Have you ever heard about the all weather portfolio? Basically it´s a portfolio created for the general public to “invest” for the long term without having to learn anything about...
Robert T Kiyosaki is one of the greatest financial educator in the world, at least in the last 20 years. He has made the theory and practice of financial freedom much easier to understand for tens of millions of people across the world.
Robert Kiyosaki was a pioneer in helping regular people like you and me to understand personal economics and I don´t mean the numbers, the numbers are one thing but that´s not what he is teaching so well. What Robert is so good at, is writing and talking so that basically anyone can understand.
I just saw a TED Talks with him, and I decided to write a little about my views on his work.
Here´s the TED Talk “Why the rich are getting richer” by Robert Kiyosaki:
Who is Robert T Kiyosaki?
Robert Kiyosaki is the inventor of the surfer’s nylon wallets that were popular in the 80´s, the creator of the board game “Cash flow” and the author of many purple books, among them rich dad poor dad, the best-selling personal finance book of all time.
Robert had two fathers, one that was his real father and one that was his best friend’s father. His both fathers were great successful people but they had very different mindsets.
His poor dad (which was his biological father) was an academic, he was a teacher and head of education in Hawaii, a very educated man. Poor dad was very book-smart and when Robert, at 9 years of age asked him how to become rich, he answered in the only way he knew. “You have to do well in school so you can get good grades so you can go to a good university and become a lawyer, doctor or some other high income profession”. When Robert thought about it, his dad was very well educated at a really good university, and they were not rich, how come?
When he went to ask his father again, he told him about Roberts’s friend´s father, he was an entrepreneur, he told him to go there and ask instead. “He is an entrepreneur and I think he will be rich one day”
Rich dad was Robert´s friend´s father. Rich dad was working hard in building a business empire and was investing the money he made from his businesses in real estate and different other assets that produces passive income. Rich dad didn´t have a nice car, a big house or any luxury things, even though he could afford it. First, he wanted to build passive income streams big enough to never have to worry about money again.
Robert and his friend started learning from rich dad about assets and liabilities, about the difference between being an employee and being an employer. About what words to use and why poor people use a certain set of words and rich people use a totally different set of words. For example poor minded people use the phrase “I can´t afford that” when rich minded people use the words “How can I afford that”. There is a huge difference in mindset, while the poor minded program themselves to not being able to afford that new car, house, vacation or whatever, rich minded people program their minds to find solutions to how they can afford whatever it is that they want. The words we use impact our life, even if it’s just silent words in our head, Every golfer knows that if you think you´re going to make a bad shot you will make a bad shot.
Rich dad´s cash flow quadrant
Rich dad´s cash flow quadrant explains the different ways people can make money from:
E – Employee
S – Self-employed or Specialist
B – Business owner
I – Investor
All the money in the world flows from some of these four parts of the quadrant and the quadrant is divided into two sides where E and S is on the left side and B and I is on the right side. On the left side of the quadrant we have active income and on the right side we have passive income.
The E and S side of the cash flow quadrant
The E and S side is where most people get their incomes from and over 90% of the world’s population are on this side. This side is the side where the income is highest taxed and it´s also the side where there is the least money, less than 10% of all the worlds’ wealth are divided among employees and the self-employed. This might feel very unfair but the fact is that the system is fair, the system is not designed to reward the people that are working the hardest, the system is designed to reward the ones that get the most done.
Let’s say we have this guy Allan, He spends a day digging a hole. Digging is really hard work and Allan gets very tired from digging the hole.
Now let´s say we have this other guy Sven, he looks at Allan and all other people working and getting exhausted from digging holes. Sven thinks outside the box and builds a tractor, a hole digging machine. Sitting in the tractor anyone can dig a hole like the one Allan dug, but it would take maybe 20 minutes instead of a whole day, almost totally effortless. Now Sven can run a tractor business, employ thousands and thousands of people, make billions and get a very low tax rate, legally.
The system rewards people that employ others, help a lot of people, involve a lot of people or basically create some kind of greater value.
There are very successful E and S people in this world, there is nothing saying that you can’t get rich on the left side of the quadrant. But most of the times the success and wealth comes with time slavery. The vice president of big corporations often have a high salary, they can afford a lot of stuff but the problem is that the high salary comes with many, many hours of work and always being on-call. The same goes for small business owners, most often they work a lot if they are “successful”. On the left side you can also find celebrities, professional athletes and other specialists, if Zlatan Ibrahimovic stops playing football the money stops flowing in (from his football Job).
The common thing on the left side of the cash flow quadrant is that you sell your time for money, you always have to be active to make money – Active income.
The B and I side of the cash flow quadrant
The right side of the cash flow quadrant is where Business owners and Investors get their incomes from. On this side over 90% of the world’s wealth circulate but less than 10% of the people get their money from here. This is where the lowest tax rates are, sometimes as low as 0%. This is the side of passive incomes, and passive income is always taxed at a lower rate.
Here we have all incomes that are automated/semi-automated. Like owners of businesses big enough so that they have employees taking care of it for them. The owners can be as little or as much involved as they like and the business will still keep on growing and keep producing income for them. The same goes for people that have built up big sales networks using MLM, and automated online marketing businesses.
On the right side we also find investors, people who own assets that continuously produce income for them. This could be stocks that pay out dividends, real estate, goldmines, fruit plantations, chicken farms or anything you can think of that keeps putting money in your pocket while you´re sleeping.
Robert T Kiyosaki – Conspiracy of the rich
Back in 2002 Robert wrote a book called the conspiracy of the rich. In that book he wrote that there would come a giant financial crash somewhere around the year of 2016. In that same book he also wrote that there would be a smaller crash (before the big one) around the year 2007. His calculations are based on demographics and the understanding of how the financial system works.
Robert T Kiyosaki – A scam?
A couple of years back an old childhood friend called me up and wanted me to teach him about investments and how he could grow his money. So we had a great meeting over a cup of coffee. By the end of the meeting I told him to read Robert Kiyosakis book Rich dad Poor dad as a first step, to understand the mindset of financially independent people. The next day he contacted me again and said something like, “there were some interesting comments for that book on the online bookstore”. So I just had to see what people wrote. Some of the comments were really aggressive saying “Don´t read this book, it´s a scam”, “this doesn´t work” and “Robert Kiyosaki made all his money from selling books but everything he writes in the books is lies”.
Well, since I know for a fact that what he writes works, people can think whatever they want. The problem I see with people writing about things they apparently know nothing about is that other people might not even get the chance to decide for themselves. When someone goes to the online bookstore and reads those comments they might get scared and end up not reading the book that could change their life for the better. This is so sad because things like that happens all the time, people reading things on the internet that are just turned around, twisted and simply not true and then take it for facts, get scared and miss out on opportunities
What do you think about all the incorrect information that we can find out there online?