Robert T. Kiyosaki
accredited investor if the individual has: (Location 23)
I realized that I needed to understand the thinking pattern of my rich dad if I wanted to have the same financial power he had. I knew that if I thought like him, I would be rich forever. (Location 84)
I realized that wealth was a way of thinking and not a dollar amount in the bank. It is this thinking pattern of rich investors that I want to deliver to you in this book. (Location 87)
The worst way to invest is to invest as an individual. The average investor knows very little about business and often invests as an individual. (Location 99)
I will also spend time on investing through a business because that is how rich dad taught me to invest. (Location 102)
The reason we have billionaires who are still in their twenties is not because they bought investments. They created investments, called businesses, that millions of people want to buy. (Location 108)
A true investor makes money regardless of whether the market is going up or crashing down. (Location 125)
One of rich dad’s plan was preparing my mind to become a rich investor. (Location 131)
Rich dad encouraged me to invest (Location 136)
from the B quadrant because the tax laws are better for investing. (Location 136)
"The tax laws are not fair. They are written for the rich and by the rich. If you want to be rich, you need to use the same tax laws the rich use." (Location 137)
One of the reasons that 10 percent of the people control most of the wealth is that only 10 percent know which tax laws to use. (Location 138)
One problem is the problem of not enough money. The other problem is the problem of too much money. (Location 154)
Rich dad often said, "If you want to be rich, just find out what everyone else is doing and do exactly the opposite." (Location 170)
The average investor works hard. The rich investor works less and less to make more and more. (Location 178)
While the average investor lives in fear of (Location 187)
market crashes, the rich investor looks forward to market crashes. (Location 187)
"It is known as a non-registered security. This particular investment is sometimes (Location 302)
called a ‘private placement memorandum.’" (Location 302)
"The three E’s," I repeated. "What are the three E’s?" (Location 342)
Education Experience (Location 344)
Excess (Location 345)
"It’s the first million that is the hardest." (Location 373)
In retrospect, making $1 million was not that difficult. It’s keeping the million and having it work hard for you that I found to be difficult. (Location 373)
The following is a list of some of the investments in which so-called accredited investors and sophisticated investors invest: (Location 378)
Private placements Real estate syndication and limited partnerships Pre-initial public offerings (IPOs) IPOs (while available to all investors, IPOs are not usually easily accessible) Sub-prime financing Mergers and acquisitions Loans for start-ups Hedge funds (Location 380)
Investments such as these are where the rich routinely invest their money. (Location 390)
A 35-percent return is normal, but returns of 1,000 percent and more are occasionally achieved. (Location 391)
It’s not simply a matter of, "Buy 100 shares of this or sell 100 shares of that." Nor is it, "Is the P/E high or is the P/E low?" That is not what being a sophisticated investor is about. Investing in these investments is about getting very close to the engine of capitalism. (Location 393)
This book is specifically about the investor and the path to becoming a sophisticated investor. It is about your finding the path that’s right for you to acquire the three E’s: education, experience, and excess cash. (Location 398)
The Five Phases of Becoming a Sophisticated Investor (Location 406)
If you are a student of great wealth, you may notice while reading this book that rich dad’s five phases are the same five phases that the richest business people and investors in the world went through in order to become very, very rich. (Location 420)
Are You Part of the Revolution? Great wealth, vast fortunes, and mega-rich families were created during the Industrial Revolution. The same is going on today during the Information Revolution. (Location 425)
While Mike and I were in high school, rich dad had made his move by expanding to different islands of the Hawaiian chain, buying businesses and real estate. (Location 462)
"The only reason I built businesses was so I could invest in the investments of the rich. The only reason you build a business is so that your business can buy your assets. Without my businesses, I could not afford to invest in the investments of the rich." (Location 478)
"Most investments are too expensive when you purchase them as an employee. But they are much more affordable if my business buys them for me." (Location 481)
On the other hand, my rich dad said, "Learn to build businesses and invest through your businesses." He was recommending a career path that looked like this: (Location 490)
"When it comes to money and investing, people have three fundamental reasons or choices for investing—to be: Secure, Comfortable, or Rich." (Location 556)
Only three out of a hundred people in America are rich because of this priority of choices. (Location 563)
My poor dad put "to be secure" as priority one, and rich dad put "to be rich" as priority one. Before beginning to invest, it is important to decide what your priorities are. (Location 580)
My real dad always encouraged me to play it safe and seek security. My rich dad encouraged me to develop skills and be creative. (Location 617)
The safest thing that person can do is just put money in the bank and live off the interest only. People who can see the other side of the coin would take that money and multiply it rapidly and safely. (Location 626)
They use their money to get to the other side faster while everyone else uses money to become poorer faster." (Location 628)
Most rich kids lose their parents’ money because, although they grow up in extreme wealth, they never really learn how to build an engine or fix it after it is broken. (Location 635)
I have noticed that one of the main reasons people are not rich is that they worry (Location 651)
too much about things that might never happen. (Location 651)
"If you do not have a plan for having too much money, then you will lose all your money and go back to the only plan you know, which is what 90 percent of the population knows—a world of not enough money." (Location 654)
It was these financial skills that gave rich dad the power to begin acquiring some of the most valuable real estate in Hawaii even though he had very little money. These same financial skills give people the power to take an opportunity and turn it into millions of dollars. Most people can see opportunities. They just cannot turn that opportunity into money. That is why they often seek even more security. (Location 660)
The problem with investing in something because it’s popular or rated as the number-one fund for the past two years is that real investors have already made their money in that investment. (Location 750)
"Too many so-called investors get attached to one investment product and one investment procedure. For example, a person may invest only in stocks or a person may invest only in real estate. The person becomes attached to the vehicle and then fails to see all the other investment vehicles and procedures available. The person becomes an expert at that one wheelbarrow and pushes it in a circle forever." (Location 824)
A true investor does not become attached to the vehicles or the procedures. A true investor has a plan and has multiple options for different investment vehicles and procedures. All a true investor wants to do is get from point A to point B safely and within a desired time frame. That person doesn’t want to own or push the wheelbarrow." (Location 829)
Rich dad nodded, saying, "In fact, don’t invest until you have a plan. Always remember that investing is a plan—not a product or procedure. That is a very important lesson." (Location 849)
"Because the idea that it takes money to make money is one of the worst ideas there is, especially if a person wants more money," (Location 869)
