Rich Dad’s Cashflow Quadrant Robert T. Kiyosaki Audiobook

Rich dad’s cash flow quadrant written by a Robert T Kiyosaki with Sharon L Lecter CPA

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HHello my name is Robert Kiyosaki I am the author of the Rich Dad Poor Dad book series Rich Dad Poor Dad is a true story about my two dads one my real dad and one my best friend’s father my real dad was a smart highly educated man at one time the head of education for the state of Hawaii in my book he was my poor dad because regardless of how much money he made he was usually broke at the end of every month my Rich Dad was my best friend’s father although he started out his life without any money he wound up being one of the richest men in the state of Hawaii when you look at the white sand beaches the blue ocean the tall palm trees the hula girls and the tall hotels Rich Dad owned the land under some of those hotels the rich dad’s book in audio series reveals the lessons on money careers and business that my rich dad taught me contrasted to the lessons my poor dad taught me for many people reading the simple stories gives them insights into the lessons about money they learn from their own parents often saying such things as I had a poor dad well my dad sounded very much like your Rich Dad this program rich dad’s cash flow quadrant is about a very important icon or diagram that my rich dad used to educate his son and me about money investing and choosing a career path in life rich dad’s cashflow quadrant is about the four different people or cast of characters that make up the world of money business and investing the cash flow quadrant is about the differences between the e quadrant which stands for employee the S quadrant which stands for self-employed or small business owner the B quadrant which stands for business owner and the AI quadrant which stands for investor years ago when I was just a boy my highly educated dad the man I called my poor dad often said to me son go to school get good grades so that you can get a safe secure job with excellent benefits my rich dad on the other hand said if you follow your dad’s advice you will wind up in the e quadrant it’s okay to be in the e quadrant if what you really want in life is job security but if you want to be rich the a quadrant is the hardest quadrant to become rich in the reason my Rich Dad said that was for many reasons which I found in this book the result of my rich dad’s advice and the use of the cashflow quadrant changed my choice of career path and the direction I took once I was old enough to decide what I wanted to do for the rest of my life as you may have guessed I did not follow my poor dad’s advice and look for job secured in the e quadrant nor did I go into the world of self-employment or small business also known as the escuadrón instead it used my rich DES advice and the cash flow quadrant and chose her into the B quadrant the quadrant for business owners and the AI quadrant the quadrant for investors so who was rich dad’s quadrant for my answer is that is for anyone who is familiar with Rich Dad Poor Dad and is now ready to make some changes in their life changes that may require a change from one quadrant to another as you listen to this program you may soon discover that the four people in the four quadrants are four totally different people as you listen to and read this book you will find that the four people found in the four different quadrants are different mentally as well as emotionally you will also find that is the emotional differences that play a much more important role in determining which quadrant a person ultimately gravitates to for example a person who is an e quadrant is often motivated by the need for security a person found that the S quadrant is often motivated by the need for independence wanting to do things on their own not relying on others so this program goes into the differences between each of the four quadrants as I said it is for anyone looking for some kind of change in their life either professionally or financially this program does not imply that one quadrant is better than the other it does however stress as my Rich Dad stressed that each of us should choose a quadrant or quadrant the best suit our own core values personal beliefs and future dreams I use my rich dad’s cashflow quadrant a guide to find my own true self and the life’s path that was best for me this audio program has been created to serve as your guide to the future and your own personal self-discovery and to unlock what is important to you in your own life are you financially free if you have come to a financial fork in the road and you want to take control of what you do today in order to change your financial destiny rich dad’s cash flow quadrant will help you chart your course each of us resides in at least one of the four quadrants of the cash flow quadrant where we are is determined by where our cash comes from many of us rely on paychecks and are therefore employees while others are self-employed employees and self-employed individuals reside on the left side of the cash flow quadrant the right side of the cash flow quadrant is for individuals to receive their cash from business as they own or investments they own rich dad’s cash flow quadrant is about the four different types of people who make up the world of business who they are and what makes individuals in each quadrant unique it will help you to find where you are in the quadrant today and help you chart a course for where you want to be in the future as you choose your own path to financial freedom while financial freedom can be found in all four of the quadrants the skills of a B business owner or an AI investor will help you to reach your financial goals more quickly a successful ii employee should also become a successful i investor this program is ii and ii Rich Dad Poor Dad series for those of you who may not have listened to Rich Dad Poor Dad it was about the different lessons my two dads taught me about the subject of money and life choices one was my real dad and the other my best friend’s dad one was highly educated and the other a high school dropout one was poor and the other rich whenever I was asked the question what do you want to be when you grow up my highly educated but poor dad always recommended go to school get good grades and then find a safe secure job poor dad was recommending that I choose to become either a high-paid employee or a high-paid s self-employed such as a medical doctor lawyer or accountant my poor dad was very concerned about a steady paycheck benefits and job security my rich but uneducated dad on the other hand offered very different advice he recommended go to school graduate bill the businesses have become a successful investor this audio program is for people who are ready to change quadrants it is for people who are ready to move beyond job security and begin to achieve financial security it is not an easy life span but the prize at the end is worth the journey it is the journey to financial freedom rich dad told me a simple story when I was 12 years old that has guided me to great wealth and financial freedom it was rich dad’s way of explaining the difference between the left side of the cash flow quadrant the e employee and as self-employed quadrants from the right side or the B business owner and I investor quadrants it goes once upon a time there was this quaint little village it was a great place to live except for one problem the village had no water unless it rained to solve this problem once and for all the village elders decided to put out to bid the contract to have water delivered to the village on a daily basis two people volunteered to take on the task and the elders awarded the contract to both of them they felt that a little competition would keep prices low and ensure a backup supply of water the first of the two people who won the contract Eadie immediately ran out bought two galvanized steel buckets and began running back and forth along the trail to the lake which was a mile away he immediately began making money as he labored morning to dusk hauling water from the lake with his two buckets he would empty them into the large concrete holding tank the village had built each morning he had to get up before the rest of the village awoke to make sure there was enough water for the village when it wanted it it was hard work but he was very happy to be making money and for having one of the two exclusive contracts for this business the second winning contractor build disappeared for a while he was not seen for months which made it very happy since he had no competition Edie was making all the money instead of buying two buckets to compete with that bill had written a business plan created a corporation found for investors employed a president to do the work and returned six months later with a construction crew within a year his team had built a large volume stainless steel pipeline which connected the village to the lake at the grand opening celebration bill announced that his water was cleaner than adds water bill knew that there had been complaints about dirt in ads water bill also announced that he could supply the village with water 24 hours a day seven days a week edy could only deliver water on the weekdays he did not work on weekends then bill announced that he would charge 75 percent less than Eddie did for the higher quality and more reliable source of water the village cheered and ran immediately for the faucet at the end of bills pipeline in order to compete edy immediately lowered his rates by 75 percent bought two more buckets added covers to his buckets and began hauling four buckets each trip in order to provide better service he hired his two sons to give him a hand for the nightshift and on weekends when his boys went off to college he said to them hurry back because someday this business will belong to you for some reason after college his two sons never returned eventually Eadie had employees and union problems the union was demanding higher wages better benefits and wanted its members to only haul one bucket at a time bill on the other hand realized that if this village needed water then other villages must need water too he rewrote his business plan and went off to sell his high-speed high-volume low-cost and clean water delivery system to villages throughout the world he only makes a penny per bucket of water delivered but he delivers billions of buckets of water every day regardless if he works or not billions of people consume billions of buckets of water and all that money pours into his bank account bill has developed a pipeline to deliver money to himself as well as water to the villages bill lived happily ever after and ed worked hard for the rest of his life and had financial problems forever after the end this story of Bill and Ed has guided me for years it has assisted me in my life’s decision-making process I often ask myself am i building a pipeline or hauling buckets and am i working hard or am i working smart the answers to those questions have made me financially free and financial freedom is what this program is about I’ve divided this program into three sections in the first part I will explore the differences between people in the four quadrants the next section is about personal change and identifies whom you have to be in stead what you have to do the last section of this program will define the seven steps that you can take on your path to change along the way I will share more of my rich dad’s secrets and help you choose your own path to financial freedom why don’t you get a job in 1985 my wife Kim and I were homeless we were unemployed and had little money left from our savings our credit cards were exhausted and we lived in an old brown toyota with reclining seats that served as beds at the end of one week the harsh reality of who we were what we were doing and where we were headed began to sink in our homelessness lasted for another two weeks a friend when she realized our desperate financial situation offered us a room in her basement we lived there for nine months when friends and family were informed of our plight the first question was always why don’t you get a job at first we attempted to explain but in most instances we failed to clarify our reasons to someone who values a job it is difficult to explain why you might not want a job occasionally we did a few odd jobs and earned a few dollars here and there but we did that only to keep food in our stomachs and gas in the car I must admit that during moments of deep personal doubt the idea of a safe secure job with a paycheck was appealing but because job security was not what we were looking for we kept pushing on living day to day on the brink of the financial abyss that year 1985 was the worst of our lives as well as one of the longest anyone who says that money isn’t important obviously is nothing without it for long Kim and I fought and argued often fear uncertainty and hunger shortens the human emotional fuse and often we fight with a person who loves us the most yet love held the two of us together and our bond as a couple grew stronger because of the adversity we knew where we were going we just did not know if we would ever get there we knew we could always find a safe secure high paying job both of us were college graduates with good job skills and solid work ethics but we were not going for job security we were going for financial freedom in 1989 we were millionaires although financially successful in some people’s eyes we still had not reached our dreams by then we never had to work again for the rest of our lives barring any unforeseen financial disaster we were both financially free Kim was 37 and I was 47 it doesn’t take money to make money I often hear people say it takes money to make money I disagree we had no money when we started and we were in debt it also does not take a good formal education many successful people have left school without receiving a college degree people such as Thomas Edison Henry Ford Bill Gates Ted Turner so what does it take my answer it takes a dream a lot of determination a willingness to learn quickly and the ability to use your god-given assets properly and to know which sector of the cashflow quadrant to generate your income from which quadrant you generate your income from rich dad’s cash flow quadrant represents the different methods by which income or money is generated for example an employee earns money by holding a job and working for someone else or a company self-employed people earn money working for themselves a business owner owns a business that generates money and investors earn money from their various investments in other words money generating more money different methods of income generation require different frames of mind different technical skills different educational paths and different types of people different people are attracted to different quadrants you can earn income in all four quadrants most of us have the potential to generate income from all four quadrants which quadrant you are I choose to earn a primary income from is not so much what we learned in school it is more about who we are at the core our core values strengths weaknesses and interests it is these core differences that attract us to or repel us from the four quadrants for example a medical doctor could choose to earn income as an employee and join the staff of a large hospital or work for the government the public health service become a military doctor or join the staff of an insurance company needing a doctor on its staff the same doctor can also decide to earn come as an S self-employed and start a private practice setting up an office hiring staff and building a private list of clients or the doctor could decide to become a B business owner and on a clinic or laboratory and have other doctors on staff the doctor probably would hire a business manager to run the organization in this case the doctor would own the business but not have to work in it the doctor could also decide to own a business that has nothing to do with the medical field while still practicing medicine somewhere else in this case the doctor would be earning income as both an e employee and as a B business owner as an AI investor the doctor also could generate income from being an investor in someone else’s business or in vehicles like the stock market bond market and real estate the important words are generate income from it is not so much what we do but more how we generate income more than anything it is the internal differences of our core values strengths weaknesses and interests that affect which quadrant we decide to generate our income from some people love being employees while others hate it some people love owning companies but do not want to run them others love owning companies and also love running them certain people love investing while others only see the risk of losing money most of us are a little of each of these characters being successful in the four quadrants often means redirecting some internal core values not all quadrants are equal by knowing the different features of each quadrant you’ll have a better idea as to which quadrant or quadrants might be best for you for example one of the reasons I chose to work predominantly in the B business owner and I investor quadrants is because of tax advantages for most people working on the left side of the quadrant there are a few legal tax breaks available yet legal tax breaks are bound on the right side of the quadrant by working to generate income in these quadrants I could acquire money faster and keep that money working for me longer without losing large chunks to pay taxes when people ask why Kim and I were homeless back in 1985 I tell them it was because of what my rich dad taught me about money for me money is important yet I did not want to spend my life working for it that is why I did not want a job if we were going to be responsible citizens Kim and I wanted to have our money work for us rather than spend our lives physically working for money that is why the cash flow quadrant is so important it distinguishes between the different ways in which money is generated there are ways of being responsible and creating money other than physically working for it but in order to embrace wealth it is essential to understand your relation to it my highly educated dad had a strong belief that the love of money was evil that to profit excessively meant you were greedy he often said I’ll never be rich or investing as risky or money isn’t everything my Rich Dad had a different point of view he thought it foolish to spend your life working from money and pretend that money was not important Rich Dad believed that life is more important than money but money was important for supporting life he often said you only have so many hours a day and you can only work so hard so why work hard for money learn to have money and people work hard for you and you can be free to do the things that are important to my Rich Dad what was important was to have lots of time to raise his kids to have money to donate to charities and projects he supported to bring jobs and financial stability to the community to have time and money to take care of his health and to be able to travel the world with his family those things take money said Rich Dad that is why money is important to me money is important but I don’t want to spend my life working for it it was my rich dad who often referred to the cash flow quadrant when I was a young boy he would explain to me the difference between someone who was successful on the left side versus the right side having two dynamic and