Rich Dad Manifesto

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The Better Way Is To: Earn, Spend, Pay Taxes
The Better Way Is To: Earn, Spend, Pay Taxes



Note: This book changed (my life) the way I think about money.

Intrigued by different thinking? Me too. So, in scanning the excerpt on Amazon, I couldn’t help but be intrigued at the title’s concept. So here I am, December 21, 2008, sitting in our living room, with my in-laws watching the Vikings and Falcons football game, my wife in the kitchen perparing dinner, my son playing his DS, and me, with laptop in hand, typing this message. I’ve reached the first of six Lessons.

The story revolves around what a boy learns from two fathers. One his own. The other, a friend’s father.

The boy’s real dad is educated, has a god job, and is not rich. The other dad is not educated, owns alot of things, and is very rich. The boy goes through life being exposed to both men’s idea’s around money.

So the story’s primary character, a nine-year old boy, is learning his first lesson about money. It’s easier to change yourself than to change others. If you think your employer or boss is the problem, then you have to change them. If you realize you are the problem, you can change yourself, learn something, and grow wiser. The author writes, “Most people want everyone else in the world to change but themselves. Let me tell you, it’s easier to change yourself than everyone else”.

The rich dad tells the young boy that he has 150 employees and none ever asked him to teach them about money.

Lesson #1:
“The poor and the middle class work for money. The rich have money work for them”.

Merry Christmas!

Here it is December 25, sitting with laptop in lap again. So here is another tip rich dad shares: Most people run their lives on two things – fear and greed. It’s a trap called the Rat Race.
Rich dad wants to teach the boys to master the power of money, to learn how to handle fear and desire. Ignorance intensifies fear and desire. When emotions play too big a part, people go after the wrong things for the wrong reasons.

The answer is to use your emotions to think, not think with your emotions.

Do this and you can avoid the Tar Baby in the briar patch. Rich dad says, “The briar patch is our fear and our greed. Going into our fear and confronting our greed, our weaknesses, our neediness is the way out. And the way out is through the mind, by chossing our thoughts.”

He goes on to say, “Choosing what we think rather than reacting with our emotions. Remember what I said before: A job is only a short-term solution to a long-term problem.”

Seeing what others miss.

Another point he makes is when you stop focusing on making money, you can start to focus on making money work for you. You start to look around and see things differently and find opportunity where you and others never dreamed of. The comic books getting thrown out is a great example.

The second lesson is “Teaching Financial Literacy.”

Rich dad suggests that the concept of assests versus liabilities is so simple, that “educated” people will overlook the number one rule of finance – assets put money in your pocket, liabilities take money from your pocket.

Happy New Year!!!!

It’s January 1, 2009 and I’d like to recap what I’ve learned in chapters three & four.

In 1923, agroup of wealthy and powerful business leaders met in Chicgao, at the Edgewater Beach hotel. Twenty five years later, nine of the men had either died broke, gone insane or committed suicide. The author concludes that too many people focus on money and not their greatest wealth, which is their education.

Money without financial intelligence is money soon gone, the author writes. He says people think money solves problems. It doesn’t. Intelligence does, and produces money as well.

It’s not how much money you make, it’s how much you keep.

Rule # 1 (and it is the only rule); Know the difference between an asset and a liability, and buy assets. It’s absurdly simple, and, it is the only rule you need to know to get rich.

Assets put money in your pocket. Liabilities take money from your pocket. Period!

Cash flow pattern for an asset = income.

Cash flow pattern for a liability = expense.

The poor and middle class spend their life buying liabilities. The rich buy assets. It’s not knowing the difference that causes trouble and struggle.

For most, as income goes up, so do expenses. It’s the “American Way”.

The biggest expense most have is taxes. But it’s usually not income tax. It’s usually social security tax – money your employer cannot pay you. And to top it off, you still have to pay income tax on the amount deducted for social security. You never see this money.

The Japanese, the dad told him, were aware of three powers: The sword, the jewel and the mirror. The mirror is self-knowlege and the most prized – even greater than weapons or money.

The poor and middle class often allow the power of money to control them. By simply getting and working harder they never question a better way. This is, again, known as the rat race.

These people, the author continues to share, “Often mindlessly repeat what they have been told. Ideas such as “diversify”, or “your home is your biggest asset”. “Your home is your biggest investment.” “You get a tax break for going into greater debt.” “Get a safe job.” Don’t make mistakes.” “Don’t take risks.”

On page 70, he writes a paragraph particularly impactful to me, since I have been a public speaker for 10 years now.