If a person leaves school without learning the vocabulary of investing, finance, money, accounting, corporate law, and taxation, it is difficult to feel comfortable as an investor. (Location 900)
He taught me that the word mortgage comes from mortir, which is French for death. So a mortgage is "an engagement until death." (Location 906)
It does not take money to make money. It takes a rich person’s vocabulary to make money and more importantly, to keep money." (Location 908)
A financial plan is important before someone begins to invest because it needs to take into consideration many different financial needs. These needs include college education, retirement, medical costs, and long-term health care. Many of these often large and pressing needs can be provided for by investing in products other than stocks and bonds or real estate—such as insurance products and different investment vehicles. (Location 917)
being young is that you don’t know what it feels like to be old. If you knew what being old felt like, you would plan your financial life differently." (Location 947)
You need to plan far beyond retirement. In fact, if you’re rich, you should plan for at least three generations beyond you. If you don’t, the money could be gone soon after you’re gone. Besides, if you don’t have a plan for your money before you depart from this earth, the government does." (Location 949)
To me, investing is a plan— often a dull, boring, and almost mechanical process of getting rich." (Location 981)
I wanted to be rich. I had no money. So to me, it was just common sense to find a plan or recipe to be rich and follow it. Why try to make up your own plan when someone else has already shown you the way?" (Location 993)
"And where did you find your formula?" I asked. "Playing Monopoly," said rich dad. "Most of us have played Monopoly as children. The difference is that I did not stop playing the game once I grew up. (Location 1003)
"And what is that simple formula and strategy?" asked rich dad. "Buy four green houses. Then exchange the four green houses for a red hotel," (Location 1007)
Rich dad then said, "Once I learned the formula, the process of buying four green houses and then exchanging them for one red hotel, the formula became automatic. I could do it in my sleep, and many times, it seemed like I did. I did it automatically without much thinking. I just followed the plan for ten years, and one day I woke up and realized I was rich." (Location 1013)
"Was that the only part of your plan?" I asked. "No, it wasn’t. But that strategy was one of the simple formulas I followed. To me, if the formula is complex, it is not worth following. If you can’t do it automatically after you learn it, you shouldn’t follow it. That is how automatic investing and getting rich is as long as you have a simple strategy and follow it." (Location 1016)
"All (speaking of money managers) of them think they have superior insights, intelligence, and ability to pick winning stocks, yet 80 percent are routinely out performed by the S&P 500 index." In other words, a purely mechanical method of picking stocks out performs 80 percent of the professional stock pickers. (Location 1034)
Keeping it simple is the best rule for investing. He states that instead of keeping things simple, "We make (Location 1042)
things complex, follow the crowd, fall in love with the story of a stock, let our emotions dictate decisions, buy and sell on tips and hunches, and approach each investment on a case-by-case basis, with no underlying consistency or strategy." (Location 1043)
He went on to say that investing in the S&P 500 was not necessarily the best-performing formula, although it was a good one. He explained that, while a certain sector such as large-cap stocks, may have done the best in the last five to ten years, over the past 50 years of data, it may actually be another sector of stocks, such as small-cap stocks, that may make investors the (Location 1059)
most money. (Location 1062)
That is why his formula was to build businesses and have his businesses buy his real estate as well as his paper assets. That formula has been a winning formula for wealth for at least 200 years. Rich dad said, "The formula I use, and the formula I am teaching you, is the formula that has created the richest individuals over a long period of time." (Location 1062)
Rich dad’s simple message to me years ago was: "Find a formula that will make you rich, and follow it." (Location 1069)
"How do I find the plan that is right for me?" (Location 1088)
Insurance is a very important product and needs to be considered as part of your financial plan, especially when you are first starting out. For example, if you have no money but have three children, insurance is important in case you die, are injured, or for whatever reason, are unable to complete your investment plan. (Location 1100)
So How Do You Find Your Plan? I had a goal of being a multimillionaire before I was 30 years old. (Location 1114)
So how do you find your own plan? The answer is to begin with a financial coach or mentor who has already done what you want to do. (Location 1120)
So start with realistic goals, and then improve upon or add to the goals as your education and experience increase. Always remember that it is (Location 1125)
best to start by walking before you run in a marathon. (Location 1126)
Members of your financial team may include: Banker Accountant Lawyer Broker Bookkeeper Insurance agent Successful mentor (Location 1133)
You may want to hold meetings over lunch with all these people on a regular basis. That is what rich dad did, and it was at these meetings that I learned the most about business, investing, and the process of becoming very rich. (Location 1137)
"Okay. Step one is to write out a financial plan to be financially secure." (Location 1184)
"Step one," rich dad started. "Call my financial advisor. Say, ‘I want a written financial plan for lifetime financial security.’" (Location 1195)
"Step two," said rich dad. "After you have a written plan for basic financial security, call me and we’ll go over it. Lesson is over. Good-bye." (Location 1196)
The lesson I learned was that, unless I am clear about what I want, it is hard for the advisor to be clear about it and help me achieve my goals. (Location 1208)
"And that is why so many people today go from job to job or from business to business—never really getting to where they want to go financially. So they often spend their most precious asset, their time, and wander through life without much of a plan. They might be happy doing what they are doing, but they really do not know what they are missing out on." (Location 1212)
The point is that if you want to be rich, you will need all three plans—a plan to be secure, a plan to be comfortable, and a plan to be rich. (Location 1263)
Remember that only three out of every 100 Americans are rich. (Location 1264)
"Think of it more like buying time than saving time. The moment you begin to think of time as precious and that it has a price, the richer you will become." (Location 1285)
Poor people measure in money. Rich people measure in time. That may be why there are more poor people who ride buses." (Location 1299)
"I think of money only as a medium of exchange. In reality, money by itself has very little value. So as soon as I have money, I want to exchange it for something of real value. (Location 1307)
"You can invest to be secure and comfortable using an automatic system or plan. In fact, I recommend that for most people. (Location 1325)
"You see, most people want to be rich but they are not willing to first invest the time. They operate on hot tips or wild get-rich-quick schemes. Or they want to start a business so they rush out and start a business without the basic skills of business. And then we wonder why 95 percent of all small businesses fail in the first five to ten years." (Location 1330)
But always remember the price: The more secure an investment, the more time it takes to make money, if it makes money. (Location 1360)
When people ask me questions such as, "What stocks are you investing in?" I have to say, "I don’t pick stocks. Professional money managers do that for me. " (Location 1365)