successful father figures around me gave meaning to what each was saying but it was what they were doing that allowed me to begin to notice the differences between the es side of the quadrant and the BI side one painful lesson I experienced as a young boy was simply how much time one dad had available to spend with me versus the other as the success and prominence of both dads grew it was obvious that one dad had less and less time to spend with his wife and four children my real dad was always on the road at meetings our dashing off to the airport for more meetings the more successful he got the fewer dinners we had together as a family weekend’s he spent at home in his crowded little office buried under paperwork my rich dad on the other hand had more and more free time as a success grew one of the reasons I learned so much about money finance business and life was simply because my rich dad had more and more free time for his children and me although both dads made more and more money as they became successful my real dad the educated one also got further into debt so he’d work harder and suddenly find himself in a higher income tax bracket his banker and accountant would then tell him to buy a bigger house for the so called tax break my dad would follow the advice and buy a bigger house and soon he was working harder than ever so he can make more money to pay for the new house taking him even further away from his family my Rich Dad was different he made more and more money but paid less in taxes he too had bankers and accountants but he was not getting the same advice my highly educated dad was getting yet the driving force that would not allow me to stay on the left side of the quadrant was what happened to my highly educated but poor dad at the peak of his career in the early 1970s I was already out of college and in Pensacola Florida going through pilot training for the Marine Corps on my way to Vietnam my educated dad was now the Superintendent of Education for the state of Hawaii and a member of the governor’s staff one evening my dad phoned me my room on base son he said I’m going to resign for my job and run for lieutenant governor of the state of Hawaii for the Republican Party I gulped and then said you’re going to run for office against your boss that’s right he replied why I asked Republicans do not have a chance in Hawaii the Democratic Party in the labor unions are too strong I know son I also know that we do not have a prayer of winning judge Samuel King will be the candidate for governor and I will be his running mate why I asked again why run against your boss if you know you’re going lose because my conscience won’t let me do anything else the games these politicians are playing disturb me are you saying they’re corrupt I asked I don’t want to say that said my real dad he was an honest and moral man who rarely spoke badly about anyone he was always a diplomat yet I could tell from his voice that he was angry and upset when he said I’ll just say that my conscience bothers me when I see what goes on behind the scenes I could not live with myself if I turned a blind eye and did nothing my job and paycheck are not as important as my conscience after a long silence I realized that my dad’s mind was made up good luck I said quietly I’m proud of you for your courage and I’m proud to be your son my dad and the Republican ticket were crushed as expected the reelected governor sent the word out that my dad was never to get a job again with the government for the state of Hawaii and he never did at the age of 54 my dad went looking for a job and I was on my way to Vietnam at middle age my dad went from jobs of big titles and low pay to more jobs of big titles and low pay he was a tall brilliant and dynamic man who was no longer welcome in the only world he knew he tried starting several small businesses and even bought a famous franchise but they all failed as he grew older and his strength slipped away so did his drive to start over again his lack of will became even more pronounced after each business failure he was a successful e employee trying to survive as an S self-employed a quadrant in which he had no training or experience and for which he had no heart he loved the world of public education but he could not find a way to get back in he died frustrated and a little angry yet he died with a clear conscience so what kept me going in the darkest of hours it was the haunting memory of my educated dad sitting at home waiting for the phone to ring trying to succeed in the world of business a world he knew nothing about that and the joyous memory of seeing my rich dad grow happier and more successful as his years went on inspired me instead of declining at age 54 we dad blossomed his years of methodically building businesses and investing were paying off and he was on his way to becoming one of the richest men in the islands the cashflow quadrant is more than two lines and some letters if you look below the surface you will find completely different worlds as well as different ways of looking at the world as a person who has looked at the world from both the left side of the quadrant and the right side I can honestly say the world looks much different depending on which side you are on one day over lunch I talked to my rich dad about my educated dad your father and I are not the same people at the core said rich dad while we are both human beings we both have fears doubts beliefs strengths and weaknesses we respond or handle those core similarities differently how we respond to those differences is what causes us to remain in one quadrant or another when your dad tried to cross over from the e employee quadrant intellectually he could understand the process but he couldn’t handle it emotionally when things did not go smoothly and he began to lose money he did not know what to do to solve the problems so he went back to the quadrant he felt most comfortable in the e and sometimes s quadrant I said Rich Dad nodded his head when the fear of losing money and failing becomes too painful inside a fear we both have he chooses to seek security and I choose to seek freedom even though we’re all human beings when it comes to money and the emotions attached to money we all respond differently and it’s how we respond to those emotions that often determines which quadrant we choose to generate our income from different quadrants different people I said that’s right said Rich Dad and if you’re going to be successful in any quadrant you need to know more than just technical skills you also need to know the core differences that cause people to seek different quadrants know that and life will be much easier what are the differences how do I tell the people are an e SB or AI without knowing much about them one of the ways is by listening to their words a person who comes from the e or employee quadrant might say I am looking for a safe your job with good pay and excellent benefits a person who comes from the S or self-employed quadrant might say my rate is $35 per hour or my normal commission rate is 6% of the total price or I can’t seem to find people who want to work and do the job right or I’ve got more than 20 hours into this project a person operating out of the B or a business owner quadrant might say I’m looking for a new president to run my company lastly someone operating out of the AI or investor quadrant might say is my cash flow based on an internal rate of return or net rate of return words are tools once my Rich Dad knew who the person he was interviewing was at the core at least for that moment he would know what that person was really looking for what he had to offer and what words to use when speaking to him which dad always said words are powerful tools if you want to be a leader of people then you need to be a master of words one word may excite one type of person while that same word would completely turn off another person for example the word risk might be exciting to a person in the eye investor Quadrant while a voguing total fear to someone in the ‘i employee quadrant he would say hear their words feel their souls because behind the words a person chooses are the core values and core differences of that individual when I hear the word secure or benefits I get a sense of who the person might be at the core the word secure is a word often used in response to the emotion of fear if a person feels fear then the need for security is often a commonly used phrase for someone who comes predominantly from the e– employee quadrant when it comes to money and jobs there are many people who simply hate the feeling of fear that comes with economic uncertainty hence the desire for security the word benefit means people would also like some kind of additional reward that is spelled out a defined and assured extra compensation such as a health care or retirement plan the key is that they want to feel secure and see it in writing uncertainty does not make them happy certainty does for them the idea of security is often more important than money the s self-employed wants to be their own bosses or they like to do their own thing often when it comes to the subject of money a hard core s self-employed does not like to have his or her income be dependent on other people those who are self-employed do not like having the amount of money they earn dictated by someone else or by a group of people who might not work as hard as they do they also understand that if they do not work hard then they don’t deserve to be paid much when it comes to money they have fiercely independent souls so while the employee often will respond to the fear of not having money by seeking security the s self-employed will often respond by taking control of the situation and doing it on their own when it comes to fear and financial risk they want to take the bull by the horns in this group you find well-educated professionals who spend years in schools such as doctors lawyers and dentists also in the S self-employed group are people who took educational paths other than or in addition to traditional school in this group are direct Commission salespeople real estate agents small business owners restauranteurs consultants therapists hair stylists and artists to name a few self-employed people are often hardcore perfectionist and that is why we hire them if you hire a brain surgeon you want that brain surgeon to have had years of training and experience but most importantly you want this brain surgeon to be a perfectionist the same goes for a dentist hair stylist marketing consultant plumber lawyer or a corporate trainer you as the client hiring this person wants someone who is the best for this group money is not the most important thing about their work their independence the freedom to do things their way and to be respected as experts in their field are much more important than mere money many s self-employed types are hesitant to hire and train other people because once trained they often end up as their competition this in turn keeps them working harder and doing things on their own the B business owner could almost be the opposite of the S self-employed those who are true bees like to surround themselves with smart people from all four categories unlike the s self-employed who do not like to delegate work because no one could do it better the true be likes to delegate the true motto of a bee is why do it yourself when you can hire someone to do it for you and they can do it better Henry Ford fit this mold my rich dad’s idol was Henry Ford he had me read books about people like Ford and john d rockefeller the founder of Standard Oil which dad constantly encouraged his son and me to learn the essence of leadership and the technical skills of business there is a science to business and leadership as well as an art to business and leadership for me both are lifelong studies leadership rich dad’s fed is the ability to bring out the best in people so he trained his son and me in the technical skills necessary to become successful in business technical skills such as reading financial statements marketing sales accounting management production and negotiations and he really stressed that we learned to work with then lead people which dad always said the technical skills of business are easy the hard part is working with people the difference between an S type of business and a B type of business is those who are true bees business owners can leave their business for a year or more and return to find their business more profitable and running better than when they left in a true self employing type business if the S left for a year or more the chances are there would be no business left to return to so what causes the difference saying it’s simply an S self-employed owns a job a B business owner owns a system and then hires competent people to operate the system or put another way in many cases the S self-employed is the system that is why they cannot leave to be successful as a B business owner requires ownership or control of systems and the ability to lead people for s’s self-employed to evolve into B’s business owners they need to convert who they are and what they know into a system and many are not able to do that or they are often too attached to the system many people come to me for advice on how to start a company or ask me how to raise money for a new product or idea I listen usually for about 10 minutes and within that time I can tell where their focus is is it the product or the system of business in those 10 minutes I most often hear words such as these remember the importance of being a good listener and allowing words to direct you to the core value of a person’s soul this is a far better product than company XYZ makes I’ve looked everywhere and nobody has this product I’ll give you the idea for this product all I want is 25 percent of the profits I’ve been working on this product book music score invention for years these are the words of a person generally operating from the left side of the quadrant theyy employee or s self-employed side since I need to be gentle at this time because we are dealing with core values and ideas at this point of the conversation I often use the McDonald’s hamburger example for clarification I slowly ask can you personally make a better hamburger than McDonald’s so far 100% of the people I’ve talked with about their new idea or product have said yes at this point I ask them the next question can you personally build a better business system than McDonald’s some people see the difference immediately and some do not and I would say the difference is whether the person is fixated on the left side of the quadrant which is focused on the idea of the better burger or on the right side of the quadrant which is focused on the system of business I do my best to explain that there are a lot of entrepreneurs out there offering far superior products or services but only McDonald’s has the system that has served billions of burgers the reality is there are unlimited new ideas billions of people with services or products to offer millions of products and only a few people who know how to build excellent business systems Bill Gates of Microsoft did not build a great product he bought somebody else’s product and built a powerful global system around it the I investor makes money with money they do not have to work because their money is working for them the I investor quadrant is the playground of the rich regardless of which quadrant people make their money if they hope someday to be rich they ultimately must come to the I quadrant it is in the I quadrant that money becomes converted to wealth the cashflow quadrant simply makes distinctions on how income is generated if you are an e employee you have a job if you are in s self-employed you own a job but if you own a system and people work for you you are a B business owner and finally if you are an i investor your money works for you a few years ago I read an article that said most rich people received 70% of their income from investments or the I investor quadrant and less than 30% from wages or the e employee quadrant and if they were in E employee the chances were they were employees of their own corporation for most everyone else the poor in the middle class at least 80% of their income comes from wages from the e employee or s self-employed quadrants and less than 20% from investments or the I investor quadrant although my wife and I were millionaires by 1989 we were not financially free until 1994 there was a difference between being rich and being wealthy by 1989 our business was making us a lot of money we were earning more and working less because the business system was growing without any more physical effort on our part we still needed to convert the cash flow coming from the business into even more tangible assets that would generate additional cash flow we had grown a business into a success and it was time to focus on growing our assets to the point where the cash flow from all our assets would be greater than our living expenses by 1994 the passive income from all of our assets was greater than our expenses then we were wealthy the definition of wealth is the number of days you can survive without physically working or anyone else in your household physically working and still maintain your standard of living for example if your expenses are $1,000 a month and if you have three thousand dollars in savings your wealth is approximately three months or 90 days wealth is measured in time not dollars by 1994 my wife and I were wealthy indefinitely barring great economic changes because the income from our investments was greater than her monthly expenses ultimately it is not how much money you make that matters but how much money you keep and how long that money works for you regardless of how much money people make ultimately they should put some in the i’ investor quadrant the i’ investor quadrant deals specifically with the idea of money making money or the idea that your money works so that you do not have to work yet it is important to acknowledge that there were other forms of investing people invest in their education traditional education is important because the better your education the better your chances of earning money you can spend four years in college and have your income earning potential go from $24,000 a year to $50,000 a year or more given that the average person spends 40 years or more actively working four years worth of college or some type of higher education is an excellent investment loyalty and hard work is another form of investing like being a lifelong employee of a company or the government in return via contract that individual is rewarded with a pension for life that is a form of investment popular in the industrial age but obsolete in the information age other people invest in having large families and in turn have their children care for them in their old age that form of investing was the norm in the past yet due to economic constraints in the present it is becoming more difficult for families to handle the living in medical expenses of parents government retirement programs such as Social Security and Medicare in America which were often paid for through payroll deduction is another form of investment mandated by law but due to massive changes in demographics and costs this form of investment may not be able to keep some of the promises it is made and there were independent investment vehicles for retirement that are called individual retirement plans often the federal government will offer tax incentives to both the employer and employee to participate in such plans in America one popular plan is the 401k retirement plan and