“It is said that the fear of public speaking is a fear greater than death for most people. According to pyschiatrists, the fear of public speaking is caused by the fear of ostracism, the fear of standing out, the fear of criticism, the fear of ridicule, the fear of being an outcast. The fear of being different prevents most people from seeking new ways to solve their problems.”

This rich dad exposed the two boys, now 16 years old, to some of the smartest people in the community, because to rich dad was meeting and directing them because he hired them to work for him – attorneys, bankers, investors, brokers, accountants, managers, employees, etc. The boys got an education light years beyond what their high scholl classmates wwould ever get.

Important point – your home is not an asset. The bigger the home, the greater the expenses. Expenses take money from your pocket and are a liability.

If you think your home is your biggest asset, you’re in trouble.

I have to say it again, because it’s so profound, and so completely different from anything I’ve ever been taught about money.

If you think your home is your biggest asset, you’re in trouble.

High emotions tend to lower financial intelligence. Money has a way of making every decision emotional. Yikes. We better figure this one out!

Why the rich get richer:Their asset column generates more income than their expenses.

Why the middle class struggle: As their wages increase, so do their taxes (and expenses).

They work for:
1. Someone else. While earning a paycheck, they make someone else richer.
2. The overnment. Taxes.
3. The bank: Mortage. Credit card debt, etc.

The author states, “The problem with simply working harder is that each of these three levels takes a greater share of your increased efforts.”

The way he ends chapter three is with his definition of wealth. It’s one he adopted from Buckminster Fuller (the geodesic dome patent in 1961):

“Wealth is a person’s ability to survive so many number of days forward.” Or, in the authors words, “If I stopped working today, how long could I survive?”

This is different from net worth (assets minus liabilities).

Very different.

How long could I survive if I stopped working today? Yikes. I’ve got some work to do.

On paper, things look real good. But here’s the catch, paper doesn’t pay bills and cover living expenses, money does.

Only if I started to sell our assets, would I be able to generate income to buy groceries, gas, electricity, telephone, etc. At this pace, I start to get a picture of wealth versus worth.

Here’s an example: let’s say my income is $1,000 per month. My expenses $2,000 per month. Assuming a 30-day month, I’d make it half a month.

Not until I generate $2,000 per month would I be wealthy, because my asset income would cover my living expenses. Got it?

So then the goal would be to buy (build) additional assets to generate additional income to then reinvest to buy more assets. Got it?

This is really making sense.

The more my assets grow, the more my income grows. The more my income grows, the more assets I can buy. The more assets I buy, the more my income grows. The more my income grows….the cycle is self perpetuating (potentially), as long as I keep my expenses less than my income.

Hey, it’s still January 1, but I’m now ready to move to chapter four’s key message(s):

Mind Your Own Business

Ray Kroc, the founder of McDonalds, gave a speech to the University of Texas at Austin MBA class, in 1974. He essentially said that everyone thinks he’s in the hamburger business. “I’m not”, he says. He then told the audience, “I’m in the real estate business.”

When “Rich Dad, Poor Dad” was released in 1997, McDonalds was the largest single owner of real estate in the world, owning even more than the Catholic Church. Maybe they still are number one today. It doesn’t matter. The point is made.

Mind your own business. Working for someone else makes it difficult to mind your own business. Don’t confuse your profession with your business. There’s a BIG difference.

An important reason you’re not a millionaire on paper is when you start selling off your assets, you’re taxed on your capital gains. You ain’t gonna pocket a million dollars. Got it?

Here are some assets the author suggests:

1. Businesses that do not require your presence.
2. Stocks.
3. Bonds.
4. Mutual funds.
5. Income-generating real estate.
6. Notes (IOU’s).
7. Royalties from intellectual property (music, scripts, patents)
8. Anything else that has value, produces income or appreciates and has a ready market.

The poor dad said get a good job. The rich dad said aquire assets that you love.

If you don’t love it, you won’t take care of it.

Keep your asset column strong. Once a dollar goes in, don’t let it come out. Money works for you.

Keep your daytime job, and work hard, but keep building your asset column.

Rich buy their luxuries last. The poor first.

A true luxuary is something you can afford and is a reward for the hard work of investing in and developing an asset.

Ok. Time for a break. I’m on chapter five – The History of Taxes and The Power of Corporations.

Take from the rich and give to the poor. Classic Robin Hood.

The real reality is that the rich are not taxed.


It’s the middle class that pays pays for the poor. Especially the educated upper-income middle class.