Most of us know intuitively that if you want a real deal, you have to be on the inside. (Location 1388)
"It makes perfect sense to invest from the outside when you invest at the secure and the comfortable level of investing. That is why you turn your money over to a professional you hope is closer to the inside than you are. But if you want to be rich, you have to be closer to the inside than the professional to whom most people entrust their money." (Location 1400)
You’ll become far richer if you learn to be an investor, regardless of what you do to earn the money along the way." (Location 1519)
Many of my wealthy friends said that their families started an investment portfolio for them when they were very young and then guided them in learning to be investors—before they decided what type of profession they wanted to enter. (Location 1521)
If your home is your biggest investment, then you’re probably in financial trouble. Your financial portfolio needs to be a much bigger investment than your home. (Location 1532)
All you need to do to make more money is simply focus on becoming a better investor. If you focus on improving your experience and education as an investor, you will gain tremendous wealth. (Location 1554)
make this point because regardless of how young or old you are, learning the basics of anything, especially a game, is important. Most people take some kind of golf lessons to learn the basics before playing golf, but unfortunately, most people never learn the simple basics of investing before investing their hard-earned money. (Location 1567)
He went on to explain that too many people begin investing without having the first two plans in place, and that was risky in his mind. He said, "After you have those two plans firmly in place, then you can experiment and learn more exotic techniques utilizing different investment vehicles. (Location 1571)
"Investment basic rule number one," said rich dad, "is to always know what kind of income you are working for." (Location 1575)
Passive income is generally derived from real estate. It can also be derived from royalties from patents or license agreements. Yet approximately 80 percent of the time, passive income is from real estate. There (Location 1582)
are many tax advantages available for real estate. (Location 1583)
"Investment basic rule number two," said rich dad, "is to convert ordinary earned income into portfolio income or passive income as efficiently as possible." (Location 1593)
"And that, in a nutshell, is all an investor is supposed to do," (Location 1595)
"Investment basic rule number three," said rich dad, nodding to my last statement, "is to keep your ordinary earned income secure by purchasing a security you hope (Location 1602)
converts your earned income into passive income or portfolio income." (Location 1604)
"You mean a stock or a piece of real estate is a security, but it may not be an asset?" I asked. "That is correct. However, many average investors cannot distinguish between a security and an asset. Many people, including many professionals, do not know the difference. Many people call any security an asset." (Location 1608)
"A security is something you hope will keep your money secure. And generally, these securities are bound up tightly by government regulations. (Location 1611)
"So if the security makes money, as the diagram shows, it puts money into the income column of the financial statement and it is an asset. But if it loses money and that event is recorded in the expense column of the financial statement, then that security is a liability. (Location 1624)
In fact, a good investor loves to follow behind a risky investor because that is where the real investment bargains are found." (Location 1639)
As a person who operates on the B and I side, I want to find securities that are liabilities and turn them into assets, or wait for someone else to begin turning them into assets." (Location 1647)
I like to think of myself as a repairman. I want to look at the wreck and see if it can be fixed. If it can be fixed, then it would still be a good investment only if other investors also want it fixed. If it cannot be fixed or if no one would want it even after it is fixed, I don’t want it either. So a true investor must also like what the crowd likes, and that is why I would not say I am a pure contrarian. I will not buy something just because no one else wants it." (Location 1650)
Most investments that will make you rich are available for only a narrow window of time—a few moments in the world of trading or a window of opportunity that is open for years, as it is in real estate. But regardless of how long the window of opportunity is open, if you are not prepared with education and experience or extra cash, a good (Location 1660)
opportunity will pass. "So how does one prepare?" "You need to focus and keep in mind what others are already looking for. If you want to buy a stock, then attend classes on how to spot bargains in stocks. The same is true for real estate. It all begins with training your brain to know what to look for and being prepared for the moment the investment is presented to you. (Location 1662)
"Yes, that is what I mean, and that piece of raw land was a better deal than most. That is what I mean about being prepared. I knew what the land was worth, and I also knew what was going to happen in that neighborhood in a few months, so there was very low risk coupled with a very low price. I would love to find ten more pieces of land today in that same neighborhood." (Location 1679)
"If you are prepared, which means you have education and experience, and you find a good deal, the money will find you or you will find the money. (Location 1701)
In real estate, people often say the key to success is location, location, location. I think differently. In reality, in the world of investing—regardless of whether it is real estate, business, or paper assets—the key is always people, people, people. I have seen the best real estate in the best location lose money because the (Location 1707)
wrong people were in charge." (Location 1710)
The next step is to do their best to convert that money into cash flow or capital gains. That is when you find out if (Location 1716)
you or the person to whom you entrusted your money can turn that security into an asset or if it will become a liability. Again, it is not the investment that is necessarily safe or risky. It is the investor." (Location 1716)
"So again," I summarized, "it is not the investment that is risky. It is the investor who doesn’t have the adequate skills that makes the investment a higher risk." (Location 1741)
The Three E’s "Correct," said rich dad. "At this level, the level at which the rich invest in, the investor should have the three E’s. And the three E’s are: Education Experience Excess cash (Location 1742)
said, "If someone cannot explain the investment to you in less than two minutes in a way that allows you to understand it, then either you don’t understand, he doesn’t understand, or you both don’t understand. Whatever the case, it is best that you pass on the investment." (Location 1753)
"In the world of investing, there are three basic asset classes you can invest in. We already covered the idea of ordinary earned income, passive income, and portfolio income. The big difference between the really rich and the average rich is the tetrahedron I drew here." "You mean building a business is an investment?" I asked. "Probably the best investment of all, if you want to become a rich investor. Roughly 80 percent of the very rich became rich through building a business. Most people work for people who build businesses or invest in businesses. (Location 1835)
One of the main reasons the poor and middle class struggle is that they value money over true assets." (Location 1844)
Meanwhile, the rich buy things like businesses, stocks, and real estate with their money. (Location 1862)
