I was growing up I had two dads. One was a highly educated
teacher with a PHD (Poor Dad), the other never finished the
Eighth Grade (Rich Dad). Both fathers had conflicting views on
money. One Dad would say "I can't afford it" while the
other would ask: "how can I afford it?" Here is what I
learnt from them.
THE RICH DON'T WORK FOR MONEY
When I was 9 my best friend, Mike, and I were tired of other
kids not wanting to play with us because we were 'poor kids'.
When we asked Mike’s dad (Rich Dad) how to make money he
agreed to teach us.
Rich Dad put us to work dusting cans in one of the corner stores
he owned. The pay (10 cents a week) wasn't much. After 3 weeks
dusting and not learning anything I decided to quit. I saw Rich
Dad and demanded a pay increase. I told him that he wasn't
keeping to the bargain and teaching us about money. He
disagreed. In 3 weeks I was already sounding like his employees,
he said. Life pushes you around, he said. 'Some people just give
up and quit every time life pushes them. Others take the
opportunity to learn'.
"Most people are afraid of not having any money. That's why
they take a low paying job. Some people say I exploit my
employees but they really exploit themselves." He convinced
me I had a good opportunity to learn so I agreed to keep
working. "Good," he said, "But his time you'll
work for nothing."
I worked for 3 weeks with no pay when Rich Dad came by. He told
us how most people let their emotions do their financial
thinking rather than their brains. When it comes to money most
people are driven by the emotions of fear (not having enough
money) and desire (to have nice things). You must always
acknowledge your emotions, but don't let them do your thinking.
He offered us a huge raise, which we declined. He could see we
had overcome our desire by not accepting the larger pay, and we
had also overcome our fear by working for nothing. This was
good. We now needed to use our eyes to look for opportunities.
A couple of weeks later I noticed the lady who managed the store
cutting the cover off some comic strips and throwing away the
comics. Mike and I set up a comic library for the local kids in
a room at Mike's house. We charged kids 10 cents to enter the
library and paid Mikes sister $1 a week to mind it. After a
while we were averaging $9.50 a week.
If you want to be rich you need to develop financial literacy.
Even the difference between an asset and a liability is often
confused. An asset earns you money
and a liability burns your money. When you put
money into assets such as stocks, bonds and investment
properties you can earn money or income from them. Poor dad saw
them as liabilities.
Liabilities are things that cost you money. A car loses 25% of
its value the day you drive it off the lot. In addition, you
have many other expenses such as loan repayments, insurance,
registration, running and maintenance costs.
The rule is that if you want to get rich, put your money into
assets. This doesn't mean not to buy a home or car - just think
don't think of them as assets.
Lets look at the cash flow of the rich, middle class and poor.
The poor tend to spend all of their money on living expenses,
(food, clothes taxes etc) regardless of what their income is.
Everyone has living expenses but the poor spend all of their
money on them. The middle class tend to spend most of their
money on liabilities such as credit card debt, personal loans
and mortgage repayments. While the rich also have living
expenses and liabilities they focus their money on purchasing
Wealth is not so much about your level
of income but your pattern of spending. Even people
with relatively high incomes can easily find themselves
struggling or broke. And people who win big in lotto usually
find that after a couple of years they are back to where they
If you want to change your financial circumstances you need to
change your pattern of spending. If you find yourself in a hole
- stop digging.
MIND YOUR OWN BUSINESS
Most people who continue to struggle financially rely on their
weekly paycheque. Job security is now a thing of the past and
shouldn't be relied on. You have to start minding your own
business. By this I don't mean throwing in your day job, but
start building assets.
In my early days I worked on a commission basis at Xerox selling
photocopiers. I used the money I made to purchase real estate.
Within 3 years the income I was earning from real estate was
greater than what I could earn selling photocopiers
The rich focus on increasing their assets while everyone else
focuses on increasing their income. But when your income
increases so do your expenses and liabilities. Most people rush
out and purchase expensive consumer goods, home entertainment
systems, cars, clothes, holidays… as soon as they can. The
rich deliberately delay doing this until they have a good
portfolio of assets bringing in a steady income.
It wasn't until 1874 and 1913 that England and the United States
respectively introduced permanent income taxes on their
citizens. Initially it was levied only against the rich but it
soon trickled down to the middle class and the poor.
The rich have never sat around waiting to be taxed but have made
sure they conduct research to find where the best tax advantages
lie. And often these tax advantages are available to everyone
but it is the rich who are 'minding their own business' and
making use of all the tools and opportunities that are available
The poor and middle class don't do much financial research. Many
people today still don't the legitimate tax deductions they can
make, for instance and suffer because of it. You need to gain
financial literacy in order to understand how to best use your
money and make it work for you.
THE RICH INVENT MONEY
Self confidence is one of the biggest things that hold us back
in life. Boldness is the thing that gets us ahead, financially
and otherwise. And we all possess at least some of it. If you
want to succeed to financially we need courage to take risks and
not cling to what we think is secure.
The more we develop our financial IQ the more options we have
available to us. For example, in the early 1990s the economy in Phoenix
was terrible. People were going bankrupt. Houses that
were once $100,000 were going for $75,000. In the bankruptcy
courts I was able to pick up these same houses for $20,000 or
less. I would quickly resell these properties for $60,000 making
a $40,000 profit. I did this 6 times and made $190,000 in profit
and the total amount of time it took was only about 30 hours.
Think about how long it would take to save $190,000 out of your
income and how much it would cost you in taxes to save it. This
proves that no matter what the economic climate you can always
succeed if you have good financial intelligence. This is just
one example of the many different transactions I made on the way
to financial success.
WORK TO LEARN - NOT FOR MONEY
There are many skills you must master in order to be successful.
The most important skills are in the areas of sales, PR,
marketing and advertising.
A journalist I met wanted to become a best selling author. She
had written some good novels but nothing had happened. I told to
her to take a course in sales. She was offended at this
suggestion and said she would not stoop so low as to do anything
in sales. I pointed out that she was already a good writer.
However, she would need sales skills to become a best-selling
It is important to find employment where you will learn a lot of
different skills even if it means earning less in your take home
pay. When I graduated I went into the Merchant Marines. This
taught me much about international trade. I then joined the
Marine Corps in order to learn about leadership. I left there to
join Xerox where I learnt to sell.
Take the long term approach. Find employment where you can learn
these skills, even if it means taking a second job.
There are five main steps once you overcome the obstacles.
Fear. Nobody likes
losing money. However if you can't handle your fear about it you
won't be able to make any. One of the most common reasons for lack
of financial success is that people play it too safe. One thing
you can try and do is to think like a Texan. They live their life
big. They either win big or they lose big. There is a saying that
"everyone wants to go to heaven but nobody wants to
Don't listen to cynicism from yourself or others. Especially don't
take advice from someone who hasn't done what you want to do. Many
people give advice on things they know nothing about. Don't let
this influence you.
Laziness. People can
be lazy in a number of ways. Some people keep themselves busy
doing everything but the one thing they need to do. A good way to
overcome this is to enlist the emotion of greed. Think about all
the things you can have and do once you've achieved your financial
Habits. Create good
habits especially in the area of money. Pay yourself (in savings
or investments) first before you do anything else with your money.
These are the steps I suggest you follow to awaken your financial
You need a
big dream. Some thing that is strong and will
drive you to success.
Use the power
of choice. For example, you could sit at
home and watch TV all day or you could take a course in
financial planning. The choice is yours
friends carefully. Choose people who have great
personal characteristics that you admire.
The world is changing rapidly. What may have worked yesterday
might not work today.
first. Spend money on assets before you do
anything else with your pay cheque.