The year income tax became a permanent US practice, with the adoption of the 16th amendment to the Constitution.

Once upon a time Americans were anti tax. Seriously. We had no taxes.

Taxes were eventually put in place to “punish” the rich. The rich were taxed, sort of like the rob the rich and give to the poor idea. Our government got the taste of money and never looked back. Eventually, the middle class and poor also had to pay taxes.

What happened though was the very people who were supposed to benefit (the middle class and poor), were now the victims. Victims because rich folks are smart and found ways, loopholes, around taxes.

One of those loopholes is the corporation.

A corporation isn’t a thing though.

It’s really like a file folder of legal stuff, registered and totally legal. It’s not a building. It’s a legal “body” without a soul.

Real estate is one great example of avoiding taxes. You can invest, trade up, and as long as you trade up, you avoid capital gains taxes. This is section 1031 of the IRS.

The author reinforces that corporations are the biggest secret of the rich.

The author, by the way is Robert T. Kiyosaki, along with Sharon L. Lechter, C.P.A. He says his rich dad’s best lession was, “Be smart and you won’t be pushed around as much. If you know you’re right, you’re not afraid of fighting back.”

Here are four points he says make up financial IQ:

1. Accounting
2. Investing
3. Understanding Markets
4. The Law

Two more real important points:

1. Tax advantages
2. Protection from lawsuits

Accounting. Financial literacy to read and understand financial statements. The more money the more accuracy required. Strengths and weakness are easier to spot. Left-brain.

Investing. The science of money making money. Strategies and formulas. Right-brain.

Understanding markets. Science of supply and demand. The “technical” aspects of the market, which is emotion driven. The other is the “fundamental” or the economic sense – does the investment make sense based on current market conditions. Stocks, bonds, real estate, baseball-card markets, etc.

The law. Combine the tax advantages of the corporation with sound technical accounting, investing and market skills – to aid explosive growth. The difference is profound when it is held up for the long-term.

Tax advantages. A corporation can do so many things an individual can’t. Like pay for expenses before taxes. Dude! How cool is that?! So someone like me pays taxes and spends what is left over. A corporation earns, then spends everything it can, and is taxed on what is left. Dude. Again, how cool is that?! Vacations become board meeetings. Car payments, insurance, repairs are company expenses. Health club membership? Expense. Restaurant meals? Most are partially expensible. And so on. All done legally, with pre-tax dollars. Dude!

Protection from lawsuits. People like to sue. So the rich hide their assets as much as possible – using corporations and trusts, to stay protected from creditors. The rich control everything, but own nothing. Huh?

Robert recommends learning more about protection from lawsuits and suggests reading, “Inc. and Grow Rich

He summarizes:

The Rich:
1. Earn
2. Spend
3. Pay Taxes

People who work for corporations:
1. Earn
2. Pay Taxes
3. Spend

Ready for Lession Five? Great! Let’s go. It’s titled – The Rich Invent Money

Love the way Robert starts out. He’s been a teacher since 1984. Me, since 1999. He calls it a disturbing profession. Anyway, he talks about a big frustration he observes in all his students, including himself (and may I add myself in their too).

He says we all have potential. I call that a blinding flash of the obvious (BFO). Yet the one thing that holds us all back is self-doubt.

It is less about skills and financial intelligence than it is about lacking self-confidence.


Powerful, eh?

Some are more affected than others. Another BFO.

In the real world, we all need to exercise something else. Something scary. It’s called by many names:

Guts. Audacity. Balls. Courage. Tenacity. Cunning. Daring. Risk. Bravado. Brillance.

In the real world!

In the real world it isn’t necessarily the smartest, but rather, the most bold!

Those who cling to old ideas and to fear are doomed to get what they’ve always gotten.

First it was Land. Then Industry. Now, Information. Wealth is always a time of opportunity and today’s world is perhaps the biggest opportunity we’ve ever seen.

It’s a GREAT time to be alive!!

The person who owns the most timely information owns the wealth.

Robert created a game, CASHFLOW. The interaction between the income statement and the balance sheet – how cash flows.

Financial intelligence is about having more options. If opportunity doesn’t come to you, what are you gonna do to improve your income? How creative can you be to solve challenges? Most people subsrcibe to this: work hard, save and borrow.

So Robert says, on page 115, “The more real you think money is, the harder you will work for it. If you can grasp the idea that money is not real, you will grow richer faster.” The mind is money – at least that is what I think Robert is saying. look for ways to increase and use your financial intelligence.

