Rich Dad Poor Dad

Sadly, money is not taught in schools. Schools focus on scholastic and professional skills, but not on financial skills. This explains how smart bankers, doctors, and accountants who earned excellent grades may struggle financially all of their lives. (Location 47)

Our staggering national debt is due in large part to highly educated politicians and government officials making financial decisions with little or no training in the subject of money. (Location 49)

For example, one dad had a habit of saying, “I can’t afford it.” The other dad forbade those words to be used. He insisted I ask, “How can I afford it?” (Location 55)

“Study hard so you can find a good company to work for.” The other recommended, “Study hard so you can find a good company to buy.” (Location 68)

“When it comes to money, play it safe. Don’t take risks.” The other said, “Learn to manage risk.” (Location 73)

“There is a difference between being (Location 91)

poor and being broke. Broke is temporary. Poor is eternal.” (Location 91)

MBA. The other encouraged me to study to be rich, to understand how money works, and to learn how to have it work for me. “I don’t work for money!” were words he would repeat over and over. “Money works for me!” (Location 99)

Money is one form of power. But what is more powerful is financial education. Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth. (Location 127)

The poor and the middle class work for money. The rich have money work for them. (Location 136)

His father owned warehouses, a construction company, a chain of stores, and three restaurants. It was the restaurants that kept him out late. (Location 228)

Mike’s dad, whom I call my rich dad, owned nine of these little superettes, each with a large parking lot. They were the early version of the 7-Eleven convenience stores, little neighborhood grocery stores where people bought items such as milk, bread, butter, and cigarettes. (Location 281)

“That’s how they teach you in school,” he said, smiling. “But that is not how life teaches you, and I would say that life is the best teacher of all. Most of the time, life does not talk to you. It just sort of pushes you around. (Location 336)

Lesson #1: The Rich Don’t Work for Money (Location 475)

I have friends who keep working even though they have plenty. I know people who have millions who are more afraid now than when they were poor. (Location 556)

Land was wealth 300 years ago. So the person who owned the land owned the wealth. Later, wealth was in factories and production, and America rose to dominance. The (Location 1389)

industrialist owned the wealth. Today, wealth is in information. And the person who has the most timely information owns the wealth. (Location 1390)

Most people only know one solution: Work hard, save, and borrow. (Location 1459)

You take whatever happens and make it better. Few people realize that luck is created, just as money is. (Location 1460)

But instead of shopping with local real estate agents, I began shopping at the bankruptcy attorney’s office, or the courthouse steps. In these shopping places, a $75,000 house could sometimes be bought for $20,000 or less. (Location 1493)

The $40,000 was created from money in my asset column in the form of a promissory note from the buyer. Total working time: five hours. (Location 1499)

While the bulk of our money was in larger properties and the stock market, we were able to create more than $190,000 in assets (notes at 10 percent interest) in those six “buy, create, and sell” transactions. (Location 1505)

And it may not work in your area. The market conditions may be different. (Location 1532)

It is an example of money being only an agreement. (Location 1533)

Take the time to develop your financial intelligence. Harness the power of your brain and the asset column. (Location 1539)

The point I would like to make is that investments come and go. The market goes up and comes down. Economies improve and crash. (Location 1562)

Personally, I use two main vehicles to achieve financial growth: real estate and small-cap stocks. (Location 1573)

My overall philosophy is to plant seeds inside my asset column. That is my formula. I start small and plant seeds. Some grow; some don’t. (Location 1619)

My personal basis is real estate. I love real estate because it’s stable and slow-moving. (Location 1643)

Great opportunities are not seen with your eyes. They are seen with your mind. (Location 1652)

Today my investment company invests in South American countries and Asian countries, as well as in Norway and Russia. (Location 1797)

Life is much like going to the gym. The most painful part is deciding to go. Once you get past that, it’s easy. (Location 1844)

So the rule of thumb is: “Highly specialized; then unionize.” (Location 1860)

willing to take a course in sales and a course in direct marketing. (Location 1871)

They focus on perfecting their skills at building a better hamburger rather than the skills of selling and delivering the hamburger. (Location 1874)

the most important law of money: “Give, and you shall receive.” Instead, he believed in: “Receive, and then you give.” (Location 1918)

“Texans don’t bury their failures. They get inspired by them. They take their failures and turn them into rallying cries. Failure inspires Texans to become winners. (Location 1976)