If you’re going to be in the B quadrant, then you must know how to sell as well as market. You also have to have a very thick skin and not mind people saying no to you. But you also have to be able to change their mind if it is appropriate to do so. Selling is a very necessary skill for anyone who wants to become rich, especially in the B quadrant and very often in the I quadrant." (Location 1893)
body, a financial statement allows you to look into an investment and see the truth, the facts, the fiction, the opportunities, and the risk. Reading a financial statement of a business or individual is like reading a biography or an autobiography." (Location 1901)
The financials of a person, a business, or a real estate property will tell me much more than that. But a cursory look at a financial statement does three more important things." "And they are?" "For one thing, being financially literate gives me a checklist of what is important. I can look at each line and determine what is not being done right, or what I can do to improve the business and make things right. Most investors look at the price and then the stock’s P/E, or Price/Earnings ratio. The P/E of a stock is an outsider’s indicator of the (Location 1927)
business. An insider needs other indicators, and that is what I will teach you. Those indicators are part of a safety checklist to make sure that all the parts of the business are functioning well. (Location 1931)
"The second thing is that when I look at an investment, I overlay it on my personal financial statement and see where it fits. As I said, investing is a plan. I want to see how the financial statement of the business, the stock, the bond, or the real estate will impact my personal financial statement. I want to know that this investment will get me to where I want to go. I can also analyze how I can afford the investment. (Location 1934)
"I want to know that this investment is safe and will make me money. I can tell if it is going to make money or lose money in a very short period of time. So if it does not make me money, or I cannot fix the reason why it will not make me money, why should I buy it? That would be risky." (Location 1939)
Many people who invest in real estate lose money every month and then say, ‘But the government gives me a tax break for my losses.’ That is like saying, ‘If you lose a dollar, the government will give you 30 cents back.’ A few very (Location 1943)
"So you reduce risk by being able to read financial statements," I replied. "A person needs to get his or her personal financial statement under control before investing." (Location 1964)
You should invest for only one reason: to acquire an asset that converts ordinary earned income into passive income or portfolio income. That conversion of one form of income into another form of income is the primary objective of a true investor. (Location 1968)
I have a term for the income statement and the balance sheet, the two primary reports that make up financial statements—the magic carpet." (Location 1979)
"Because they seem to magically take you behind the scenes into any business, any piece of real estate, and any country in the world. (Location 1980)
Having control over financial statements also allows me to operate multiple businesses without being in the business physically. Truly understanding financial statements is one of the keys necessary for a person in the S quadrant to move to the B quadrant. And that is why I call the income statement and balance sheet the magic carpet." (Location 1988)
Yet when it comes to investing, most investors never read the financial statements of the company they are investing in. Most investors would rather invest on a hot tip or a low price or high price, depending upon the momentum of the market. (Location 1995)
How to See Investment Opportunities If you plan to become rich by being an investor, I would say that having a good working knowledge of a financial statement is a minimum requirement. It will not only improve your safety factor, but it will also allow you to make much more money in a shorter period of time. Being able to read a financial statement will allow you to see investment opportunities that the average investor misses. (Location 2000)
The sophisticated investor knows that most of the best investment opportunities are not visible to the untrained eye. (Location 2004)
"Where you find the best investment opportunities is from understanding accounting, the tax code, business law, and corporate law. It is in these invisible realms where the real investors shop for the biggest investment bargains. That is why I call the income statement and balance sheet the magic carpet." (Location 2006)
"If he just took the time to learn how to read numbers and the vocabulary of money, his life would change dramatically." Financial literacy was one of rich dad’s six lessons in Rich Dad Poor Dad. To rich dad, financial literacy was crucial for anyone who was sincere about being a business owner or a professional investor. (Location 2014)
A sophisticated investor should be able to read many different financial documents. The income statement (Location 2018)
and balance sheet are at the center of all the documents. (Location 2019)
say, "Just because something is listed under the asset column does not make it an asset." I think that statement was the single most important point he made. He would say, "The reason most people suffer financially is that they purchase liabilities and list them under the asset column. That is why so many people call their home an asset when it is really a liability." (Location 2025)
is, "No, just because you have no debt on your home, that does not necessarily make it an asset." The reason for that answer is again found in the term cash flow. For most personal residences, even if you have no debt, there still are expenses and property taxes. In fact, you never truly own your real estate outright. Real estate will always ultimately belong to the government. The word "real" in "real (Location 2034)
estate" comes from the Spanish word "royal." It does not mean "physical or tangible" here. That’s because property has always belonged to the royals. Today it belongs to the government. If you doubt that statement, just stop paying your property taxes and you will find out who really owns your property, with or without a mortgage. The non-payment of property taxes is where tax-lien certificates come from. (Location 2037)
To rich dad, the most important words in business and investing were cash flow. (Location 2046)
The real answer is that you need to refer to the income statement to find out if it is an asset or a liability. (Location 2068)
The riskiest of all investors are those who have nothing but liabilities that they think are assets, who have as much in expenses as they have in income, and whose only source of income is their labor. (Location 2119)
"The average investor has the count-your-chickens-before-they-hatch mentality. They buy items that cost them money each month, yet call them assets based upon opinions. They count on their house going up in value in the future, or they act like their house can be sold immediately for what their real estate broker told them it is worth. (Location 2127)
As rich dad said, "Averages are for average investors. A professional investor wants control. And that control begins with yourself, your financial education, your sources of information, and your own cash flow." That is why rich dad’s advice to the average investor is, "Don’t be average." To him, being an average investor is being a risky investor. (Location 2143)
Many people ask me, "What is my first step to financial freedom?" My response is, "Take control of your money and your financial statement." (Location 2159)
Rich dad said, "Sophisticated investors must see at least two financial statements simultaneously if they want a true picture." During one of my lessons, rich dad drew this diagram: "Always remember that your expense is someone else’s income. (Location 2166)
One reason it is hard to find accurate investment information is because (Location 2205)
gaining a full picture requires financial literacy, an accountant, and an attorney. In other words, you need two different professionals to get the real picture. (Location 2206)