In a down real estate market, you can buy, create and sell transactions. Page 116-17. He uses real estate as his foundation and small-cap stocks for fast growth. He doesn’t recommend anything he does. he just tells what he does to accomplish five things. these five things can be applied to any situation, I believe:

1. To inspire people to want to learn.
2. To let folks know it is easy if the foundation is strong.
3. To show that anyone can create great wealth.
4. To show that there are millions of ways to achieve your goals.
5. To show that it’s not rocket science.

REIT = Real estate investment trust.
Stock portfolio, surrounded by a corporation – he and his wife call a “personal mutual fund”.

The idea is to use your financial/technical knowlege, wisdoma and love of the game to cut the odds down, lowering risk.

Three additional skills needed to be an investor who creates investments:

1. How to find an opportunity that everyone else has missed. You need to see with your mind what others miss with their eyes. Example of the guy who bought a sppoky, run down house. Everyone questioned him. But you see, the house came with four empty lots. He torn the old house down and sold the five lots to a builder.

2. How to raise money. Learn how to raise capital, without going to the bank. Don’t let lack of money stop you from making the deal. Investing isn’t about buying, it’s about knowing.

3. How to organize smart people. Intelligent people are those who work with or hire people who are smarter than they are.

Risk is always around you. Learn to manage it instead of it stopping you.

Dude, here we are 8:40pm, Saturday, January 3, 2009. I’ve had a great day going to Downtown Disney’s Lego’s shop, and having a wonderful seafood feast with my in-laws, mom, wife and son. A perfect afternoon.

And, finally, Lesson six.

Work To Learn – Don’t Work For Money

He tells the story of the reporter, an excellent writer, who didn’t want to learn who to sell. Robert isn’t a best-writing author. He’s a best-selling author. Most people just don’t get it.

Worth repeating, financial intelligence is:

Accounting, investing, marketing, and law.

When it comes to money, and life, most people know only one skill – work hard.

Robert’s first book was “If You Want to Be Rich and Happy, Don’t Go to School?”. His publisher asked him to change the title to “The Economics of Education”. That would sell two books. One to his family and one to his best friend.

By having a controversial title, he would get on more TV and radio shows, and get millions in free publicity.

Funny bone? Know what JOB means? “Just over broke.”

Here’s another funny thought. “Workers work hard enough to not be fired and owners pay just enough so that workers won’t quit.”

Because schools don’t teach financial intelligence, most people work to “live within their means”. And even though they try, they can’t.

Robert suggests to young people to work for the opportuntiy to learn, not for the money. he described how his job progression was a path of learning opportunities. For example, his job at Xerxo taught him how to sell. His job as a pilot taught him how to lead others.

He formed his first company in 1977, selling nylon and velcro wallets, manufactured in the far east and shipped to New York.

He uses the movie, “Jerry McGuire’ as an example of people’s fear. When Jerry got fired, he asked, “Who wants to come with me?” One female co-worker said, “I would but I’m up for a promotion in three months”. Excuses and fear. Deadly, eh?

We keep ourselves busy working to pay bills. Playing it safe. Running in the rat race.

Highly specialized, then unionize. He talks about knowing a little about a lot, instead alot about one thing. His rich dad thought this was dangerous to be specialized.

At home, who can cook a better hamburger than McDonald’s? Most people can, using their backyard grills or experience in their own kitchen. So, if there are many who can cook a better burger, why is McDonald’s making so much money? Which leads to another extremely important point.

Business systems are the key. It’s the ability to put processes in place to make money. Anybody can talk about it. But unless you can execute the business plan, you’ve got nothing but an occassional excellent burger you enjoy with your family. Doesn’t exactly pay the bills, does it?

The world is filled with talented, poor people.

These people focus on making a better burger. Huge mistake.

Selling and marketing and delivering their burgers is where they should become excellent. Otherwise, their talented but poor.

Robert says the main management skills needed are:
1. The management of cash flow.
2. The management of systems (including yourself and time with family).
3. The management of people.

The most important specialized skills are sales and marketing. The ability to sell – therefore, to communicate with others.

Writing, speaking, negotiating. Crucial!

We usually don’t get good at these for fear of rejection.

So, let’s add one more crucial skill (courtesy of me) – handling rejection.

Work with people smarter than you. Pull smart people together in teams.

Robert ends chapter seven with his rich dad’s belief in giving to receive. He said it’s the secret to most wealthy families.

Chapter Eight – Overcoming Obstacles




Bad Habits


Wow, here it is Sunday, March 8, 2009, and I’m just getting back th writing notes. Fininshed the book two months ago, and for a god portion, was entering notes as I read. So much for that. The last 50 pages will be a bit lighter on the details. OK? Good.