They go broke over a duplex. Financially, they play life too safe and too small. (Location 1992)

But playing it safe and balanced on your investment portfolio is not the way successful investors play the game. (Location 1998)

If you have any desire to be rich, you must focus. (Location 2004)

Follow One (Location 2006)

Course Until Successful. (Location 2006)

But a savvy investor knows that the seemingly worst of times is actually the best of times to make money. When everyone else is too afraid to act, they pull the trigger and are rewarded. (Location 2038)

I hold a small portion of my assets in tax-lien certificates instead of CDs. I earn 16 percent per year on my money, (Location 2051)

They criticize instead of analyze. (Location 2069)

A great property manager is key to success in real estate. (Location 2073)

Finding a good manager is more important to me than the real estate. (Location 2073)

They don’t make money because they choose to not lose money. Instead of analyzing, they close their minds to another powerful investment vehicle, the stock market. (Location 2080)

With that information, I immediately began looking for and found a new, undervalued oil company that was about to find some oil deposits. (Location 2085)

A stop is simply a computer command that sells your stock automatically if the price begins to drop, helping to minimize your losses and maximize some gains. (Location 2091)

Today, I often meet people who are too busy to take care of their wealth. (Location 2106)

That’s the most common form of laziness: laziness by staying busy. (Location 2110)

Instead, rich dad required his children to say, “How can I afford it?” He believed that the words “I can’t afford it” shut down your brain. (Location 2123)

“How can I afford to never work again?” And my mind began to kick out answers and solutions. (Location 2141)

dad. “I still pay myself first. Even if I’m short of money. My asset column is far more important to me than the government.” (Location 2172)

“So you see, after paying myself, the pressure to pay my taxes and the other creditors is so great that it forces me to seek other forms of income. (Location 2181)

There are many people in the world of money, finances, and investments who have absolutely no idea what they’re talking about. (Location 2204)

It has encouraged us to learn a profession so we can work for money, but failed to teach us how to have money work for us. (Location 2214)

true. In real estate, I can go out and in a day come up with four or five great potential deals, while the average person will go out and find nothing, even looking in the same neighborhood. (Location 2224)

I have lost money and been set back many times, but it was the deep emotional reasons that kept me standing up and going forward. (Location 2244)

Financially, with every dollar we get in our hands, we hold the power to choose our future: to be rich, poor, or middle class. Our spending habits reflect who we are. (Location 2251)

Many rich families lose their assets in the next generation simply because there was no one trained to be a good steward over their assets. (Location 2256)

One is time, which is your most precious asset. The second is learning. (Location 2261)

But that is a choice we all make daily: the choice of what we do with our time, our money, and what we (Location 2262)

put in our heads. (Location 2262)

Invest first in education. (Location 2264)

Most people simply buy investments rather than first investing in learning about investing. (Location 2266)

So what do I do? I go to seminars. I like it when they are at least two days (Location 2269)

In 1973, I was watching this guy on TV who was advertising a three-day seminar on how to buy real estate for nothing down. I spent $385 and that course has made me at least $2 million, if not more. (Location 2270)

Today, I often say, “How would Donald Trump do this, or Warren Buffett or George Soros?” The only way I can access their vast mental power is to be humble enough to read or listen to what they have to say. (Location 2278)

Listening is more important than talking. If that were not true, God would not have given us two ears and only one mouth. (Location 2286)

I am always shocked at people who buy stocks or real estate, but never invest in their greatest asset, their mind. Just because you bought a house or two does not make you an expert at real estate. (Location 2290)

If you watch business channels on TV, they often have a panel of so-called experts. One expert will say the market is going to crash, and the other will say it’s going to boom. If you’re smart, you listen to both. Keep your mind open, because both have valid points. Unfortunately, most poor people listen to Chicken Little. (Location 2306)

I would say that one of the hardest things about wealth-building is to be true to yourself and to be willing to not go along with the crowd. This is because, in the market, it is usually the crowd that shows up late that is slaughtered. If a great deal is on the front page, it’s too late in most instances. Look for a new deal. (Location 2312)

Smart investors don’t time the markets. If they miss a wave, they search for the next one and get themselves in position. This is hard for most investors because buying what is not popular is frightening. (Location 2315)