in countries such as Australia they were called superannuation plans although all of these are forms of investing the eye investor quadrant focuses on investments that generate income on an ongoing basis during your working years in other words gives your money working for you and generating current income for you let’s look at a person who buys a house as an investment and rents it out if the rent collected is greater than the expenses to operate the property that income is coming from the I investor quadrant the same is true for people who receive income as interest from savings or dividends from stocks and bonds so the qualifier for the I investor quadrant is how much income you generate from the quadrant without working for it besides the obvious advantages of knowing how to make money with money and not having to get up and go to work there are also many tax advantages that are not available to people who have to work for their money one of the reasons the rich get richer is because they sometimes can make millions and legally not pay taxes on that money that’s because they make money in the asset column not in the income column or they make money as investors not workers why aren’t more people investors the same reason many people do not start their own businesses it can be summed up in one word risk many people do not like the idea of handing over their hard-earned money and not having it come back many people are so afraid of losing they choose not to invest or risk their money at all no matter how much money they could make in return the fear of losing money seems to divide investors into four broad categories first people who are risk adverse and do nothing but play it safe keeping their money in the bank second people who turn the job of investing over to someone else such as a financial adviser or mutual fund manager third gamblers for whom investing is a game of chance and finally investors for whom investing is a game of skill for the people who turn their money over to someone else to invest investing is often a game they do not want to learn the important thing for these individuals is to choose a financial advisor carefully the good news about investing is that risk can be greatly minimized or even eliminated and you still receive high yields on your money if you know the game it is the fear of losing money that causes most people to seek security yet the I investor quadrant is not as treacherous as many people think it has its own skills and mindset the skills to be successful in the I investor quadrant can be learned if you’re willing to take the time to learn them when I was a boy my Rich Dad encouraged me to take risks with my money and learn to invest he would always say if you want to get rich you need to learn how to take risks learn to be an investor at home I told my educated dad about my rich dad suggestion that we learn how to invest and learn to manage risk my educated dad replied I don’t need to learn how to invest I have a government pension plan a pension from the teachers union and Social Security benefits guaranteed why take risks with my money my educated dad believed in industrial age pension plans such as government employee pensions and Social Security he was happy when I signed up for the US Marine Corps instead of being worried that I might lose my life in Vietnam he simply said stay in for 20 years and you’ll get a pension and medical benefits for life although still in use such pension plans officially have become obsolete the idea of the company being financially responsible for your retirement and the government picking up the balance of your retirement needs through pension schemes is an old idea that is no longer viable people need to become investors as we move from defined benefit pension plans or what I call industrial age retirement plans to defined contribution pension plans or information age pension plans the result is that you as an individual must now be financially responsible for yourself many people who have spent their lives avoiding financial risks are now being forced to take them a large majority of these people the Ease employees and s’s self-employed are people who by nature are security oriented that is why they seek secure jobs or secure careers or start small businesses they can control they are migrating today because of the defined contribution retirement plans to the eye investor Quadrant where they hope they will find security for when their working years are over unfortunately the eye Quadrant is not known for its security the eye quadrant is the quadrant of risk because so many people on the left side of the cash flow quadrant come looking for security the stock market responds in kind that is why people who seek security use diversification as an investment strategy for it not losing it is not an investment strategy for winning successful or rich investors do not diversify they focus their efforts learn to manage risk it is possible to invest for high returns with low risk all you have to do is learn how it’s done it is not hard in fact it’s much like learning how to ride a bike in the early stages you may fall down but after a while the falling stops an investing becomes second nature just as riding a bicycle is for most of us the problem with the left side of the cash flow quadrant is that most people go there to avoid financial risk instead of avoiding risk I recommend learning how to manage financial risk people who take risks change the world too many people have come to depend on government to eliminate the risks of life the beginning of the information age is the end of big government as we know it big government has just become too expensive unfortunately the millions of people around the world that have come to depend upon the idea of entitlements and Pensions for life will be left behind financially the information age means we all need to become more self-sufficient and begin to grow up the times are changing my concern in this program is for those individuals who want to make them move from the left side of the quadrant to the right side but don’t know where to start anyone can make the move with the right skills and determination why people choose security over freedom the primary reason many people seek job security is because that is what they were taught to seek at home and at school because most of us learn little to nothing about money at home or at school it is only natural that many of us cling even more tightly to the idea of job security instead of reaching for financial freedom if you analyze the cash flow quadrant you will notice that the left side is motivated by security and the right side is motivated by freedom trapped by debt the main reason that 90% of the population is working on the left side is simply because that is the side they learn about in school they then leave school soon deeply in debt so deeply in debt that they must cling even tighter to a job or professional security just to pay the bills if we track the life of average educated people the financial script often goes like this the child goes to school graduates finds a job and soon has some money to spend the young adult can now afford to rent an apartment buy a TV set new clothes some furniture and of course a car and now the bills begin to come in one day the adult meets someone special sparks fly they fall in love and get married for a while life is blissful because two can live as cheaply as one they now have two incomes only one rent to pay and they can afford to set a few dollars aside to buy the dream of all young couples their own home they find their dream home pull the money from savings and use it for a down payment on the house and now they have a mortgage because they have a new house they need new furnishings so they find a furniture store that advertises those magic words no money down easy monthly payments life is wonderful and they throw a party to have all their friends over to see their new house new car new furniture and new toys they are now deeply in debt for the rest of their lives then the first child arrives the average well-educated hard-working couple after dropping the child off at nursery school must now put their nose to the grindstone and go to work they become trapped by the need for job security simply because on average they are less than three months away from financial bankruptcy from these people you often hear I can’t afford to quit I have bills to pay the money trap success on the right side of the quadrant requires a knowledge about money called financial intelligence rich dad to find it this way financial intelligence is not how much money you make but how much money you keep how hard that money works for you and how many generations you keep it for if people lack basic financial intelligence they will in most cases not survive on the right side of the quadrant my Rich Dad was good with money and with people at work he had to be he was responsible for creating money managing as few people as possible keeping costs low and keeping profits high those are the skills necessary for success on the right side of the quadrant it was my rich dad who stressed to me that your home is an asset but a liability he could prove it because he taught us to be financially literate so we were able to read numbers he had the free time to teach his son and me because he was good at managing people his skills from work carried over into his home life my educated dad did not manage money and people at work although he thought he did as the State Superintendent of Education he was a government official with a multi-million dollar budget and thousands of employees but it was not money he created it was taxpayers money and his job was to spend all of it if he did not spend it the government would give him less money the next year so at the end of each fiscal year he was looking for ways to spend it all which meant he often hired more people to justify next year’s budget the funny thing was the more people he hired the more problems he had as a young boy observing both father’s I began to take mental notes of what kind of life I wanted to lead my educated dad was a voracious reader of books so he was worried literate but he was not financially literate because he could not read numbers he had to take the advice of his banker and accountant and both told him that his house was an asset and that it should be his largest investment because of his financial advice not only did my highly educated dad work harder but he also got further into debt every time he received a promotion for his hard work he also got a pay raise and with each pay raise he went into a higher tax bracket he made more money but all that happened was his taxes increased and his debt increased he became more emotionally attached to his job in the paycheck that paid the bills the more insecure he felt the more he sought security your two biggest expenses because my dad could not read financial statements he could not see the money trap he was getting into as he grew more successful it’s the same money trap I see millions of other successful hard-working people fall into the reason so many people struggle financially is because every time they make more money they also increase their two biggest expenses taxes and interest on debt to top it off the government often offers you tax breaks to get deeper into debt doesn’t that make you a little suspicious I know many people search for freedom and happiness the problem is most people have not been trained to work from the be business owner and I investor quadrants because of this lack of training the programming into job security and their increasing amount of debt most people limit their search for financial freedom to the left side of the cash flow quadrant unfortunately financial security or financial freedom are seldom found in the e employee or s self-employed quadrant true security and freedom are found on the right side going from job to job in search of freedom one thing the cashflow quadrant is useful for is to track or observe a person’s life pattern many people spend their lives in search of security or freedom but wind up instead going from job to job for example I have a friend from high school I hear from him about every 5 years and he is always excited because he has found the perfect job he is ecstatic because he has found the company of his dreams he loves the company it’s doing exciting things he loves his work he has an important title the pay is great that people are great the benefits are great and his chances for promotion are great about four and a half years later I hear from him again and by this time he is dissatisfied the company he works for is now corrupt and dishonest in his opinion it doesn’t treat its workers with respect he hates his boss he was passed over for promotion and they don’t pay him enough six months go by and he’s happy again he’s ecstatic because he’s found the perfect job again his life pattern is going from job to job so far he lives well because he is smart attractive and personable but the years are catching up with him and younger people are now getting the jobs he used to get he has a few thousand dollars in savings nothing set aside for retirement a house you will never own child support payments and college yet to pay for his youngest child eight lives with his ex-wife and his oldest child 14 lives with him he used to always say to me I don’t have to worry I’m still young I have time I wonder if he’s saying that now in my opinion he needs to make a serious effort to begin moving to either the B business owner or the AI investor quadrant quickly a new attitude and a new educational process need to begin unless he gets lucky and wins the lottery or finds a rich woman to marry he is on a course of working hard for the rest of his life doing your own thing employees become self-employed another common pattern is someone going from II employee to s self-employed during this current period of massive downsizing many people are getting the message and are leaving their jobs with big companies to start their own businesses there is a boomin so-called home-based businesses so many people made the decision to start their own businesses do their own thing and be their own bosses of all the life paths this is the one I feel for the most in my opinion being an S self-employed can be the most rewarding and also the most risky I think the S self-employed quadrant is the hardest quadrant there is the failure rates are high and if you make it being successful can be worse than failing that is because if you are successful as an S self-employed you will work harder than if you are in any of the other quadrants and you will work harder for a long time for as long as you are successful the reason s is self-employed work the hardest is because they typically are their proverbial chief cook and bottle washer they have to do or be responsible for all the jobs that in a bigger company are done by many managers and employees and s self-employed just starting out often answers the phone pays the bills make sales calls tries to advertise on a small budget handles customers hires employees fires employees fills in when employees do not show up talks to the taxman fights off the government inspectors and on and on personally I cringe whenever I hear people say they’re going to start their own businesses I wish them well yet I feel great concern for them I’ve seen so many E’s employees take their life savings or borrow money from friends and family to start their own businesses after three or so years of struggle and hard work the businesses fold and instead of building on their life savings they are left paying off debt nationally 9 out of 10 of these types of businesses fail in five years of the one that is remaining nine out of ten of them fail in the next five years in other words 99 out of 100 small businesses ultimately disappear in ten years I think the reason most fail in the first five years is due to the lack of experience and lack of capital the reason the one survivor often fails in the second five years is not due to lack of capital but lack of energy the hours of long hard work finally get to the person many S’s just burn out that is why many highly educated professionals change firms or try to start something new or die maybe that is why the average life expectancy for doctors and lawyers is lower than it is for most others their average life expectancy is 58 for everyone else it is in the 70s for those who do survive they seem to become used to the idea of getting up going to work and working hard forever that seems to be all they know a friend’s parents remind me of this for 45 years they have spent long hours in their liquor store on a street corner as crime increased in their neighborhood they had to put steel bars up on the doors and all the windows today money has passed through a slot much like in a bank I go by occasionally to see them they are wonderful sweet people but it saddens me to see them as virtual prisoners in their own business from in the morning till 2 of the next morning staring out from behind the bars many wise s’s self-employed sell their businesses at their peak before they run out of steam – someone with energy and money they take some time off and they start something new they keep doing their own thing and love it importantly they know when to get out if you were born prior to 1930 the advice go to school get good grades find a safe secure job was good advice but if you were born after 1930 it is bad advice for people who earn their income out of the e employee quadrant there are virtually no tax breaks left today in America being an employee means you are a 50/50 partner with the government that means the government ultimately will take 50% or more of an employee’s earnings and much of that even before the employee sees the paycheck when you consider that the government offers you tax breaks for going further into debt the path to financial freedom is virtually impossible for most people in the e employee quadrant and foremost in the S self-employed quadrant I often hear accountants tell clients who begin earning more income from the e employee quadrant to buy a bigger house so they can receive a bigger tax break while that might make sense to someone on the left side of the cash flow quadrant that makes no sense to someone on the right side of the quadrant who pays the most taxes the rich pay few income taxes why simply because they do not earn their money as employees the ultra-rich know that the best way to avoid tax is legally is by generating that income out of the B business owner and I investor quadrants if people earn money in the e employee quadrant the only tax break they are offered is to buy a bigger house and go into greater debt from the right side of the cash flow quadrant that is not to financially intelligent to people on the right side that is the same as saying give me $1 and I will give you 50 cents back I often hear people say it’s unamerican not to pay taxes Americans who say this seem to have forgotten their history America was founded out of tax protest have they forgotten the infamous Boston Tea Party as 1773 the rebellion that led to the Revolutionary War which separated the American colonies from the oppressive taxes of England taxes are a necessity of modern civilization but problems arise when taxes become abusive and mismanaged taxes and debt are two of the main reasons most people never feel financially secure or achieve financial freedom the path to security or freedom is found on the right hand side of the cash flow quadrant you need to go beyond job security it is time to know the difference between financial security and