This book expands on the concepts presented in Rich Dad Poor Dad
. Don't expect a detailed guide to getting rich; Kiyosaki explains that he doesn't write how-to books, but rather provides the mental framework that's necessary for gaining great wealth. He calls it the BE-DO-HAVE approach: "strengthen your thoughts (being) so that you can take the action (doing) that will enable you to become financially free (having)."
Kiyosaki promotes himself as living proof that you can get rich quickly; he went from homeless to millionaire in 4 years, and financially independent in another 5. Understandably, he doesn't believe in the "get rich slowly" movement, and thinks you're wasting your time if you do. He also rejects such other common wisdom as seeking job security, relying on mutual funds, and considering a house an asset.
"If you have a secure system that produces more and more money with less and less work, then you really do not need a job, or need to worry about losing your job or need to live life below your means. Instead of living below your means, expand your means. To make more money, simply expand the system and hire more people".
The last page of the book provides a great summary:
"Your boss's job is to give you a job. It's your job to make yourself rich. Are you ready to stop hauling water buckets and begin building pipelines of cash flow to support you, your family, and your lifestyle? Minding your own business might be difficult and sometimes confusing, especially at first...the hardest part of the process is at the start. Once you make the commitment, life really does get easier and easier."
The reference to hauling water buckets relates to an analogy at the beginning of the book. Think of money as water. Most people try to increase their income by working more hours, or carrying more buckets of water. This is exhausting, and can only get you so far. Instead, it's better to run a business and invest to earn passive income 24/7, represented by building pipelines that provide a constant flow of water.
The book explores Kiyosaki's idea of the Cashflow Quadrant, which divides income generation into 4 quadrants. Cashflow QuadrantE: Employee
has a job
works for the system
values security, certainty, benefits over moneyS: Self-employed
owns a job
is the system
values independence over moneyB: Business owner
runs a system in which people work for them
creates, owns, or controls the system
delegates to hired expertsI: Investor
invests money into the system
money works for themDifferences between the left and ride sides
The E and S are on the left, the B and I on the right.
The left side values security, while the right side values freedom.
The right side has more tax advantages.
The right side must be good with financial numbers.
The left side is riskier because you need to live within your means and keep your job.Differences between an "S" and "B" business
"B" can leave their business for a year or more, and the business will be more profitable when they return. "S" business would collapse if the owner left.
"S" owns a job, "B" owns a system and hires competent people to operate it.Additional notes
Become a B before an I because I's invest in B's. Having a business will give you business sense, plus the free time and money to invest.Become a higher level investor
Levels 0-3 are poor or middle class, and invest unintelligently, if at all.
Level 4 - Long-Term Investor: starts early, uses stocks and mutual funds to get rich in the long term.
Level 5 - Sophisticated Investor: uses riskier vehicles like real estate, businesses, new stock issues.
Level 6 - Capitalist: creates investments that create jobs and make others rich.
A house is a liability, not an asset, because it doesn't generate cash, and it costs you in maintenance and taxes.
Formula for wealth: "build a business and buy real estate"; make money with C corporations, and shelter the income in real estate.7 Steps to the Financial Fast Track1. Mind your own business
Fill out your personal financial statement
Set 1- and 5-year financial goals2. Control your cash flow
Pay yourself first - save to invest
Eliminate personal debt3. Know the difference between risk and risky
Ignorance is risky; business and investing aren't
Relying on job security is risky; minding your own business isn't
Buying liabilities is risky; buying assets isn't4. Become educated in investing and business
For financial areas outside your expertise, 1) get educated or 2) find experts
Learn from seminars, classes, trade expos, and media5. Seek mentors
Find investing and business role models
The 6 people you spend the most time with determine your future6. Make disappointment your strength
Try new things and expect disappointment, but have a mentor to coach you through the experience7. Have faith
Believe in yourself