Timid investors are like sheep going along with the crowd. Or their greed gets them in when wise investors have already taken their profits and moved on. Wise investors buy an investment when it’s not popular. They know their profits are made when they buy, not when they sell. They wait patiently. (Location 2317)

It’s all “insider trading.” There are forms of insider trading that are illegal, and there are forms of insider trading that are legal. But either way, it’s insider trading. (Location 2320)

the inside are you? The reason you want to have rich friends is because that is where the money is made. It’s made on information. You want to hear about the next boom, get in, and get out before the next bust. I’m not saying do it illegally, but the sooner you know, the better your chances are for profits with minimal risk. That is what friends are for. And that is financial intelligence. (Location 2321)

4. Master a formula and then learn a new one: the power of learning quickly (Location 2325)

The predominant formula I see in the world is that every day millions of people get up, go to work, earn money, pay bills, balance checkbooks, buy some mutual funds, and go back to work. That is the basic formula, or recipe. (Location 2331)

If you’re tired of what you’re doing, or you’re not making enough, it’s simply a case of changing the formula via which you make money. (Location 2333)

Years ago, when I was 26, I took a weekend class called “How to Buy Real Estate Foreclosures.” I learned (Location 2334)

a formula. The next trick was to have the discipline to actually put into action what I had learned. That is where most people stop. For three years, while working for Xerox, I spent my spare time learning to master the art of buying foreclosures. I’ve made several million dollars using that formula. (Location 2335)

I would venture to say that personal self-discipline is the number-one delineating factor between the rich, the poor, and the middle class. Simply put, people who have low self-esteem and low tolerance for financial pressure can never be rich. (Location 2352)

The three most important management skills necessary to start your own business are management of: 1. Cash flow 2. People 3. Personal time (Location 2358)

you (Location 2373)

The diagram reflects the actions of individuals who choose to (Location 2374)

pay themselves first. Each month, they allocate money to their asset column before they pay their monthly expenses. (Location 2375)

That is why my income comes from my asset column, through a Nevada corporation. If I work for money, the government takes it. (Location 2395)

I actually have liabilities that are higher than (Location 2398)

99 percent of the population, but I don’t pay for them. Other people pay for my liabilities. They’re called tenants. (Location 2398)

Don’t get into large debt positions that you have to pay for. Keep your expenses low. Build up assets first. Then buy the big house or nice car. Being stuck in the Rat Race is not intelligent. (Location 2405)

rich know that savings are only used to create more money, not to pay bills. (Location 2413)

My rich dad taught me to take the opposite approach. He believed in paying professionals well, and I have adopted that policy also. Today, I have expensive attorneys, accountants, real estate brokers, and stockbrokers. Why? Because if, and I do mean if, the people are professionals, their services should make you money. (Location 2422)

A good broker saves me time, in addition to making me money— like when I bought the vacant land for $9,000 and sold it immediately for over $25,000 so I could buy my Porsche quicker. (Location 2430)

What I find funny is that so many poor and middle-class people insist on tipping restaurant help 15 to 20 percent, even for bad service, but complain about paying a broker three to seven percent. They enjoy tipping people in the expense column and stiffing people in the asset column. That is not financially intelligent. (Location 2434)

Keep in mind that not all brokers are created equal. Unfortunately, most (Location 2437)

brokers are only salespeople. They sell, but they themselves own little or no real estate. There is a tremendous difference between a broker who sells houses and a broker who sells investments. The same is true for stock, bond, mutual fund, and insurance, brokers who call themselves financial planners. (Location 2437)

When I interview any paid professional, I first find out how much property or stocks they personally own and what percentage they pay in taxes. (Location 2440)

Find a broker who has your best interests at heart. Many brokers will spend the time educating you, and they could be the best asset you find. Just be fair, and most of them will be fair to you. If all you can think about is cutting their commissions, then why should they want to help you? It’s just simple logic. (Location 2443)

In the world of the asset column, being an Indian giver is vital to wealth. (Location 2455)

The sophisticated investor’s first question is: “How fast do I get my money back?” They also want to know what they get for free, also (Location 2456)

called a “piece of the action.” That is why the ROI, or return on investment, is so important. (Location 2456)

I will move my money in for a week to a month while the stock moves up. Then I pull my initial dollar amount out, and stop worrying about the fluctuations of the market, because my initial money is back and ready to work on another asset. So my money goes in, and then it comes out, and I own an asset that was technically free. (Location 2466)