financial freedom what is the difference between job security financial security and financial freedom as you know my highly educated dad was fixated on job security as our people of his generation he assumed that job security meant financial security that was until he lost his job and could not get another job my rich dad never talked about job security he talked instead about financial freedom the answer to finding the kind of security or freedom you desire can be in observing the patterns found in the cash flow the pattern for job security people who go from school to the e employee quadrant are often good at performing their jobs many spent years in school and years on the job gaining experience the problem is they know little about the B business owner quadrant or the I investor quadrant even if they have retirement plans they feel financially insecure because they’ve been trained only for job or professional security the pattern for financial security to become more financially secure I suggest in addition to performing their jobs in the e employee or as self-employed quadrants individuals become educated in the B business owner or I investor quadrants this is the pattern of study my Rich Dad recommended it is the path to financial freedom this is true financial freedom because in the B business owner quadrant people are working for you and in the I investor quadrant your money is working for you you are free to work or not to work your knowledge in these two quadrants has brought you complete physical freedom from work if you look at the ultra-rich their pattern in the quadrant typically reveals that they start as a B business owner and then they become an AI investor this signifies the income pattern of Bill Gates of Microsoft Warren Buffett of Berkshire Hathaway and Ross Perot a quick word of caution the B business owner quadrant is much different from the AI investor quadrant I’ve seen many successful B’s business owners sell their businesses for millions and their newfound wealth goes to their heads they tend to think that their dollars are a measure of their IQ so they swagger on down to the AI investor quadrant and lose it all the game and rules are different in all of the quadrants which is why I recommend education over ego just as in the case of financial security having income generated from two quadrants gives you greater stability in the world a financial freedom there are different financial paths people can choose unfortunately most people choose the path of job security when the economy starts wobbling they often cling more desperately to job security they wind up spending their lives there at a minimum I recommend becoming edge in financial security which is feeling confident about your job and feeling confident about your ability to invest in good times and in bad times a big secret is that true investors make more money in bad markets they make their money because the non investors are panicking and selling when they should be buying that is why I’m not afraid of the possible coming economic changes because change means wealth is being transferred your boss cannot make you rich the economic change is currently happening are partly from the sales and mergers of companies the reality is your boss’s job is not to make you rich your boss’s job is to make sure you get your paycheck it is your job to become rich if you want to and that job begins the moment you receive your paycheck if you have poor money management skills then all the money in the world cannot save you if you budget your money wisely and learn about either they be business owner or I investor quadrant then you are on your own path to great personal fortune and most importantly freedom the path I recommend I’m often asked by people on the left side of the quadrant what path would you recommend I recommend the same path my Rich Dad recommended to me the same path that people like Ross Perot Bill Gates and others took the path goes from II employee to be business owner and then to I investor or from s self-employed to be business owner and again to AI investor I occasionally received this complaint but I’d rather be an investor to which I reply then go to the I investor quadrant if you have plenty of money and lots of free time go straight to the I investor quadrant but if you don’t have an abundance of time and money the path I recommend is safer in most cases people do not have an abundance of time or money so they then ask another question why do you recommend the B business owner quadrant first there are two reasons first experience and education if you are first successful as a B business owner you will have a better chance of developing into a powerful I investor if you first develop a solid business sense you can become a better investor you will be better able to identify other good B’s business owners true investors invest in successful bees business owners with stable business systems it is risky to invest in an e employee or an S self-employed who does not know the difference between a system and a product or who lacks excellent leadership skills the second reason I recommend the bee business owner quadrant is cashflow if you have a business that is up and running then you should have the free time in the cash flow to support the ups and downs of the I investor quadrant many times I meet people from the es quadrants who are so tight on cash they could not afford to take any kind of financial loss one market swing and they are wiped out financially because they operate financially at redline the reality is investing is capital and knowledge intensive sometimes it takes lots of capital and time to gain that knowledge many successful investors have lost many times before winning successful people know that success is a poor teacher learning comes from making mistakes and in the eye investor quadrant mistakes cost money if you lack both knowledge and capital its financial suicide to try to become an investor by developing the skill of becoming a good B business owner first you will also be providing the cash flow necessary to move on to becoming a good investor the business you develop as a B business owner will provide the cash to support you as you gain the education to become a good investor once you have gained the education to become a successful investor you will understand how I can say it does not always take money to make money the good news is technology has also made it easier to be successful in the B business owner quadrant although it’s not as easy as just getting a minimum-wage job the systems are in place now for more and more people to find financial success as B business owners the kinds of business systems in moving to the B business owner quadrant remember that your goal is to own a system and have people work that system for you you can develop the business system yourself or you can look for a system to purchase think of the system as the bridge that will allow you to cross safely from the left side of the cash flow quadrant to the right side your bridge to financial freedom there are three main types of the systems commonly in use today they are traditional c-type corporations where you develop your own system franchises where you buy an existing system and network marketing where you buy into and become part of an existing system each has its strengths and weaknesses yet each ultimately does the same thing if operated properly each system will provide a steady stream of income without much physical effort on the part of the owner once it is up and running the problem is getting it up and running in 1985 when people asked why were you homeless Kim and I simply said we were building a business system it was a business system that was a hybrid of the traditional C type Corporation and a franchise as stated before the B business owner quadrant requires a knowledge of both systems and people our decision to develop our own system meant a lot of hard work I had taken this route before and my company had failed although it was successful for years it suddenly went broke in its fifth year when success came to us we were not ready with an adequate system the system began to break down even though we had hard working people we felt like we were on a good-sized yacht that had sprung a leak but we could not find the leak all of us were trying to figure out where the leak was but we could not bail water fast enough to find the leak and fix it even if we found it we were not certain we can plug it when I was in high school my Rich Dad told his son and me that he had lost a company when he was in his 20s that was the best and worst experience of my life he said as much as I hated it I learned more by repairing it and eventually turning it into a huge success knowing that I was contemplating starting my own company Rich Dad said to me you may lose two or three companies before you build a successful one that lasts he was training Mike his son to take over his empire because my dad was a government employee I was not going to inherit an empire I had to build my own rich dad always said we learn the most about ourselves when we fail so don’t be afraid of failing failing is part of the process of success you cannot have success without failure so unsuccessful people are people who never fail maybe it was a self-fulfilling prophecy but in 1984 the company that went down was my third company I had made millions and had lost millions and was starting all over again when I met Kim the reason I know she did not marry for my money is because I did not have any money when I told her what I was going to do build a company number four she did not back away I’ll build it with you was her reply and she was true to her word along with another partner we built a business system with 11 offices worldwide that generated income regardless of whether we worked building it from nothing to 11 offices to five years of blood sweat and tears but it worked both dads were happy for me and sincerely congratulated me they both lost money in my previous experiments at starting companies when my rich dad began teaching me about becoming a be business owner there was only one kind of business that was big business a major corporation that usually dominated the town in our town in Hawaii it was the sugar plantation that controlled virtually everything including the other big businesses as I started high school we began to hear about a thing called franchises but none had come to our little town we had not heard about McDonald’s or Kentucky Fried Chicken or Taco Bell they were not a part of our vocabulary while I was studying with rich dad when we did hear rumors about them we heard they were illegal fraudulent scams and dangerous naturally upon hearing those rumors rich dad flew to California to begin checking franchises out rather than believing the gossip when he returned all he said was franchises are the wave of the future and he bought the rights to two of them his wealth skyrocketed as the idea of franchises caught on and he began selling his rights to other people so they could have a chance at building their own businesses when I asked him if I should buy one from him he simply said no you’ve come this far and learning how to build your own business system don’t stop now franchises are for people who do not want to build or do not know how to build their own systems besides you don’t have the $250,000 it takes to buy a franchise from me the way I learned to become a be business owner was by being an apprentice to my rich dad his son and I were both ease employees learning to be these business owners and that is the way many people learn it’s called on-the-job training this is the way many closely held family and fires are passed on from one generation to the next the problem is not too many people are privileged or lucky enough to learn the behind the scene aspects of becoming a B business owner most corporate management training programs are just that the company only trains you to be a manager if you teach what it takes to try to be at be business owner often people get stuck in the S self-employed quadrant and their journey to the B business owner quadrant this happens primarily because they do not develop a strong enough system and so they end up becoming an integral part of the system successful B’s business owners develop a system that will run without their involvement how to learn to become a B business owner there are three ways you can make it to the B business owner side quickly you can find a mentor buy a franchise or develop network marketing my Rich Dad was my mentor a mentor is someone who has already done what you want to do and is successful at doing it do not find an adviser an adviser is someone who tells you how to do it but has not personally done it most advisors are in the S self-employed quadrant the world is filled with s’s trying to tell you how to be a B or an i my Rich Dad was a mentor not an adviser one of the biggest tips my Rich Dad gave was be careful of the advice you take while you must keep your mind open always be first aware of which quadrant the advice is coming from my rich dad taught me about systems and how to be a leader of people not a manager of people managers often see their subordinates as inferiors leaders must direct people who are often smarter a traditional way of learning about systems is to get your MBA from a prestigious school and get a fast-track job up the corporate ladder an MBA is important because you learn the basics of accounting and how the financial numbers relate to the systems of a business yet just because you have an MBA does not automatically mean you are competent to run all the systems that ultimately make up a complete business system to learn about all the systems necessary in a big company you’ll need to spend 10 to 15 years there learning all the different aspects of the business you should then be prepared to leave and start your own company working for a successful major corporation is like being paid by your mentor even with a mentor and or years of experience this first method is labor-intensive to create your own system requires a lot of trial and error upfront legal costs and paperwork all of this occurs at the same time you’re trying to develop your people another way to become a be business owner is through franchises another way to learn about systems is to buy a franchise when you buy a franchise you are buying a tried and proven operating system there are many excellent franchises by buying the franchise system instead of trying to create your own you can focus on developing your people buying the system removes one big variable when you are learning how to be a be business owner the reason many banks will loan money on a franchise and not to a small startup business it’s because the bank’s recognize the importance of systems and how starting with a good system will lower their risk a word of caution if you buy a franchise please do not be an S self-employed who wants to do your own thing if you buy a franchise system be an e employee just do it exactly the way they tell you to do it nothing is more tragic than the courtroom fights between franchisees and franchisors the fights occur usually because the people who buy the system really want to do it their way not the way the person who created the system wants it run if you want to do your own thing then do it after you’ve mastered both systems and people the final way to become a B business owner is through network marketing also called multi-level marketing or direct distribution systems just as with franchises the legal system initially attempted to outlaw network marketing and I know of some countries that have succeeded in outlawing or severely restricting it after I began researching network marketing I found that there were many people who were sincerely and diligently building successful network marketing businesses when I met these people I saw the impact that their businesses had on other people’s lives and financial futures I began to truly appreciate the value of the network marketing system for a reasonable entry fee often around $200 people can buy into an existing system and immediately start building their businesses due to the technological advances in the computer industry these organizations are totally automated and the headaches of paperwork order processing distribution accounting and follow-up are entirely managed by the network marketing software systems new distributors can focus all their efforts in building their businesses through sharing this automated business opportunity instead of worrying about the normal startup headaches of small businesses one of my old friends who did more than a billion dollars in real estate in 1997 recently signed on as a network marketing distributor and began building his business I was surprised to find him so diligently building a network marketing business because he definitely did not need the money what I asked him why he explained it this way I went to school to become a CPA and have an MBA in finance when people ask me how I became so rich I tell them about the multi-million dollar real estate transactions I do and the hundreds of thousands of dollars in passive income I receive each year from my real estate I then notice that some of them withdraw or shy away we both know that their chances of doing multimillion-dollar real estate investments like I do are slim to none besides not having the educational background they do not have the extra capital to invest so I began to look for a way I could help them achieve the same level of passive income I developed from real estate without going back to school for six years and spending twelve years investing in real estate I believe network marketing gives people the opportunity to build up the passive income they need for support where they learn to become professional investors that is why I recommend network marketing to them even if they have little money they can still invest sweat equity for five years and begin to generate more than enough passive income to begin investing by developing their own businesses they have the free time to learn and the capital to invest with me and my bigger deals my friend is now doing as well in his network marketing business as in his investment business he told me I did it initially because I wanted to help people find the money to invest and now I’m getting rich from a whole new business and that’s why today I recommend people consider network marketing many famous franchises cost a million dollars or more to buy network marketing is buying a personal franchise often for less than $200 I know much of network marketing is hard work but success in any quadrant is hard work from my research into network marketing I found two important things you can learn through their programs that are essential in becoming a successful be business owner to be successful you need to learn to overcome your fear of being rejected and to stop worrying about what other people will say about you so many times I’ve met people who hold themselves back simply because of what their friends might say if they did something different I know because I was the same way and you need to learn to lead people working with different kinds of people is the hardest thing about business the people I have met who are successful in any business are those who are natural leaders the ability to get along and inspire people is a priceless skill a skill that can be learned at this point of the program we will assume that you will become familiar with the quadrant concept and will refer to each quadrant by its letter classification only efore employee s4 self-employed B for business owner and I for