The more you read financial statements, annual reports, and prospectuses, the more your financial intelligence, or financial vision, will increase. Over time you will begin to see things that the average investor never sees. (Location 2228)
What takes the longest time to find a good investment is analyzing the numbers. Learning to read financial statements is a tedious process, especially when you first begin to learn. The good news is that it gets easier and faster as you practice. Not only does it get easier, but you can also review many more investment opportunities almost automatically without thinking—just like riding a bike or driving a car. (Location 2235)
The way this is done is by something called deal flow. Every professional investor has a continuous number of potential business or real estate investments that need investment capital. (Location 2241)
your own financial statement and keeping it up to date as well as read the statements of other businesses? (Location 2247)
As rich dad said, "School smarts are important, but street smarts make you rich." (Location 2371)
As Winston Churchill said, "Success is the ability to go from one failure to another with no loss of enthusiasm." (Location 2383)
physics, give what you want. If you want a smile, first give a smile. If you want a punch, first throw a punch. If you want money, first give some (Location 2418)
money. For greedy people, opening up their fist or wallet can be very hard to do. (Location 2419)
These two men have co-authored several best-selling books: Blood in the Streets, The Great Reckoning, and The Sovereign Individual. These books have dramatically affected the way I invest and how I look to the future. (Location 2429)
8. You can become rich by being financially smart. (Location 2439)
Millions of people faithfully place their retirement savings and other monies into the market. However, the decision makers of the underlying investments actually make the large sums of money, not the individual investor or retiree. (Location 2443)
This helps explain why only one in ten millionaires reaches a net worth of $5 million. (Location 2453)
I was a millionaire in my early twenties. But I quickly recognized even then that a few million did not amount to much. I could not afford my preferred (Location 2456)
lifestyle on such a small fortune. My conclusion is that the best way to make real money is to undertake private stage investments in private companies. (Location 2457)
my rich dad said to me, "The rich get richer partly because they invest differently than others. They invest in investments that are not offered to the poor and the middle class. Most importantly, however, they have a different educational background. If you have the education, you will always have plenty of money." (Location 2459)
The Definition of Rich Forbes magazine defines rich as $1 million in income and $10 million in net worth. Rich dad had a tougher definition: a consistent $1 million in passive income, which is income that comes in regardless of whether you work or not, and $5 million in assets, not net worth since net worth can be an elusive and much-manipulated figure. Rich dad also felt that if you could not maintain a 20-percent return from capital invested, you were not really an investor. (Location 2490)
It Starts with a Plan To be a rich investor, you must have a plan, be focused, and play to win. An average investor does not have a plan, invests in hot tips, and chases the hot investment products of the day, flitting from technology stocks to commodities to real estate to starting his or her own business. (Location 2498)
In addition to the three E’s, rich dad had a list of what he called the five D’s that were required to become very rich, especially when you start with nothing. They are: Dream Dedication (Location 2501)
Drive Data Dollars (Location 2504)
Rich dad concluded his discussion on the five D’s by saying, "In reality, it is the focus on the first three D’s that ultimately gains you the data and dollars you need to become very, very rich." (Location 2509)
"So your rich dad’s 90/10 riddle was to give you a blank asset column and ask you how you would fill it with assets without having to buy the assets." (Location 2564)
Creating a business is the way an entrepreneur does it, but you don’t have to be an entrepreneur to create an asset inside the asset column. I’ve done it with real estate without using any money. All you have to do is be creative, and you can be rich for life." (Location 2576)
"It was the invisible thought process that took the comic book and created an asset out of it. The thought process was the real asset." "That is how my rich dad saw it. He later told me that the power he had was his thinking process. It was a thinking process that he often jokingly called ‘turning trash into cash.’ (Location 2591)
"The people who are in the 90/10 grouping of money are modern-day alchemists. The only difference is that they are able to turn nothing into assets. Their power is the ability to take ideas and turn them into assets." (Location 2596)
I already know of one who is a millionaire without ever having a job. After reading my book and playing my games, he bought a large piece of real estate, sold off a section of vacant land, kept the apartment house, and paid off his loan with the money from the land. He now owns the apartment house which is worth a little over a million dollars and has cash flow of $4,000 a month income without working. He will graduate from high school in about a year." (Location 2625)
"So if I want to join the 90/10 investor club, I am better off to practice creating assets instead of buying assets. I should acquire assets by being creative rather than by doing what everyone else does." (Location 2636)
"That is why billionaire Henry Ford said, ‘Thinking is the hardest work there is. That is why so few people engage in it,’" I replied. "It also explains why, if you do what the 90 percent of investors do, you will join them in sharing only 10 percent of the wealth." (Location 2638)
"Do you ever use money to buy other assets?" asked the same student. "Yes, but I like to use the money generated by the asset I create to buy other assets," I replied, picking up my briefcase. "Remember that I don’t like working for money. I’d rather create assets that buy other assets and liabilities." (Location 2646)
"An asset they can pass on to their kids if their kids want it. I don’t know of too many companies that will let you pass on your job to your kids. That is one test of an asset: You can hand it on down to the people you love. (Location 2650)
He said it was (Location 2656)
better to work years at creating an asset rather than to spend your life working hard for money to create someone else’s asset." (Location 2657)
My rich dad had me repeatedly create new assets in an empty asset column. He would sit down with his son and me and ask us how we could create a new and different asset. He really did not care if the idea was crazy. He just wanted us to be able to substantiate how our idea could be turned into an asset. (Location 2665)
There are many books and educational programs written on how to buy assets wisely. For most people, buying assets is the best plan for them. I would also recommend that you buy assets for the secure and comfortable levels of your investment plan. Invest in such assets as blue-chip stocks for the secure and comfortable level. But if you have dreams of becoming a very rich investor, the question is, "Are you willing to create your assets rather than buy someone else’s assets?" If not, then as I said, there are many books and educational programs about how to purchase assets. (Location 2670)
My rich dad said, "There are investors who buy assets, and there are investors who create assets. If you want to solve the 90/10 riddle for yourself, you need to be both types of investors." (Location 2691)
In other words, rich dad solved his 90/10 riddle by creating assets that in turn purchased other assets. That plan was not only rich dad’s investment plan. It is the investment plan for most of the 10 percent who make 90 percent of the money—in the past, in the present, and into the future. (Location 2698)