People who hate risk put their money in the bank. In the long run, safe savings are better than no savings. But it takes a long time to get your money back and, in most instances, you don’t get anything for free with it. (Location 2471)

On every one of my investments, there must be an upside, something for free—like a condominium, a mini-storage, a piece of free land, a house, stock shares, or an office building. And there must be limited risk, or a low-risk idea. (Location 2473)

than ROI. They look at the assets they get for free once they get their money back. That is financial intelligence. (Location 2477)

“I told him the $3,000 was his, but he could not directly buy a car with it. He could use it to find a stockbroker and buy and sell stocks. Once he had made $6,000 with the $3,000, the money would be his for the car, and the $3,000 would go into his college fund.” (Location 2492)

When I wanted to buy a Porsche, the easy road would have been to call my banker and get a loan. Instead of choosing to focus in the liability column, I chose to focus in the asset column. (Location 2516)

If your financial intelligence is low, money will run all over you. It will be smarter than you. If money is smarter than you, you will work for it all your life. To be the master of money, you need (Location 2523)

to be smarter than it. Then money will do as it is told. It will obey you. Instead of being a slave to it, you will be the master of it. That is financial intelligence. (Location 2525)

I follow what Warren Buffett invests in, and I read anything I can about his point of view on the market and how he chooses stocks. And I read about Donald Trump, trying to find out how he negotiates and puts deals together. (Location 2536)

If I could leave one single idea with you, it is that idea. Whenever you feel short or in need of something, give what you want first and it will come back in buckets. That is true for money, a smile, love, or friendship. I know it is often the last thing a person may want to do, but it has always worked for me. I trust that the principle of reciprocity is (Location 2549)

true, and I give what I want. I want money, so I give money, and it comes back in multiples. I want sales, so I help someone else sell something, and sales come to me. I want contacts, and I help someone else get contacts. Like magic, contacts come to me. I heard a saying years ago that went: “God does not need to receive, but humans need to give.” (Location 2552)

Stop doing what you’re doing. In other words, take a break and assess what is working and what is not working. The definition of insanity is doing the same thing over and over (Location 2576)

and expecting a different result. Stop doing what is not working, and look for something new. • Look for new ideas. For new investing ideas, I go to bookstores and search for books on different and unique subjects. I call them formulas. I buy how-to books on formulas I know nothing about. (Location 2577)

Find someone who has done what you want to do. Take them to lunch (Location 2584)

and ask them for tips and tricks of the trade. (Location 2585)

Make lots of offers. When I want a piece of real estate, I look at many properties and generally write an offer. If you don’t know what the right offer is, neither do I. That is the job of the real estate agent. They make the offers. I do as little work as possible. (Location 2593)

I said to write offers on all six, offering half of what the owners asked for. She and the agent nearly had heart attacks. They thought it was rude, (Location 2597)

I always make offers with escape clauses. In real estate, I make an offer with language that details “subject-to” contingencies, such as the approval of a business partner. Never specify who the business partner is. Most people don’t know that my partner is my cat. If they accept the offer, and I don’t want the deal, I call home and speak to my cat. (Location 2606)

You must go to the market and talk to a lot of people, make a lot of offers, counteroffers, negotiate, reject, and accept. I know single people who sit at home and wait for the phone to ring, but it’s better to go to the market, even if it’s only the supermarket. Search, offer, reject, negotiate, and accept are all parts of the process of almost everything in life. (Location 2611)

I will jog a certain neighborhood for a year and look for change. For there to be profit in a deal, there must be two elements: a bargain and change. (Location 2615)

There are lots of bargains, but it’s change that turns a bargain into a profitable opportunity. (Location 2616)

jog, I jog a neighborhood I might like to invest in. It is the repetition that causes me to notice slight differences. I notice real estate signs that are up for a long time. That means the seller might be more agreeable to deal. I watch for moving trucks going in or out. I stop and talk to the drivers. I talk to the postal carriers. It’s amazing how much information they acquire about an area. I find a bad area, especially an area that the news has scared everyone away from. I drive it for sometimes a year waiting for signs of some thing changing for the better. I talk to retailers, especially new ones, and find out why they’re moving in. It takes only a few minutes a month, and I do it while doing something else, like exercising, or going to and from the store. (Location 2617)