investor as I said the transition from the left quadrant to the right quadrant is not so much what you do but whom you have to become learn how to handle rejection how not to be affected by what other people think of you and learn to lead people and you will find prosperity so I endorse any network marketing organization that is first committed to developing you as a human being more than developing you into a salesperson I would seek organizations that have successful track records a distribution system and a compensation plan that has been successful for years a business opportunity you can succeed with believe in and share confidently with others ongoing long-term educational programs to develop you as a human being self-confidence is vital on the right side of the quadrant as well as a strong mentor program you want to learn from leaders not advisors people who are already leaders on the right side of the quadrant and want you to succeed and finally I’d choose an organization that has people you respect and enjoy being with if the organization meets these criteria then and only then look at the product a system is a bridge to freedom being homeless was not an experience I want to repeat yet for Kim and me the experience was priceless today freedom and security are found not so much in what we have but what we know we can create with confidence since that time we have created or helped develop a real estate company an oil company a mining company and two education companies so the process of learning how to create a successful system was beneficial for us yet I would not recommend the process to anyone unless they truly want to go through it until only a few years ago the possibility of a person becoming successful in the B quadrant was only available to those who were brave or rich Kim and I must have been brave because we certainly weren’t rich the reason so many people stay stuck in the left side of the quadrant is because they feel the risks involved in developing their own systems are too great for them it is smarter to remain safe and secure in a job today primarily due to changes in technology the risk in becoming a successful business owner has been greatly reduced and the opportunity to own your own business system has been made available to virtually everyone franchises and network marketing took away the hard part of developing your own system you acquire the rights to a proven system and then your only job is to develop your people think of these business systems as bridges bridges that will provide a path for you to cross safely from the left side to the right side of the cash flow quadrant your bridge to financial freedom the seven levels of investors my Rich Dad once asked me what is the difference between a person who bets on horses and a person who picks stocks I don’t know was my response not much was this answer never be the person who buys the stock what you want to be when you grow up is the person who creates the stock that broke her sell and others buy for a long time I did not understand what my rich dad really meant it was not until I started teaching investing to others that I really understood the different types of investors a special thanks goes to John Burleigh an authority in real estate and a fellow teacher he developed the original six levels of investors which I have modified over the years see if you recognize anyone you know using this identification method in concert with the cashflow quadrant will allow you to understand the world of investors and learn how you can change your own attitudes and investment future level 0 those with nothing to invest these people have no money to invest they either spend everything they make or spend more than they make there are many rich people who had fall into this category because they spend as much or more than they make unfortunately this zero level is where about 50 percent of the adult population would be categorized level 1 borrowers these people solve financial problems by borrowing money often they even invest with borrowed money their idea of financial planning is robbing Peter to pay Paul they live their financial lives with their heads in the sand like ostriches hoping and praying that everything will work out while they may have a few assets the reality is that their level of debt is simply too high for the most part they’re not conscious about money and their spending habits anything they own a value has debt attached to it they use credit cards impulsively and then roll that debt into a long-term a home equity loan so they can clean up their credit cards and then start charging again if the value of their homes goes up they borrow on the equity again or buy larger and more expensive homes they believe the value of real estate only goes up the words low down easy monthly payments has always drawn their attention the often purchased depreciating toys or doodads such as boats swimming pools vacations and cars with those words in mind they list these depreciating toys as assets and go back to the bank for another loan and wonder why they get turned down shopping is their favorite form of exercise they buy things they don’t need saying to themselves I’ll go ahead you deserve it or you’re worth it or if I don’t buy it now I may never find it again at such a great price they think spreading debt over a long period of time is smart always kidding themselves that they’ll work harder and pay off their bills someday they spend everything they make and then some if they have money it gets spent if they don’t have the money they borrow it when asked what their problem is they will say they just don’t make enough money they think more money will solve the problem no matter how much they make they only get deeper into debt they fail to see that the problem is not necessarily income or lack of it but rather their money habits they often argue with loved ones about money emphatically defending their need to buy this or that they live in complete financial denial pretending that miraculously their money problems will someday disappear or they pretend they will always have enough money to spend on whatever they desire this level of investor can often look rich they may have big houses and flashy cars but if you check they buy on borrowed money they may also make a lot of money but they are one professional accident away from financial ruin level 2 savers these people put aside a small amount of money usually on a regular basis the money is in a low risk low return vehicle such as a money market checking account savings account or certificate of deposit CD if they have an individual retirement account IRA they have it with a bank or in a mutual fund cash account they often save to consume rather than to invest saving for a new TV car vacation etc they believe in paying in cash they are afraid of credit and debt instead they like the security of money in the bank even when shown that into the economic environment savings give a negative return after inflation and taxes they are still unwilling to take on much risk little do they know that the US dollar has lost 90% of its value since 1950 and continues to lose value annually at a greater rate than the interest a bank pays them they often have whole life insurance policies because they love the feeling of security people in this group often waste their most precious asset which is time trying to save pennies they spent hours clipping coupons from the newspaper and then at the supermarket they hold up everyone else in line fumbling to find those big savings instead of trying to save pennies they could have put that time into learning how to invest if they had put $10,000 into John Templeton’s fund in 1954 and forgotten about it it would have been worth two point four million dollars in 1994 or if they put $10,000 into George Soros as quantum fund in 1969 it would have been worth twenty two point 1 million in 1994 instead their deep need for security which is fear-based keeps them saving in low yield investments such as bank CD’s you often hear these people saying a penny saved is a penny earned or I’m saving for the kids the real truth is that there is often some deep insecurity running them in their lives and truth they often shortchange themselves and the people they’re saving for they are almost the exact opposite of the level one investor it is good to have some savings it is recommended that you have six months to a year x’ with the living expenses held in cash but after that there are far better and safer investment vehicles than money in the bank to hold your money in the bank earning 5% while others are getting 15% and more is not a wise investment strategy level 3 smart investors there are 3 different types of investors in this group this level of investor is aware of the need to invest they may even participate in the company retirement plan 401k SEP sopran uation pension etc sometimes they even have outside investments in mutual funds stocks bonds or limited partnerships generally they are intelligent people who have a solid education they make up the 2/3 of the country we call the middle class however when it comes to investing they are often not educated or lack what the investment industry calls sophist occasion rarely where they read a company annual report or company prospectus how could they they were not trained to read financial reports they lack financial literacy they may have advanced college degrees and may be doctors or even accountants but few have ever been formally trained and educated in the win-lose world of investing these are the three main categories in this level specifically those who can’t be bothered those who are cynics and those who are gamblers they are often smart people who are well educated and often make substantial incomes and they do invest yet there are differences of the group that can’t be bothered they’ve convinced themselves they don’t understand money and never will they say things like I’m just too busy or it’s just too complicated or investing is too risky these people just let the money sit and do little in their retirement plan or turn it over to a financial planner who recommends diversification they block their financial future out of their minds work hard day to day and say to themselves at least I have a retirement plan when they retire then they’ll look at how their investments did the second category is the cynic these people know all the reasons why an investment will not work they are dangerous to have around they often sound intelligence speak with authority are successful in their chosen fields but are really cowards under their intellectual exterior they can tell you exactly how and why you will get swindled with every investment known to man when you ask for their opinions on a stock or other investment you walk away feeling terrible often afraid or doubtful they’re most commonly repeated words are well I’ve been taken before they’re not gonna do that to me again yet strangely these same cynics often follow the market like sheep at work they’re always reading the financial pages or The Wall Street Journal they read the paper and then tell everyone else what they know at the coffee break they talk about the big deals but are never in them they look for stocks that make the front page and if the report is favorable they often buy the problem is they buy late because if you get your news from the newspaper it is too late the truly smart investors have bought way before it makes the news the cynic does not know that when bad news comes they criticize and say things like I knew it they think they’re in the game but they’re really only spectators standing on the sidelines they often want to get into the game but deep down they are terribly afraid of getting hurt security is more important than fun cynics are often what professional traders call pigs they squeal a lot and then run to their own slaughter they buy high and sell low why because they’re so smart they’ve become overly cautious they are smart but are terrified of taking risks and making mistakes so they study harder get smarter the more they know the more risk they see so they study even harder their cynical caution causes them to wait until it’s too late they come to market when greed finally overpowers their fear they come to the trough with the other pigs and get slaughtered but the worst part about cynics is that they infect the people around them with their deep fear disguised as intelligence when it comes to investing they can tell you why things won’t work but they can’t tell you how they could work it is possible to get rich quickly with little money and with little risk it is possible but only if you are willing to do your part to make it possible one of the things you need to do is keep an open mind and beware of cynics as well as con men they are both financially dangerous the third category of this level is the gambler this group is also called pigs by professional traders but while the cynic is overly cautious this group is not cautious enough they look at the stock market or any investment market about the same way they look at a Las Vegas craps table it’s just luck throw the dice and pray this group has no set trading rules or principles they want to act like the big boys so they fake it until they make it or lose it all the latter is most probable they are searching for the secret to investing or the Holy Grail they are always looking for new and exciting ways to invest instead of long term diligence and study and understanding they seek tips or shortcuts they jump into commodities initial public offerings IPOs penny stocks gas and oil cattle and every other investment known to mankind they like to use sophisticated investment techniques such as margins puts calls and options they jump into the game without knowing who the players are and who makes up the rules these people are the worst investors the planet has ever known they always try to hit a home run they usually strike out when asked how they are doing they’re always about even or a little bit up in actuality they have lost money lots of money often huge amounts of money this type of investor loses money over 90% of the time they never discussed their losses they only remember the killing they made six years ago they think they were smart and failed to recognize they were merely lucky they think that all they need is the one big deal and then they’ll be on easy street society calls these people incurable gamblers deep down they were simply lazy when it comes to investing money level for long term investors these investors are clearly aware of the need to invest they are actively involved in their own investment decisions they have clearly laid out long term plans that will allow them to reach their financial objectives they invest in their education before actually buying an investment they take advantage of periodic investing and whenever possible invest in a tax-advantaged way most importantly they seek out advice from competent financial planners if you are not yet a long-term investor get yourself there as fast as you can what does this mean this means that you sit down and map out a plan get control of your spending habits minimize your debt and liabilities live within your means and then increase your means find out how much invested per month for how many months at a realistic rate of return it will take to reach your goals goals such as and what age do you plan to stop working how much money will you need per month simply having a long-term plan that reduces your consumer debt while putting away a small amount of money on a periodic basis into a top mutual fund will give you a head start on retiring wealthy if you start early enough and keep an eye on what you’re doing at this level keep it simple don’t get fancy forget the sophisticated investments just do solid stock and mutual fund investments learn how to buy closed and mutual funds soon if you haven’t already don’t try to outsmart the market use insurance vehicles wisely as protection but not as wealth accumulation a mutual fund like the Vanguard index 5 which in the past has outperformed two-thirds of all mutual funds year in and year out is worth using as a benchmark over ten years this type of fund may give you a return that exceeds 90% of the professional mutual fund money managers but always remember there is no 100% safe investment index funds have their own inherent tragic flaws stop waiting for the big deal get into the game with small deals like my first small condo that allowed me to start investing for just a few dollars don’t worry about being right or wrong at first just start you’ll learn a lot more once you put some money down just a little to start money is a way of increasing intelligence quickly fear and hesitation retards you you can always move up to a bigger game but you can never get back the time and education you lost by waiting to do the right thing or make the big deal remember small deals often lead to bigger deals but you must start start today don’t wait reduce your credit card debt get rid of doodads and call a good no-load mutual fund although there is no such thing as a true no-load fund sit down with your loved ones and work out a plan call a financial planner or go to the library and read about financial planning and start putting money away even if it’s only $50 a month for yourself the longer you wait the more you waste one of your most precious assets the intangible and priceless asset of time an interesting note level 4 is where most of the millionaires in America come from for people who don’t like risk and we’ve got to focus on their profession or career instead of spending a lot of time studying the subject of investing level 4 is a must if you want to live a prosperous and financially abundant life for these individuals it is even more important to seek the advice of financial planners they can help you develop your investment strategy and get you started on the right track with a long term investing pattern this level of investor is patient and uses the advantage of time if you start early and invest regularly you can make it to phenomenal wealth if you start late in life past age 45 this level may not work especially between now in the year 2010 level 5 sophisticated investors these investors can afford to seek more aggressive or risky investment strategies why because they have good money habits a solid foundation of money and also investment savvy they are not new to the game they are focused not usually diversified they have a long track record of winning on a consistent basis and they’ve had enough losses that give them the wisdom that only comes from making mistakes and learning from them these are the investors that often buy investments wholesale rather than retail they put their own deals together for their own use or they are sophisticated enough to get into deals that their capitalist friends the level-6 group have put together that need investment capital what determines whether people are sophisticated they have a financial base that is sound from their profession business or retirement income or have a base of solid conservative investments these people have their personal debt equity ratios and control which means they have much more income than expenses they are well-educated in the world of investing and actively seek new information they are cautious yet not cynical always keeping an open mind they risk less than 20% of all their capital and speculative ventures they often start small putting a little money down so they can learn the business of investing be it stocks a business acquisition a real estate syndication buying foreclosures etc if they lost this 20% it would not damage them