise is go out to dinner with friends to celebrate. The very first thing they do when they graduate college is buy a new car. The very first thing they do after they get married is buy a new house. In general, all poor and middle class people need to spend money is an excuse to spend it. Something that gives their minds the green light. A perfect example would be the government stimulus checks that were sent out during 2020 and early 2021 (in the U.S.). You know as well as I know, the first thing every single person asked themselves after they got that future taxpayer funded gift was, "What can I buy?" Some people, if they fit the mold I'm describing above, put the money down on a new car purchase, something that will cost them more in insurance, more in local property tax, more in principle, and more in interest. Those are future costs that could have been avoided if the buyer had any amount of self control. Basically, what they did was add to the foundation of what's already a debt-ridden society.

The problem is, the buyer I described above has no idea they did anything wrong. They merely followed the path laid before them by many other Americans. No one I know saves up to buy a car with cash. Everyone I know would much rather buy the car first and then pay for it later, all the while adding on interest payments for something they should never have paid interest on in the first place. In both cases, the car was paid for. The buyer had the money. The question is, when did the buyer have the money? Before the purchase or after? Taking on unnecessary debt is a very risky business. I know people who have been ruined by debt. Utterly ruined.