Fear – overcoming the fear of losing money. It’s how you handle the failure of losing money. Start saving early if you hate risk.

Failure inspires winners and defeats losers. It’s one of the winner’s biggest secrets. use defeat to come back stronger.

Cynicism – Doubt, what if?, it didn’t work before, etc. A great property manager is the key to real estate success. Hire one that will fix toilets, so you don’t have to.

Laziness – many stay busy so they don’t have to face the really important things, like health and wealth building. Laziness by staying busy. Be careful with this one. It’s silent but deadly.

Poor Dad would say, “We can’t afford it”.

Rich Dad would say, “How can we afford it?”

Feel the difference?

Guilt is worse than greed. For guilt robs the body of it’s soul.

Eleanor Rososevelt said, ” Do what you feel in your heart to be right – for you’ll be criticized anyway.”

HabitsAre lives are a reflection of our habits. Learn to pay yourself first. Period.

Arrogance – Arrogance is ego plus ignorance. Rich Dad said, “What I know makes me money. What I don’t know loses me money.” When you know you’re ignorant, find an expert or educate yourself somehow.

Chapter Nine – Getting Started

Rich Dad suggests the following: Acquiring wealth is like riding a bike. When you first start learning, there’s a lot of wobbling. After a while, it’s a piece of cake. But when it comes to money, it’s your determination to get through the wobbling that holds your key, and your determination is really a very personal attribute.

Try to let go of the old dogma, “get a good education, work hard, earn money and spend it, and when we run short, borrow.”

Here’s Robert’s ten steps:

1. I Need a reason greater than reality: The power of the spirit. The will to do what others will not.

If you do not have a strong reason, there is no sense of reading further. It will sound like too much work

2. I choose daily: The power of choice. Educate yourself how to use every dollar.

3. Choose friend carefully – The power of association. Know what you can learn from your friends, and avoid any of their fears and doubts.

4. Master a formula and then learn a new one – The power of learning quickly. Every baker has a recipe for bread then they learn a new one.

5. Pay yourself first – The power of self-discipline. The most difficult to master is this one.

The three most important management skills Robert says you must master are:

1. Management of cash flow
2. Management of people
3. Management of personal time

He recommends, “The Richest Man in Babylon”, by George Classen

See diagrams on pages 174 -175.

6. Pay your brokers well – The power of good advice. Don’t take shortcuts to get great advice.

7. Be an Indian giver – This is the power of getting something for nothing. Ask, “How fast can I get my money back? (and what can I get for free – aka a piece of the action)

8. Assets buy luxuries – The power of focus. Use money to make money – the father who gave his 16-year old son $3000 to invest to earn money to buy his first car.

Robert’s example from page 181:

If we gave 100 people $10,000 at the start of the year, he gives his opinion that at year’s end:

— 80 would have nothing. And many would be in even greater debt.
— 16 would have increased their $10,000 by 5-10%
— 4 would have increased it to $20,000 or into the millions

9. The need for heros – The power of myth. Find people who make it look easy, and use their attitude to mimic their bravado.

10. Teach and you shall receive – The power of giving. It is necessary to give away money – give to get.

Chapter Ten – Still Want More? Here are some To Do’s

* Stop doing what you’re doing. Take a break and assess what you do and don’t do.

* Look for new ideas. He read “The 16 Percent Solution”, by Joel Moskowitz. Find someone who’s done what you want to do and take them to lunch.

* Always make offers with escape clauses. For example, “subject to approval of business partner.” (page 189)

* Finding a good deal, the right business, the right people, the right investors, or whatever is just like dating. You must go to the market and talk to alot of people, make a lot of offers, counteroffers, negotiate, reject and accept.

* Stocks. “Beating the Street”, by Peter Lynch. Know what you’re looking for before you go looking.

* Real Estate – profit is made when you buy, not when you sell. Wow (page 190).

* Learn from history.

* Action always beats inaction.

Robert closes out his book with a few thoughts, including this one, “The idea that it takes money to make money is the idea of the financially unsophisticated. This doesn’t mean they are not intelligent. They simply haven’t learned the science of making money”.

“It is what is in your head that determines what is in your hand”.

“Don’t play it safe, play it smart”.

Your mind and your time: Spend it foolishly, and you join the poor. Spend it on liabilities and you join the middle-class. Spend it on acquiring assets and you will be choosing wealth.

There, we made it.

The End.
(March 8, 2009 – 9pm)

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