Again, the formula is to create an asset that buys other assets. That formula is the reason why McDonald’s owns the (Location 2702)
most expensive real estate in the world. (Location 2703)
investors. You need to be a person who knows how to create assets, as well as a person who knows how to buy assets. The average investor is not generally aware of the different processes and is not good at either process of investing. The average investor usually does not even have a formally written plan." (Location 2704)
own. If you want to be one of the 10 percent who make 90 percent of the money, you will need to know how to build a business structure inside your creative ideas." (Location 2711)
Rich dad explained that the process of making a lot of money is a mental process more than a physical process. (Location 2723)
The reason the 90/10 rule holds true is that it does not take a great idea to become rich, but it does take a great person behind the idea to become rich. You must be of strong spirit and strong in your convictions to turn your ideas into fortunes. (Location 2731)
"If you can learn to build a successful B-quadrant business, your business will generate excess cash. Then you can use the skills you learned becoming a successful B to analyze investments as an I." (Location 2805)
If you can qualify as an accredited investor, you will have access to investments that most people do not. To be successful in choosing your investments, however, you still need financial education. If you choose not to invest your time in your financial education, you should turn your money over to competent financial advisors who can assist you with your investment decisions. (Location 2821)
The Inside Investor To build a successful business is the goal of the inside investor. The business may be a single piece of rental real estate or a multimillion-dollar retail company. (Location 2846)
"Wait until you’re rich, and the best investments will come to you first. The rich always get first pick of the best investments. In (Location 2874)
addition, the rich can buy at very low prices as well as in volume. That is one of the reasons why the rich get richer." (Location 2874)
However, rich dad cautioned me, "Even if you are an accredited investor, you still may not get the opportunity to invest in the best investments. To do that requires a completely different type of investor with the right knowledge and access to the information about new investment opportunities." (Location 2877)
The accredited investor might have a lot of money but usually doesn’t know what to do with it. (Location 2881)
Investing seems risky to the average investor because they lack the basic financial education skills to be a fundamental investor and do not have adequate technical investor skills. (Location 2933)
In a bullish stock market, people who operate strictly as fundamental investors do not do as well as investors who also consider the technical side of the market. In a bullish market, people who take the most risk win, and people with more cautious and value-oriented views lose out. In fact, many of the risk takers frighten many technical investors with their high prices of stock without any value. (Location 2940)
But in a crash, it is the investors with strong fundamental investments and technical trading skills who do well. (Location 2943)
Lots of easy money makes people think they are financial geniuses when in fact, they become financial fools." (Location 2945)
Wall Street Journal, the paper he helped found, is primarily a paper written for technical investors, and not necessarily for fundamental investors. (Location 2947)
In addition, the fundamental investor tracks the economy and the industry of the company. Warren Buffett has been acknowledged as one of the best fundamental investors. A technical investor invests from charts that track the price and volume trends and patterns of the company’s stock. (Location 2950)
George Soros is often recognized as one of the best technical investors. (Location 2953)
rich dad taught me. (Location 2960)
"If a person’s financial foundation is weak, his or her self-confidence is also weak." A friend of mine once said, "The main reason people do not want to look at their personal financial statements is that they might find out they have financial cancer." (Location 2966)
Rich dad said, "A technical investor invests with insurance from huge losses. The average investor is like a person flying a plane without a parachute." (Location 2972)
Qualified investors are less concerned about the market going up or coming down. They enter confidently with a trading system for an up-trending market. When the market reverses, they will often change trading systems, exiting their previous trades and using short selling, and put options to profit while the market comes down. (Location 2980)
asset, but it is often difficult to get out. If you want to be a savvy investor, you need to know how to exit an investment as well as how to get into the investment." (Location 3036)
"Always remember that when you are excitedly buying an asset, there is often someone who knows more about the asset who is excitedly selling it to you!" (Location 3045)
"When you buy an investment, you should also have an idea of when to sell it, especially investments offered to accredited (and higher) investors. (Location 3047)
"The ability to manage cash flow and to read financial statements is fundamental to success on the B and I side of the CASHFLOW Quadrant." (Location 3074)
Generally, the investor will compare a company’s ratios for the current year with that of previous years to measure the growth of the company. The investor will also compare the company’s ratios with those of other companies in the same industry. (Location 3095)
"And you always try to operate via a C corporate entity, don’t you?" I would ask rich dad. "In most cases," (Location 3133)
having waited a long time to explain it. "A sole proprietorship, a partnership, and an S corporation are all part of you. They are, in simple terms, an extension of you." "And what is a C corporation?" I asked. "A C corporation is another you. It is not just an extension of you. A C corporation has the ability to be a clone of you. If you are serious about doing business, then you do not want to do business as a private citizen. That is too risky, especially (Location 3137)
in this day and age of lawsuits. When you do business, you want a clone of you actually doing the business. You do not want to do business or own anything as a private citizen," rich dad guided me. "If you want to be a rich private citizen, you need to be as poor and penniless as possible on paper." (Location 3141)
I am often asked, "Why do you recommend C corporations instead of S corporations or LLCs? Why do you want to be subject to double taxation?" (Location 3155)
Business owners often increase their own salaries to reduce or wipe out corporate profits and thereby eliminate the possibility of having those profits taxed twice. (Location 3159)
Alternatively, as the corporation continues to grow, the retained profits are used to expand the business and help it grow. (In the United States, a C corporation must justify this accumulation of earnings or it will become subject to the Accumulated Earnings Tax.) There is no double taxation unless dividends are declared. (Location 3160)
"Investors control. Everyone else gambles. The rich are rich because they have more control over their money than the poor and middle class. The moment you understand that the game of money is a game of control, you can focus on what is important in life, which is not making more money (Location 3182)
but gaining more financial control." (Location 3184)
For instance, debt taken to acquire a rental property, which has a positive cash flow each month, would be good debt. Likewise, paying for legal and tax advice are good expenses if they save you thousands of dollars in reduced taxes (Location 3233)
from tax planning. An example of a good loss is the loss generated by depreciation from real estate. This good loss is also called a "phantom loss" because it is a paper loss and does not require an actual outlay of cash. The end result is a savings in the amount of tax paid on the income offset by the loss. (Location 3234)