or take food off their tables they will look at the loss as a lesson learn from it and get back into the game to learn more knowing that failure is part of the process of success while hating to lose they are not afraid of losing if people are sophisticated they can create their own deals with returns of 25 percent to infinity they are classified as sophisticated because they have the extra money a team of hand-picked professional advisers and a track record to prove it these investors know that bad economic times or markets offer them the best opportunities for success they get into markets when others are getting out they usually know when to get out at this level an exit strategy is more important than entry into the market they are clear on their own principles and their rules of investing their vehicle of choice might be real estate discounted paper businesses bankruptcies or new issues of stocks while they take risks greater than the average person they abhor gambling they have plans and specific goals they study on a daily basis they read paper read magazines subscribe to investment newsletters and attend investment seminars they actively participate in the management of their investments they understand money and know how to have money work for them their main focus is on increasing their assets rather than investing so they can make a few extra bucks to spend they reinvest their gains to build a bigger asset base they know that building a strong asset base that throws off high cash yields or high returns with minimal tax exposure is the path to great long-term wealth they often teach this information to their children and pass on the family fortune to the generations that follow in the form of corporations trusts and partnerships they personally own little nothing is found in their names for tax purposes as well as for protection from robin hood’s who believe in taking from the rich to give to the poor but although they own nothing they control everything to corporations they control the legal entities that own their assets they have a personal board of directors to help them manage their assets they take advice and learn this informal board is comprised of a team of bankers accountants attorneys and brokers they spend a small fortune on solid professional advice not only to increase their wealth but also to protect their wealth from family friends lawsuits and the government even after they have departed this life they are still controlling their wealth these people are often called stewards of money even after death they continue to direct the fate of the money they created level 6 capitalists few people in the world reach this level of investment excellence in America less than one person in a hundred is a true capitalist this person is usually an excellent B as well as an AI because he or she can create a business and an investment opportunity simultaneously a capitalists purpose is to make more money by synergistically orchestrating other people’s money other people’s talents and other people’s time often they are the movers and shakers that allow America and other great countries to become great financial powers these are the Kennedys Rockefellers Ford’s Jay Paul Gettys and Ross Perot’s it is the capitalists that provide the money that create the jobs the businesses and the goods that make a country prosper level-5 investors generally create investments only for their own port using their own money true capitalists on the other hand create investments for themselves and others by using the talents and finances of other people true capitalists create investments and sell them to the market true capitalists do not need money to make money simply because they know how to use other people’s money and other people’s time level-6 investors create the investments that other people buy they often make other people rich create jobs and make things happen in good economic times true capitalists do well in bad economic times true capitalists get even richer capitalists know that economic chaos means new opportunities returns of 100% to infinity are expected that’s because they know how to manage risk and how to make money without money they can do this because they know that money is not a thing but merely an idea created in their heads while these people have the same fears everyone has they use that fear and turn it into excitement they convert fear into new knowledge and new wealth their game in life is the game of money making money they love the game of money more than any other game that’s what makes them capitalists if you are truly sincere about getting wealthy quickly then you need to understand these seven levels of investors each time you think about your investments recognize your strengths and weaknesses do everything to understand and improve yourself only by identifying what is holding you back will you be on your path to reaching your goal of financial freedom you cannot see money with your eyes in late 1974 I purchased a small condominium on the fringes of Waikiki as one of my first investment properties the price was fifty six thousand dollars for a cute two-bedroom one-bath unit in an average building it was a perfect rental unit and I knew it would rent quickly I drove over to my rich dad’s office all excited about showing him the deal he glanced up the documents and in less than a minute he looked up and asked how much money are you losing a month about a hundred dollars a month I said don’t be foolish rich dad said I haven’t gone over the numbers but I can already tell from the written documents that you’re losing much more than that and besides why in the world would you knowingly invest in something that loses money well the unit looked nice and I thought it was a good deal a little paint in the place would be as good as new I said that doesn’t justify knowingly losing money smirked Rich Dad well my real estate agent said not to worry about losing money every month he said that in a few years the price of this unit will double and in addition the government gives me a tax break on the money I lose besides it was such a good deal that I was afraid someone else would buy it if I didn’t rich dad shook his head as he scanned the documents on that day I learned more about money and investing than I had in all my previous 27 years of life Rich Dad was happy that I had taken the initiative and invested in a property but I’d made some great mistakes that could have been a financial disaster however the lessons I learned from that one investment have made me millions over the years it’s not what your eyes see Sid Rich Dad a piece of real estate is a piece of real estate a company’s stock certificate is a company’s stock certificate you can see those things but it’s what you cannot see that is important it’s the deal the financial agreement the market the management the risk factors the cash flow the tax laws and a thousand other things that make something a good investment or not he then proceeded to tear the deal apart with questions why would you pay such a high interest rate what do you figure your return on the investment to be how does this investment fit into your long-term financial strategy what vacancy factor are you using have you figured in management costs what percentage right did you use to compute repairs did you know that the city has just announced it will be tearing up the roads in that area and changing the traffic pattern a major thoroughfare will run right in front of your building residents are moving to avoid the year-long project did you know that I know the market trend is up today but do you know what is driving that trend what happens if this place is not rented and if it isn’t how long can you keep it afloat on yourself afloat and again what goes on in your head to make you think that losing money is a good deal this really has me worried it looked like a good deal I said deflated rich dad smiled I’m glad you took action he said most people think but never do if you do something you make mistakes and it’s from our mistakes that we learn the most remember that anything important cannot be really learned in the classroom it must be learned by taking action making mistakes and then correcting them that is when wisdom sets in I felt a little better and now I was ready to learn most people said Rich Dad invest 95% of their eyes and only 5% of their minds rich dad went on to explain that people look at a piece of real estate or the name of a stock and often make their decision based on what their eyes see or what a broker tells them or on a hot tip from a fellow worker they often buy emotionally instead of rationally that is why 9 out of 10 investors do not make money set rich dad well they do not necessarily lose money they just do not make money they doesn’t break even making some and losing some that’s because they invest with their eyes and emotions rather than with their minds let’s go back over this losing deal you just bought now we’ll teach you how to turn it into a winning deal I’ll begin to teach your mind to see what your eyes cannot the next morning I went back to the real estate agent rejected the agreement and reopened negotiation it was not a pleasant process but I learned a lot three days later I returned to see my rich dad the price had stayed the same the agent got his full commission because he deserved it but the terms of the investment were very different by renegotiating the interest rate payment terms and the amortization period instead of losing money I was now certain of making a net profit of $80 per month even after the management fee and an allowance for vacancy was factored in I could even lower my rent and still make money if the market went bad I would definitely raise the rent of the market got better I estimated that you were going to lose at least 150 dollars per month said Rich Dad probably more if you had continued to lose $150 per month based on salary and expenses how many of these deals could you afford barely one I replied most months I do not have an extra hundred fifty dollars if I’d done the original deal I would have struggled financially every month even after the tax breaks I might have even had to take an extra job to pay for this investment and now how many of these deals at $80 positive cash flow can you afford asked Rich Dad I smiled and said as many as I can get my hands on Rich Dad nodded in approval now go out there and get your hands on more of them a few years later the real estate prices in Hawaii skyrocket but instead of having only one property go up in value I had seven double in value that is the power of a little financial intelligence as my Rich Dad has said the average person is 95% eyes and only 5% mind when they invest if you want to become a professional on the B and I side of the quadrant you need to train your eyes to see only 5% and your mind to see the other 95% rich dead went on to explain that people who train their minds to see money had tremendous power over people who did not train your brain to see money so what is the first step in training your brain to see money the answer is financial literacy it begins with the ability to understand the words and the number systems of capitalism the second step in training your brain to see money is to learn to recognize what real risk is when people say to me that investing is risky I simply say investing is not risky being uneducated is risky investing is much like flying if you’ve been to flight school and spent a number of years gaining experience then flying is fun and exciting but if you’ve never been to flight school I would recommend leaving the flying to someone else bad advice is risky Rich Dad firmly believed that any financial advice was better than no financial advice he was a man with an open mind he was courteous and listened to many people but ultimately he relied on his own financial intelligence to make his decisions rich dad also said your advisors can only be as smart as you are if you are not smart they cannot tell you that much if you are financially well educated competent advisers can give you more sophisticated financial advice if you are financially naive they must by law offer you only safe and secure financial strategies if you are an unsophisticated investor they can only offer low risk low yield investments they’ll often recommend diversification for unsophisticated investors few advisors choose to take the time to teach you their time is also money so if you will take it upon yourself to become financially educated and manage your money well then a competent adviser can inform you about investments and strategies that only a few will ever see but first you must do your part to get educated is your banker lying to you which dad had several bankers he dealt with they were an important part of his financial team while he was close friends with and respected his bankers he always felt that he had to watch out for his own best interests as he expected the bankers to look out for their own best interests after my 1974 investment experience he asked me this when bankers say that your house is an asset are they telling you the truth since most people are not financially literate and do not know the game of money they often must take the opinion and advice of people they tend to trust if you are not financially literate then you need to trust someone you hope is financially literate many people invest or manage their money based on someone else’s recommendations more than their own and that is risky the fact is when bankers tell you your house is an asset they’re not really lying to you they’re just not telling you the whole truth while your house is an asset they simply do not say whose asset it is for if you read financial statements it is easy to see that your house is not your asset it’s the bank’s asset my rich dad’s definitions of an asset and a liability are an asset puts money into my pocket a liability takes money out of my pocket people on the left side of the quadrant do not really need to know the difference most of them are happy to feel secure in their jobs have a nice house that they think they own they feel proud of and think they are in control of nobody will take it away from them as long as they make those payments and make those payments they do but people on the right side of the quadrant need to know the difference to be financially literate and financially intelligent means being able to understand the big picture of money financially as two people know that your mortgage does not show up as an asset but as a liability on your balance sheet it shows up as an asset on the bank’s balance sheet not yours that’s B and I accounting in accounting you would show the value of your home as an asset and the mortgage as a liability also an important point to note is that the value of your home is an opinion which fluctuates with the market while your mortgage is a definite liability not affected by the market for B and I accounting however the value of your home is not considered an asset because it does not generate cash flow many people ask me what happens if I pay off my mortgage is my house an asset then and my reply is in most cases the answer is still no it’s still a liability there are several reasons for my answer one is maintenance and general upkeep even if you own it free and clear it still costs you money for repairs with after-tax dollars a person in the B and I quadrants only includes property as an asset if it generates income through positive cash flow but the main reason a house even without a mortgage is still a liability is because you still do not own it really the government still taxes you even if you own it just stop paying your property taxes and again you’ll find out who really owns your property what does your interest rate really Rich Dad fought and negotiated tough for every single point of interest he paid he asked me this question when a banker tells you your interest rate is 8 percent per annum is it really I found out it’s not if you learn to read numbers let’s say you buy a $100,000 home make a down payment of $20,000 and borrow the remaining $80,000 at 8% interest with a 30-year term from your bank in five years you will pay a total of thirty five thousand two hundred twenty dollars to the bank thirty one thousand two hundred seventy six dollars for interest and only three thousand nine hundred forty four dollars for debt reduction if you take the loan to term for thirty years you will have paid two hundred eleven thousand three hundred and twenty three dollars total principal and interest less what he originally borrowed $80,000 the total interest you will have paid one hundred thirty one thousand three hundred twenty three dollars by the way that two hundred eleven thousand three hundred twenty three dollars does not include property taxes and insurance on the loan funny one hundred thirty one thousand three hundred twenty three dollars seems to be a little bit more than eight percent of eighty thousand dollars it’s more like a hundred sixty percent in interest over thirty years as I said they’re not lying they’re just not telling you the whole truth and if you kind of read numbers you’d really never know in the banking industry a seven-year average is used as the life expectancy for a mortgage that means banks expect the average person to buy a new house or refinance every seven years and that means in this example they expect to get their original $80,000 back every seven years plus forty-three thousand two hundred ninety one dollars in interest and that’s why it is called a mortgage which comes from the French word multi ax or agreement until death the reality is that most people will continue to work hard get pay raises and buy new houses with new mortgages on top of that the government gives a tax break to encourage taxpayers to buy more expensive houses which will mean higher property taxes for the government and let’s not forget the insurance that every mortgage company requires you to pay on your mortgage every time I watch television I see commercials where professional baseball and football players smile and tell you to take all your credit card debt and roll it into a bill consolidation loan that way you can pay off all those credit cards and carry a new loan at a lower interest rate then they tell you why it’s financially intelligent to do this a bill consolidation loan is a smart move on your part because the government will give you a tax deduction for the interest payments you make on your home mortgage viewers thinking they see the light run down to their finance company refinance their houses pay out their credit cards and feel intelligent a few weeks later they’re shopping and see a new dress realize their kid needs a new bicycle or they need to take a vacation because they’re exhausted they just happen to now have a clean credit card or they suddenly receive a new credit card in the mail because they pay it off the other they have excellent credit they pay their bills and their little heart goes pitter pat and they say to themselves all go on you deserve it you can pay it off a little every month emotions overpower logic and the clean new credit card comes out of hiding what about savings are they assets now your savings really are assets that’s the good news but again if you read financial statements you will see the total picture while it is true that your savings and checkbook balance show up in the asset column of your balance sheet they are carried on your bank’s balance sheet as the liabilities why is your savings and checkbook balance a liability to banks they have to pay you interest for your money and it costs them money to safeguard it you get a tax break for