When the supermarket has a sale, say on toilet paper, the consumer runs in and stocks up. But when the housing or stock market has a sale, most often called a crash or correction, the same consumer often runs away from it. When the supermarket raises its prices, the consumer shops somewhere else. But when housing or the stock market raise their prices, the same consumer often rushes in and starts buying. Always remember: Profits are made in the buying, not in the selling. (Location 2623)

shopped at the foreclosure auction. I paid $500 for a class on how to do this. (Location 2629)

I found a large piece of land, larger than what my friend wanted to buy, tied it up with an option, called my friend, and he said he wanted a piece of it. So I sold the piece to him and then bought the land. I kept the remaining land as mine for free. (Location 2634)

Moral of the story: Buy the pie, and cut it in pieces. (Location 2635)

Small people remain small because they think small, act alone, or don’t act all. (Location 2641)

The owner wanted $102,000, but we offered only $79,000. He took it immediately and agreed to carry back the loan with a 10 percent down payment. All my friend had to come up with was $7,900. As soon as the owner moved, my friend put the house up for rent. After all expenses were paid, including the mortgage, he put about $125 in his pocket each month. (Location 2663)

Three years later, the real estate market greatly improved in Phoenix and he was offered $156,000 for the same house by the tenant who lived in it. Again, he asked me what I thought. I advised that he sell it, using a 1031 tax-deferred exchange. (Location 2669)

Suddenly, he had nearly $80,000 to operate with. I called another friend in Austin, Texas, who then moved this tax-deferred capital gain into a mini-storage facility. Within three (Location 2671)

months, he began receiving checks for a little less than a $1,000 a month which he then poured back into the college fund. A couple of years later, the mini-warehouse sold, and he received a check for nearly $330,000 as proceeds from the sale. He rolled those funds into a new project that would now generate over $3,000 a month in income, again, going into the college fund. He is now very confident that his goal will be met easily. (Location 2672)

His children will be able to afford the education they want, and he will then use the underlying asset, wrapped in his legal entity, to pay for his retirement. As a result of this successful investment strategy, he will be able to retire early. (Location 2676)

Education and wisdom about money are important. Start early. Buy a book. Go to a seminar. Practice. Start small. I turned $5,000 cash into a one-million-dollar asset producing $5,000 a month cash flow in less than six years. But I started learning as a kid. I encourage you to learn, because it’s not that hard. In fact, it’s pretty easy once you get the hang of it. (Location 2686)

The Three Incomes In the world of accounting, there are three different types of income: 1. Ordinary earned 2. Portfolio 3. Passive (Location 2693)

Passive income, in most cases, is income derived from real estate investments. Portfolio income is income derived from paper assets (Location 2698)

such as stocks and bonds. Portfolio income is the income that makes Bill Gates the richest man in the world, not earned income. (Location 2699)

“The key to becoming wealthy is the ability to convert earned income into passive income or portfolio income as quickly as possible.” (Location 2700)

“Taxes are highest on earned income. The least-taxed income is passive income. That is another reason why you want your money working hard for you. The government taxes the income you work hard for more than the income your money works hard for.” (Location 2701)

The Key to Financial Freedom The key to financial freedom and great wealth is a person’s ability to convert earned income into passive (Location 2711)

and/or portfolio income. My rich dad spent a lot of time teaching Mike and me this skill. Having this ability is the reason my wife Kim and I are financially free, never needing to work again. (Location 2712)

“A real investor makes money in an up market and a down market. That is why they make so much money.” (Location 2727)

As Warren Buffett, America’s richest investor says, “Risk comes from not knowing what you’re doing.” (Location 2732)

“If you want to be rich, you must know what kind of income to work hard for, how to keep it, and how to protect it from loss. That is the key to great wealth.” (Location 2739)

All of you were given two great gifts: your mind and your time. It is up to you to do what you please with both. With each dollar bill that enters your hand, you, and only you, have the power to determine your destiny. (Location 2750)

Spend it foolishly, and you choose to be poor. Spend it on liabilities, and you join the middle class. Invest it in your mind and learn how to acquire assets, and you will be choosing wealth as your goal and your future. (Location 2751)

Choose to share this knowledge with your children, and you choose to prepare them for the world that awaits. No one else will. You and your children’s future will be determined by choices you make today, not tomorrow. (Location 2754)