Sophisticated investors enlist the advice of accountants, tax strategists, and financial advisors to structure the most beneficial financial organization for their (Location 3239)
investments. (Location 3240)
Almost all of the high returns are found in the small microcap stocks with market capitalizations below $25 million. The down side is that these stocks are hard to find for the average investor. (Location 3280)
How I Did It I found my financial freedom as an inside investor. Remember that I started small, buying real estate as a sophisticated investor. I learned how to use limited partnerships and corporations to maximize the tax savings and asset protection. I then started several companies to gain additional experience. (Location 3285)
I do not know how to pick stocks and do not choose to buy stocks as an outsider. (Why would I? Being an insider is much lower risk as well as much more profitable.) If I can learn to become an inside investor through building a company, then so can you. Remember that the more controls you possess over your investment, the less risky it is. (Location 3289)
My rich dad had become wealthy by first investing as an inside investor. He had started small and learned the tax advantages available to him. He quickly gained confidence and became a truly sophisticated investor at an early age. He had built an incredible financial empire. (Location 3376)
Ray Kroc and rich dad understood that the purpose of a business is to buy assets. (Location 3390)
"My business buys assets with pre-tax dollars," said rich dad as he drew the following diagram. (Location 3398)
"Always remember that we may live in a free country, but everybody does not live by the same laws. If you want to be rich, you had best follow the same laws the rich use." (Location 3406)
I get ahead faster because I get to buy my assets with gross income and pay taxes on net income. Your dad pays taxes on gross income and then tries to buy assets with his net income. That is why it is very, very hard for him to achieve any kind of wealth. He gives a lot of his money to the government first, money that he could be using to buy assets. I pay my taxes on the net, or what is left over, after I buy my assets. I buy assets first and pay taxes last. Your dad pays taxes first and has very little money left over to buy assets with." (Location 3413)
"Rule number one in becoming an entrepreneur is to never take a job for money. Take a job only for the (Location 3499)
long-term skills you will learn." (Location 3500)
Do not bother trying to make a great product. Focus more on starting a business so you can learn to become a great business owner. (Location 3530)
My wife and I are employees of several corporations in which we also have ownership interests. Therefore, we have financial statements as individuals and financial statements from our businesses. As our businesses become successful and generate cash flow for us, we take less income as employees. (Location 3589)
1. To provide excess cash flow (Location 3603)
One of the primary reasons rich dad started so many businesses was that he had excess cash flow from his other businesses. He also had the time because his businesses required minimal effort on his part. This allowed him the free time and extra money to keep investing in more and more assets tax-free. (Location 3605)
The problem with building a business in the S quadrant is that there is usually a limited market that would want to buy it. For example, if a dentist builds a practice, generally the only other person who may want to buy it is another dentist. To rich dad, that was too narrow of a market. He said, "For something to be valuable, there must be many more people than you who want it. The problem with an S-quadrant business is that you are often the only person who wants it." (Location 3609)
"Building a business is the riskiest road for most people. But if you can survive and keep improving your skills, your potential for wealth is unlimited. If you avoid risk and play it safe on the E and S side, you may be safer, but you’ll also limit what you can truly earn." (Location 3625)
Rich dad was about 40 years old, and I was amazed at how he could run several different companies, all in different industries. For example, he had a restaurant business, a fast-food business, a convenience-store chain, a trucking company, a real estate construction business, and a property-management business. I knew he was following his plan to (Location 3655)
have his businesses buy his true investments, which for him was real estate, but it was amazing how many businesses he could run all at the same time. (Location 3657)
Rich dad would say, "If people want to become sophisticated investors and more, they must invest as a team." On rich dad’s team were his accountants, his attorneys, his brokers, his financial advisors, his insurance agents, and his bankers. (Location 3723)
When he made a decision, it was (Location 3725)
with his team’s input. Today, I do the same. (Location 3725)
One of the first things I look at as an investor is the team behind the business. If the team is weak or lacks experience and a proven track record, I rarely invest. (Location 3804)
Another line I look at in the numbers of a business plan is the line item called "salaries." If the salaries are high, I know I am looking at people who are raising money in order to pay themselves fat salaries. (Location 3810)
Investors invest in management. (Location 3813)
They look at the team within the proposed business and want to see experience, passion, and commitment. (Location 3813)
If your business is real estate, your real estate brokers become an important part of your team. Although these advisors can be expensive, their advice can provide you with an incredible return on your investment by helping you structure a strong business while avoiding pitfalls along the way. (Location 3828)
Five building blocks are essential to developing a strong business: cash flow, communications, systems, legal, and product. (Location 3858)
General Cash Management Have an investment plan for your cash on hand to maximize its earning potential. Establish a line of credit with your bank before you need it. (Location 3904)
Rich dad would say, "The better at communicating you are, and the more people you communicate to, the better your cash flow will be." (Location 3926)
Over the years, I have attended courses on: Sales Marketing systems Advertising, headlines, and copy writing Negotiations Public speaking Direct-mail advertising Running a seminar Raising capital (Location 3943)
"If you want to be a B-quadrant person, your first skill is being able to communicate and speak the language of the other three quadrants. (Location 3961)
In public speaking, it is said that body language accounts for approximately 55 percent of communication, voice tone 35 percent, and words 10 percent. (Location 3992)
I use this example for anyone who says, "Oh, my appearance does not matter." In the world of business, appearance is a powerful communicator. (Location 4000)
He said, "Sales is what you do in person, one on one. Marketing is sales done via a system." (Location 4009)
In every marketing or sales effort, include these three key ingredients: Identify a need, Provide a solution, and Answer your customers’ question, "What’s in it for me?" with a special offer. Communicate a sense of urgency for the customer to respond. (Location 4021)
When people ask me where to find the best real estate investments, I say, "Just find someone who is a poor business manager, and you will find a real estate bargain." But never buy a property just because it is a bargain. Some bargains are cleverly disguised nightmares. (Location 4058)
A good businessperson can manage multiple systems effectively without becoming part of the system. (Location 4064)
"Always remember that the B quadrant gets more money from investors because investors invest in good systems and people who can build good systems. Investors do not like to invest in businesses where the system goes home at night." (Location 4068)