buying a house and going into debt but you do not get a tax break for saving money have you ever wondered why I do not have the exact answer but I can’t speculate one big reason is because your savings are a liability to banks why would they ask the government to pass a law that would encourage you to put in their bank money that would be a liability to them thanks really do not need your savings they don’t need much in deposits because they can magnify money at least ten times if you put a single $1 note in the bank by law the bank can lend out ten dollars and depending on the reserve limits imposed by the central bank possibly as much as twenty dollars that means your single one dollar suddenly becomes ten dollars or more it’s magic on top of that the bank might pay you only five percent interest on that one dollar you as a consumer feel secure because the bank is paying you some money on your money thanks see this is good customer relations because if you have savings with them you may come in and borrow from them they want you to borrow because they can then charge nine percent or more to you on what you borrow while you may make five percent on your one dollar the bank can make nine percent or more on that ten dollars a debt your single dollar is generated recently I received a new credit card that advertised eight point nine percent interest but if you understood the legal jargon and the fine print it was really 23% needless to say that credit card is cut in half and mailed back in 1974 my rich dad was upset because the game was played against me and I did not know it I had bought this investment and had taken a losing position yet I’d been led to believe it was a winning position rich dad then explained the basics of the game the name of the game of capitalism is who is indebted to whom once I knew the game he said then I could be a better player instead of someone who just had the game run all over him the more people you are indebted to the poorer you are said Rich Dad and the more people you have indebted to you the wealthier you are that is the game we are all in debt to someone else the problems occur when the debt gets out of balance if you are going to play the game then you had best learn the game know the rules speak the same language and know with whom you’re playing Rich Dad drew the cashflow quadrant he asked if you’re going to play the money game which team do you want to be on the ease s’s bees or eyes or which side of the court do you want to be on the right side or the left I pointed to the right side of the quadrant good said Rich Dad that is why you can’t go out there to play the game and believe some sales agent when he tells you that to lose $150 a month for 30 years is a good deal because the government will give you a tax break for losing money and he expects the price of real estate to go up you simply cannot play the game with that mindset while those opinions might come true that is just not the way the game is played on the right side of the quadrant somebody is telling you to get into debt take all the risks and pay for it people on the left side think that is a good idea but not the people on the right look at it my way said rich dad you’re willing to pay fifty six thousand dollars for this condo in the sky you’re signing for the debt you take the risk the tenant pays less in rent than what it costs to live there so you are subsidizing that person’s housing does that make sense to you I shook my head no this is the way I play the game Sid Rich Dad from now on if you take on debt and risk then you should get paid got that I nodded my head making money is common sense said Rich Dad it’s not rocket science but unfortunately when it comes to money common sense is uncommon it was then that Rich Dad gave me an important rule that he is always used your profit is made when you buy now you sell rich dad had to be certain that whatever debt or risk he took on it had to make sense from the day he bought it it had to make sense if the economy got worse and it had to make sense if the economy got better he never bought on tax tricks or crystal ball forecasts of the future a deal had to make sound economic sense in good times and in bad I was beginning to understand the game of money as he saw it and the game of money was to see others become indebted to hew and to be careful to whom you became indebted today I still hear his words if you take on risk and debt make sure you get paid for it rich dad had debt but he was careful when he took it on if you take on debt personally make sure it’s small if you take on large debt make sure someone else is paying for it the importance of facts versus opinions which dad continued his lesson if you want to be successful on the right side when it comes to money you’ve got to know the difference between facts and opinions you cannot blindly accept financial advice the way people on the left side – you must know the numbers you must know the facts and numbers tell you the facts your financial survival depends upon facts not some friend or advisors wordy opinions most people struggle financially because they spend their lives using opinions rather than facts when making financial decisions opinions such as your house as an asset the price of real estate always goes up it takes money to make money you should diversify your portfolio you have to be dishonest to be rich investing is risky play it safe the point is most people’s lives are determined by their opinions rather than the facts for a person’s life to change they first need to change their opinions then start looking at the facts if you can read financial statements you will be able to see the facts not only of a company’s financial success if you can read financial statements you can tell immediately how an individual is doing rather than going by your or somebody else’s opinions one is not better than the other but to be successful in life especially financially you must know the difference if you cannot verify something as a fact then it is an opinion financial blindness is when people cannot read numbers so they must take someone else’s opinion financial and is caused when opinions are used as facts if you want to be on the right side of the quadrant you must know the difference between facts and opinions few lessons are more important than this one i sat there listening quietly doing my best to understand what he was saying do you know what due diligence means Rich Dad asked I shook my head due diligence simply means finding out what our opinions and what our facts when it comes to money most people are either lazy or searching for shortcuts so they do not do enough and due diligence and there are still others who are so afraid of making mistakes but all they do is due diligence and then do nothing too much due diligence is also called analysis paralysis the point is you must know how to sift through the facts and opinions then make your decision most people are in financial trouble today simply because they’ve taken too many shortcuts and are making life’s financial decisions based upon opinions the opinions of an e employee or an S self-employed and not on the facts if you want to be a B business owner or an AI investor you must be keenly aware of the difference learning the game of money and how it is played is an important part of your journey to financial freedom more important though assume you need to become to move to the right side of the cash flow quadrant we can be anything we want most of us have the potential to be successful in all of the quadrants it all depends on how determined we are to be successful as my Rich Dad said passion builds businesses not fear the problem with changing quadrants is often in our past conditioning many of us came from families where the emotion of fear was used as a prime motivator to get us to think and act in a certain way for example how often have you heard if you don’t get good grades you won’t get a safe secure job with benefits well today many people have gotten good grades but there were fewer safe secure jobs and even fewer with benefits like retirement plans so many people even those with good grades need to mind their own business and not just look for a job where they will mine someone else’s business how do I get rich when I’m asked where did I learn my formula for getting rich I reply playing the game of Monopoly as a kid some people think I’m kidding and others wait for the punchline expecting a joke yet it is not meant as a joke and I’m not kidding the formula for getting rich at monopoly is simple and it works in real life as well as in the game for green houses one red hotel you may recall that the secret to wealth when playing Monopoly is simply to buy four green houses and then trade them in to buy a large red hotel that is all it takes and that is the same investment formula for wealth my wife and I used when the real estate market was really bad we bought as many small houses as we could with the limited money we had when the market improved we traded in the four green houses and bought a large red hotel we never have to work because the cash flow from our large red hotel apartment houses and many storages pays for our lifestyle doing what rich people do is easy one of the reasons there are so many wealthy people who did not do well in school is because the to do part of becoming wealthy is simple there was a classic book I recommend you read Think and Grow Rich by Napoleon Hill I read this book as a youngster and it greatly influenced the direction of my life in fact it was my Rich Dad who first recommended that I read this book and others liked it there is a good reason why it’s titled Think and Grow Rich and not work hard and Grow Rich or get a job and Grow Rich the fact is people who work their hardest do not wind up rich if you want to be rich you need to think think independently rather than go along with a crowd in my opinion one great asset of the rich is that they think differently from everyone else if you do what everyone else does you’ll wind up having what everyone else has and for most people what they have as years of hard work unfair taxes and a lifetime of debt when someone asks me what do I have to do to move from the left side of the quadrant to the right side my response is it’s not what you have to do that needs to change it’s first how you think that needs to change in other words it’s who you have to be in order to do what needs to be done years ago I was in a class on goal-setting he was the mid-1970s and I really could not believe I was spending $150 in a beautiful Saturday and Sunday to learn how to set goals I would rather have been surfing instead here I was paying someone to teach me how to set goals I nearly backed out several times but what I learned from that class helped me achieve what I want in life the instructor put up on the board these three words B do have she then said goals are the half part of these three words once most people figure out what they want to have their goal they begin listening what they have to do that is why most people have to do lists they set their goal and then begin doing she discussed investments saying many people think that buying stocks or mutual funds will make them rich well simply buying stocks mutual funds real estate and bonds will not make you rich just doing what professional investors do does not guarantee financial success people who have a loser mentality will always lose no matter what stock bond real estate or mutual fund they buy next she used an example of finding the perfect romantic partner so many people go to bars or to work or to their church looking for the perfect person that is what they do what they do is go and look for the right person instead of working on being the right person here’s one of her examples about relationships in marriage many people try to change the other person so they can have a better marriage instead of trying to change the other person which often leads to fights it is better to change yourself first she said don’t work on the other person work on your thoughts about the other person she was talking about relationships my mind drifted to the many people I had met over the years who are out to change the world but we’re not getting anywhere they wanted to change everyone else but not change themselves and when it comes to money she said many people tried to do what the rich do and to have with a rich half so they go out and buy a house that looks rich a car that looks rich and sent their kids to the schools with a rich send their kids all this does has caused these people to do by working harder and to have more debt which causes them to work even harder which is not what the truly rich do my Rich Dad did not use these same words but he did often say to me people think that working hard for money and then buying things that make them look rich will make them rich in most cases it doesn’t it only makes them more tired they call it keeping up with the Joneses and if you notice the Joneses are exhausted during that weekend class much of what my rich dad had been telling he began to make more sense for years he lived modestly instead of working hard to pay bills he worked hard to acquire assets if you saw him on the street he looked like everyone else he drove a pickup truck not an expensive car then one day when he was in his late 30s he emerged as a financial powerhouse people took notice when he suddenly bought one of the prime pieces of real estate in Hawaii after his name hit the paper it was then people realized that this quiet unpretentious man owned many other businesses lots of prime real estate and when he spoke his bankers listened few people ever saw the modest house he lived in after he was flushed with cash and cash flow from his assets he then bought a new large house for his family he did not take out a loan he paid cash after that weekend class on goal setting I realized that many people tried doing what they thought the rich did and tried having what the rich had they often would buy big houses and invest in the stock market because that is what they thought the rich did yet what my rich dad was trying to tell me was if they still fought and had the same beliefs and ideas of a poor person or middle class person then did what the rich did they would still wind up having what the poor and middle class have be do have began to make sense rich dad’s cashflow quadrant is about being not doing moving from the left side of the quadrant to the right side of the quadrant is not so much about doing but more about being the good news is that it does not cost much money to change your thinking in fact it can be done for free the bad news is that sometimes it’s hard to change some deep core thoughts about money that are handed down from generation to generation or thoughts that you learn from friends from work and from school yet it can be done and this is what this recording is primarily about it’s not so much a how-to book on what to do to become financially free it’s not about what stocks to buy or what mutual fund is safest this program is primarily about strengthening your thoughts being so that you can take the action doing that will enable you to become financially free having four people contemplating making the crossing from one quadrant to another an important part of the process is to be aware of your internal dial or conversations within you and always remember that what sounds logical in one quadrant does not make sense in another quadrant the process of going from job or financial security to financial freedom is primarily a process of changing your thinking it is a process of doing your best to know which thoughts are a motion based and which thoughts are logic based if you can keep your emotions in check and go for what you know to be logical you have a good chance of making the journey no matter what anyone is saying to you from the outside the most important conversation is the one you are having with yourself on the inside that is why my Rich Dad forbade me from saying I can’t afford it I can’t do that play it safe don’t lose money Rich Dad firmly believe that what we said to ourselves at our core became our reality that is why I suspect that for people who struggle financially their emotions often do the talking and run their lives if they are emotionally based thoughts they are powerful the good news is that they can be changed with the support of new friends new ideas and a little time people who are not able to control their fear of losing should never invest on their own they are best served by turning that job over to professionals and not interfering with them as an interesting note I have met many professional people who are fearless when investing other people’s money and able to make lots of money but when it comes to investing or risking their own money their fear of losing becomes too strong and they ultimately lose their emotions to the thinking rather than their logic I have also met people who can invest their money and win constantly but lose their calm when other people ask them to invest money for them the making and losing of money is an emotional subject rich dad always said to be successful as an investor or business owner you have to be emotionally neutral to winning and losing winning and losing are just part of the game the laws understanding the laws and market forces is vital to financial success great transfers of wealth often occur when laws and markets change so it is important to pay attention if you want to have those changes work in your favor and not against you we are entering an era of tremendous change and opportunity for some people it will be the best of times and for others it will be the worst of times education is more than ever before but we need to teach people to think a little further than just looking for a secure job and expecting the company or the government to look after them once their working days are through that is an industrial age idea and we aren’t there anymore the rules have changed one advantage of living in a free society is the freedom to make choices in my opinion there are two big choices the choice of security and the choice of freedom if you choose security there is a huge price to pay for that security in the form of excessive taxes and punishing interest payments if you choose freedom then you need to learn the whole game and then play the game it is your choice from which quadrant you want to play the game in 1943 the US began taxing all working Americans via payroll deduction in other words the government got paid before people in the ii employee quadrant got paid anyone who was purely an e had a little escape from the government it also meant that instead of only the rich being taxed which was the hope of the sixteenth amendment it now meant everyone on the left side of the quadrant got taxed rich or poor but the lowest paid in America today pay more in taxes as a percentage of total income than the rich and the middle class in 1986 the tax reform act went after the highly paid professionals in the S quadrant the Act specifically listed doctors lawyers architects dentists engineers and other such professions had made it difficult if not impossible for them to shelter their income the way the rich can do in the B&I quadrants these professionals were forced to operate their businesses through S corporations instead of through C corporations or pay a tax penalty income for these highly compensated professionals is then passed through the S corporation and taxed at the highest individual tax rate possible they don’t have the opportunity to shelter their income through deductions allowed to a C corporation and at the same time the law