Friday, July 10, 2009

Work Hard and Be Poor or Have Fun and Be a Millionaire

The book this week was Rich Dad Poor Dad by Robert Kiyosaki. Amazing book. Kiyosaki's title comes from his upbringing. He had his biological father, a PhD educated professor, and his best friend's father, a serial entrepreneur. The first dad was the poor dad and the second was the rich. His poor father told him to work hard and get a good education and he would get a good job to take care of him. His rich father told him to go against the norms of society and gain financial independence.

The first step to gaining your financial independence is learning how to apply accounting concepts to your personal life. It's real simple and Kiyosaki says the reason most adults don't catch on is because it's too simple. But the trick is all about cashflow. You have to make sure your assets are greater than your expenses. The hardest part about this is determining what an asset is. An asset is anything that is going to perpetually give you income: stocks, bonds, notes, some real estate, etc. Most people don't worry about making the assets greater than their expenses and for those people... it doesn't matter how much money you give them, they will always be in over their head just scratching to pay off bills. Kiyosaki's poor father was making a great salary, but he didn't know how to regulate his cashflow so he was always over his head.

One issue in the book, which is brought up quite often, is that going to school and getting a good education is not enough to get everything you want. If you go to school, pass you classes with straight As and get into a high paying job... The government is still going to reach into your check before you can even spend a cent and tax you 40-50%. That means that you work your new job out of school and the first 4 to 5 months you are working goes straight to the government. Doesn't seem fair.

On the other hand, Kiyosaki points out what the rich do. They use corporations to protect their money from the government. A loop hole that politicians put into the books to help themselves (the rich). You see, when you have a corporation you don't get taxed until after you have spent all your money. That means that instead of the average American who is getting paid $30,000 a year, who gets 40% taken right off the top, who can spend $18,000 on their needs and wants. A corporation that makes $30,000 a year and can spend as much of that $30,000 on company cars, dinners with clients, company housing and then gets taxed on what is left after those purchases. Sounds a lot better... and anyone can start a corporation.

Kiyosaki was taught at a early age how to play the game by his rich dad. When he grew up he worked at a job just like everyone else, at Xerox. While he was at Xerox he started a Real Estate Holding Company and while he worked his day-job he flipped houses on the side. He had the best of both worlds. So in case you were wondering, you don't have to quit your day-job to be an entrepreneur.

You may call me naive, but I honestly do think that every single person has what it takes to be a millionaire. They just let fear and cynicism control them. They fear losing their money and they are a cynic of anyone that is trying to do something great... "That will never work"... I cringe at these words and I have done my best to avoid people that spout these words because in the words of Miguel de Cervantes Saavedra "Tell me what company you keep and I'll tell you what you are."

I do think you can do it. And I think if you are willing to put yourself out there, your million dollar dream is not far away. Read this book, it's an eye opener. If you have any questions on the book don't hesitate to ask me a question. I would be more than happy to help anyone that needs it.

Amazon Link to Rich Dad Poor Dad by Robert Kiyosaki

1 comment:

  1. This is the first financial book i read back when i was 14 or something. It is a very easy read, simple concepts to understand, and very motivating. Must read for all ages.