was changed to force all S corporations to have a calendar year end this again forced all income to be taxed at the highest rate when I was discussing these changes recently with my personal CPA she reminded me that the biggest shocked and newly self-employed people generally comes at the end of the first year when they realize that the biggest tax they are paying is as self-employment tax this tax is double for the esses over what they paid as ease and it is calculated on income before the individual can deduct any itemized deductions or personal exemptions it is possible for a self-employed person to have no taxable income yet still owe self-employment tax corporations on the other hand do not pay self-employment tax the 1986 tax reform act also effectively pushed the ease and s’s of America out of real estate as an investment and into paper assets such as stocks in mutual funds basing their future financial well-being upon paper assets subject to the ups and downs of the market after the 1986 tax reform act the rich continued to earn more work less pay less taxes and enjoy greater asset protection by using the formula my Rich Dad gave me 40 years ago build a business and buy real estate make a lot of money via C corporations and shelter your income through real estate while millions upon millions of Americans work pay more and more taxes and then pour billions each month into mutual funds the rich are quietly selling the shares of their C corporations making them even richer and then buying billions in investment real estate as we progress further and further away from the industrial age and into the information age we all need to continue to gather information from different quadrants in the information age quality information is our most important asset as Eric Hoffer once said in times of change learners inherit the earth while they learn and find themselves beautifully equipped to deal with the world that no longer exists remember that everyone’s financial situation is different that is why I always recommend that you seek out the best professional and financial advice you can find for example while a c-corporation may work well in some instances it does not work well in all instances even on the right side of the quadrant occasionally an S corporation is appropriate also remember that there are different advisors for the rich the poor in the middle class just as there are different advisors for people who earn their money on the right side and on the left also consider seeking advice from people who already are where you want to go never do business or investing for tax reasons a tax break is an extra bonus we’re doing things the way the government wants it be a bonus not the reason and if you are not a US citizen this advice remains the same our laws may be different yet the principles of seeking competent advice remain the same people on the right side operate very similarly throughout the world how to become a successful business owner and investor most of us have heard the saying a journey of a thousand miles begins with a single step I would like to modify that statement a little instead I would say a journey of a thousand miles begins with a baby step I emphasize this because I’ve seen too many people attempt to take the great leap forward instead of taking baby steps long-term financial success is not measured in how big your stride is long-term financial success is measured in the number of steps in which direction you’re moving and in numbers of years in reality that is the formula for success or failure in any endeavor when it comes to money I have seen too many people myself included attempt to do too much with too little and then crash and burn in other words you go from baby steps to walking and then to running this is the path I recommend for people who want to be successful in the information age the faster they begin to develop their financial intelligence and emotional intelligence the faster they will feel more financially secure and find financial freedom today when people say don’t work hard work smart they do not mean work smart in the EE or s quadrants they actually mean working smart in the B or AI quadrants that is information age thinking which is why financial intelligence and emotional intelligence are so vital today and will be vital in the future so what is the answer obviously my answer is to re-educate yourself like a rich person not a poor or a middle-class person in other words to think and look at the world from the B or AI quadrant however the solution is not as simple as going back to school and taking a few courses to be successful in the B or I quadrant requires financial intelligence systems intelligence and emotional intelligence these things cannot be learned in school the reason these intelligences are hard to learn is because most adults are wired to the hard work and spin mode of life they feel financial anxiety so they hurry off to work and work hard they come home and hear about the stock market going up and down the anxiety grows so they go shopping for a new house or car or they go and play golf to avoid the anxiety the problem is that the anxiety returns on Monday morning people often ask me how to get started thinking like a rich person I always recommend starting small and seeking education if people are serious about learning and retraining themselves to think like a rich person I recommend my patented board game cashflow I created the game to help people improve their financial intelligence it gives people the mental physical and emotional training required to allow them to make the gradual change from thinking like a poor or middle class person to thinking like a rich person cashflow not money relieves anxiety financial struggle and poverty are really financial anxiety problems they are mental and emotional loops that keep people stuck in what I call the rat race unless the mental and emotional hooks are broken the pattern remains intact I worked with the banker a few months ago on breaking his pattern of financial struggle I’m not a therapist but I have had experience in breaking my own financial habits instilled by my family the banker makes more than one hundred twenty thousand dollars a year but as always in some sort of financial trouble he has a beautiful family three cars a big house a vacation home and he looks the part of a prosperous banker when I looked at his financial statement however I found he had a financial cancer that would be terminal in a few years if he did not change his ways the first time he and his wife played cashflow he struggled and fidgeted almost uncontrollably his mind was wandering and he could not seem to grasp the game after four hours of play he was stuck everyone else had completed the game but he was still in the rat race so I asked him as we put the game away what was going on his only answer was that the game was too hard too slow and too boring I then reminded him of what I had told him before the game started that all games are reflections of the people playing in other words a game is like a mirror that allows you to look at yourself that statement hangared him so I backed off and I asked if he was still committed to getting his financial life in order he said he was still committed so I invited him and is why who loved the game to come and play again with an investment group I was coaching a week later he showed up reluctantly this time a few lights began to go on inside his head he still did not finish the game after 4 hours but he was beginning to learn as he left this time he invited himself back by the third meeting he was a new man he was now in control of the game his accounting and his investments his countenance soared and this time he successfully exited the rat race and was on the fast track this time as he left he purchased the game and said I’m going to teach my kids by the fourth meeting he told me his own personal expenses were down he had changed his spending habits and cut up several credit cards and he was now taking an active interest in learning to invest and build his asset column his thinking was now on track to make him an information age thinker by the fifth meeting he purchased cashflow 202 which is the advanced game for people who have mastered the original cashflow 101 he was now reading and eager to play the fast and risky game that troubies and eyes play the best news is that he had taken control of his financial future he had reeducate adem self not only mentally but also more importantly emotionally via the power of the repetitive learning process that comes from a game the seven steps to finding your financial fast-track in step one you need to mind your own business gather together your financial data including your income your expenses your assets and your liabilities get organized using a computer spreadsheet or just a simple piece of paper by looking at your financial data you can easily begin to see how you’ve been programmed from an early age to mind everyone else’s business and ignore your own remember your liabilities are your bankers business while your assets are yours in order to get where you want to go you need to know where you are this is the first step to take control of your life and spend more time minding your own business next set financial goals set a long-term financial goal for where you want to be in five years and a smaller short-term financial goal for where you want to be in twelve months the smaller goal is a stepping-stone along the way to your 5-year goal be sure your goals are realistic and attainable for instance try to your debt by a specific amount while increasing your cash flow from assets or passive income when you establish your 5-year financial goals do the same thing but take the long view now that you know where you are financially today and have set your goals you need to get control of your cash flow so that you can achieve your goals step 2 take control of your cash flow after deciding to mind your own business the next step is the CEO of the business of your life is to take control of your cash flow the primary reason most people have money problems is that they were never schooled in the science of cash flow management people work very hard thinking that more money will solve their financial problems but as my Rich Dad often said more money will not solve the problem if cash flow management is the problem when you review your financial statements determine which quadrant of the cash flow quadrant you receive your income from today then determine which quadrant you want to receive the bulk of your income from in five years at this point you can begin establishing your cash flow management plan here are some rules pay yourself first put aside a set percentage from each paycheck or each payment you receive from other sources deposit that money into an investment savings account once your money goes into the account never take it out until you are ready to invest it also focus on reducing your personal debt if you have credit cards with outstanding balances cut up all your credit cards except for one or two any new charges you add to the one or two cards you now have must be paid off every month do not incur any further long-term debt then come up with 150 to 200 dollars extra per month now that your becoming more and more financially literate this should be relatively easy to do if you cannot generate an additional 150 to 200 dollars per month then your chances for financial freedom may only be a pipe dream you will now pay the minimum plus the 150 to 200 dollars on that one credit card pay only the minimum amount due on all other credit cards once the first card is paid off then apply the total amount you are paying each month on that card to your next credit card you are now paying the minimum amount due on the second card plus the total monthly payment you are paying on your first credit card continue this process with all your credit cards and other consumer credit such as store charges etc with each debt you pay off apply the full amount you were paying on that debt to the minimum payment of your next debt as you pay off each debt the monthly amount you are now paying on the next debt will escalate once all your credit cards and other consumer debt is paid off continue the procedure with your car and house payments if you follow this procedure you will be amazed at the shortened amount of time it takes for you to be completely debt free most people can be debt free within 5 to 7 years now that you are completely debt free take the monthly amount you are paying on your last debt and put that money towards investments build your asset column that’s how simple it is step 3 know the difference between risk and risky I often hear people saying investing is risky I disagree instead I say being uneducated is risky – my Rich Dad – spend your life working hard from money only to have it go out as fast as it comes in is not a sign of high intelligence due to the lack of financial intelligence many educated people will put themselves into positions of high financial risk my Rich Dad called it financial red line meaning income and expenses are nearly the same every month these are the people who cling desperately to job security are unable to change when the economy changes and often destroy their health with stress and worry and these are often the same people who say business and investing is risky in my opinion business and investing is not risky being undereducated is similarly being misinformed is risky and relying on a safe secure job is the highest risk anyone can take buying an asset is not risky buying liabilities you have been told their assets is risky minding your own business is not risky minding everyone else’s business and paying them first is risky step 4 decide what kind of investor you want to be most people struggle financially because they avoid financial problems one of the biggest secrets my rich dad taught me was that if you want to acquire great wealth quickly take on great financial problems in addition to the seven levels of investors I would like to add one more distinction that defines the three different types of investors there are type-a or investors who seek problems then there were type B or investors who seek answers finally there are type C or what I call sergeant Schultz investors I know nothing let me address these types of investors in reverse order type C investors the name sergeant Schultz comes from the lovable character in the TV series Hogan’s Heroes when he knows something is wrong all Schultz says is I know nothing most people when it comes to investing take the same attitude can sergeant Schultz investors still achieve great wealth the answer is yes they can get a job with the federal government marry someone rich or win the lottery type B investors often ask such questions as what do you recommend I invest in do you think I should buy real estate what mutual funds are good for me type the investor should immediately interview several financial planners choose one and start taking their advice financial planners if they’re good provide excellent technical knowledge and can often help you establish a financial game plan for your life type a investors look for problems in particular they look for problems caused by those who get into financial trouble investors who are good at solving problems expect to make returns of 25 percent to infinity on their money they’re typically level 5 and level 6 investors who have strong financial foundations can you be all three types of investors in reality I operate as all three types of investors I am a sergeant Schultz or a Type C investor when it comes to mutual funds or picking stocks I do have a few mutual funds but I really do not spend much time studying them I can achieve better results with my apartment houses than with mutual funds as a Type B investor I seek professional answers to my financial problems I seek answers from financial planners stockbrokers bankers and real estate brokers they are closer to the market and are I trust more up-to-date with changes in the laws in the markets the advice of my financial planner is priceless simply because she knows trusts wills and insurance far better than I ever will everyone should have a plan there was much more to investing than simply buying and selling years ago my Rich Dad encouraged me to develop my skills as a business owner and investor he also said then practice solving problems for years that is all I’ve done I know that inside of every problem lies an opportunity and opportunities or word real investors are after step 5 seek mentors mentors tell us what is important find somebody who’s been there and choose your mentors wisely my highly educated but poor dad thought that a job with a high salary was important and that buying the house of your dreams was important he also believed in paying bills first and living below your means my rich dad taught me to focus on passive income and spend time acquiring the assets that provided passive or long-term residual income both dads serve the strong mentors for me as I grew up the fact that I chose to follow the financial advice of my rich dad did not lessen the impact that my educated but poor dad had on me as well I would not be Who I am today without the strong influence of both these men step 6 make disappointment your strengths be prepared to be disappointed rich dad often said Only Fools expect everything to go the way they want expecting to be disappointed is a way of mentally and emotionally preparing yourself to be ready for surprises that you may not want by being emotionally prepared you connect with calm and dignity when things do not go your way if you’re calm you can think better trying new things and expect disappointment but always have a mentor standing by to coach you through the experience and be kind to yourself we all make mistakes we all feel upset and disappointed when things do not go our way yet the difference lies in how we internally process that disappointment tell the truth the future belongs to those who can change with the times and use personal disappointments as building blocks for the future the key to this step is to take action reading watching and listening are all crucial to your education but you must also start doing step 7 the power of faith even though you may not be good at everything take time developing what you need to learn and your world will change rapidly never run from what you know you need to learn face your fears and doubts and new worlds will open to you using these seven steps my wife and I were able to move from being homeless to being financially free in a few short years I trust they can assist you in charting your own course to financial freedom to do that you need to be true to yourself if you are not yet a long-term investor and get yourself there as fast as you can sit down and take control of your spending habits minimize your debt and liabilities live within your means and then increase your means the reason I have introduced you to the cash flow quadrant is to offer you different glimpses into who you are what your interests may be and who you ultimately may become anyone can find his or her own unique path to the financial fast-track regardless of which quadrant they operate from yet it is up to you to find your own path remember your bosses job is to give you a job it’s your job to make yourself rich in the end you must mind your own business once you make that commitment life really does get easier and easier minding your business is not hard to do it’s just common sense believe in yourself and start today on your path to financial freedom

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