Without well-designed and successful operating systems, your business will be labor-intensive. Once you have well-designed and successful operating systems, you will have a salable business asset. (Location 4082)
If you want to build your own business, review the list of systems. Although you may be already performing many of these functions, you may not have defined them as separate systems. The more you can formalize your operations, the more efficient your business will become. (Location 4090)
your intellectual property attorney and your contract attorney are some of your most important advisors because they help create your most important assets. These attorneys, if they are good, will protect your ideas and your agreements from intellectual bandits, people who steal your ideas and therefore your profits. (Location 4154)
Obtaining competent legal counsel is very important, not only as you are forming your business, but as an ongoing part of your advisory team’s activities. Legal fees may seem expensive at first. However, when you compare them to the cost of legal fees from lost rights or subsequent litigation, it is much less expensive to set out your agreements properly in the beginning. (Location 4180)
Some specific areas where proper legal counsel can help you avoid potential problems in legal aspects of a business are: (Location 4188)
In the B and I quadrants, however, the most important part of a new business is the system behind the product or idea, or the rest of the B-I Triangle. (Location 4223)
They found their spirit and their mission, built a business, and allowed others to share in the dreams, the risks, and the rewards. You can do the same thing if you want. Just follow the same diagram rich dad guided me with—the B-I Triangle. (Location 4244)
So if you, your family, or your business is struggling today, look at the model of the B-I Triangle and do an analysis of what can be changed or improved. (Location 4267)
Once you master the art of building B-I Triangles, you will find that the less you work, the more money you will make and the more valuable what you are building becomes." (Location 4270)
In order for me to become rich, I needed to learn to build and put together systems that could work without me. After my first B-I Triangle was built and I sold it, I realized what rich dad meant by the less I work, the more money I will make. He called that thinking "solving the B-I Triangle riddle." (Location 4274)
I have found that the difference between people in the E and S quadrants and people in the (Location 4278)
B and I quadrants is that the E and S people are often too hands-on. Rich dad used to say, "The key to success is laziness. The more hands-on you are, the less money you can make." One of the reasons so many people do not join the 90/10 investor club is that they are too hands-on when they should be seeking new ways of doing more with less and less. (Location 4278)
If any of the management functions of the B-I Triangle’s five internal levels are weak, the company will be weak. (Location 4287)
Once you identify your weakness, you may then want to consider turning it into your strength, or hiring someone else with that strength. (Location 4289)
"To learn the skills needed for the B-I Triangle, you need to start small. Even a hot dog cart or a small rental home needs its own B-I Triangle. Every component of the B-I Triangle applies to even the smallest business. You will make mistakes. If you learn from those mistakes, you can build bigger and bigger businesses. In the process, you will become a sophisticated investor." (Location 4322)
Who Is a Sophisticated Investor? "A sophisticated investor is an (Location 4328)
investor who understands each of the ten investor controls. (Location 4329)
The Ten Investor Controls The ten investor controls are control over: Yourself Income/expense ratio and asset/liability ratios Management of the investment Taxes When you buy and when you sell Brokerage transactions E-T-C (entity, timing, characteristics) Terms and conditions of the agreements (Location 4331)
Access to information Giving it back, philanthropy (Location 4338)
A sophisticated investor knows that there are multiple right answers, that the best learning comes through making mistakes, and that financial (Location 4345)
literacy is essential to be successful. They know their own financial statement, and they understand how each financial decision they make will ultimately impact their financial statement. They’re always thinking. And to become rich, you must teach yourself to think like a rich person. (Location 4346)
Recognizing that taxes are the largest expense in the E and S quadrants, sophisticated investors may well seek to reduce their income in order to reduce income taxes while increasing funds for investment simultaneously. (Location 4400)
Rich dad truly understood the (Location 4414)
benefits offered through choosing the right entity with the right year-end and converting as much ordinary earned income into passive and portfolio income as possible. This, combined with the ability to read financial statements and to think in terms of financial statements helped rich dad build his financial empire more quickly. (Location 4414)
For instance, when I (Location 4460)
rolled over the sale of several of my small houses into a small apartment building, I used a Section 1031 exchange (U.S. law), which allowed me to roll over the gain. (Location 4460)
For a real estate investment, I calculate what the cash-on-cash return will be, based on the amount of cash I need to spend for the down payment. The bottom line always comes back (Location 4474)
to financial literacy. This chapter will cover some of the important concepts and thought processes every sophisticated investor goes through in choosing investments for their financial plan: Financial ratios of a company Financial ratios for investing in real estate Natural resources Good debt or bad debt Investing and saving (Location 4476)
Gross margin percentage is the gross margin divided by sales, which tells you what percentage of sales is left after deducting the cost of goods sold. The gross margin is sales minus the cost of goods sold. Rich dad would say, "If the gross isn’t there, there’ll be no net (income)." (Location 4481)
For Internet e-commerce sites today, these additional costs are usually much lower, so these businesses can afford to sell and make a profit with a lower gross margin percentage. The higher the gross margin, the better. (Location 4487)
What Do the Ratios Tell Me? My rich dad taught me to always consider at least three years of these figures. The direction and trend of margin percentages, leverages, and returns on equity tell me a lot about a company and its management, and even its competitors. Many published company reports do not include these ratios and indicators. A sophisticated investor learns to calculate these ratios (or hires someone knowledgeable to do so) when they aren’t provided. (Location 4522)
For example, a company with excellent ratios over the last three years and strong profits could appear to be a sound investment. However, after reviewing the industry, you may find out that the company’s main product has just been rendered obsolete by a new product introduced by the company’s main competitor. In this instance, a company with a history of strong performance may not be a wise investment due to its potential loss in market share. (Location 4530)
Financial Ratios for Investing in Real Estate When it came to real estate, rich dad had two questions. Does the property generate a positive cash flow? If yes, have you done your due diligence? The most important financial ratio of a piece of real estate to rich dad was his cash-on-cash return. Let’s say you buy an apartment building for $500,000. You put $100,000 down and secure a mortgage for the $400,000 balance. You have a monthly cash flow of $2,000 after all expenses and the (Location 4535)
mortgage payment are paid. Your cash-on-cash return is 24 percent or $24,000 ($2,000 x 12 months) divided by $100,000. Before buying the apartment building, you must decide how you will purchase it. Will you buy it through a C corporation, an LLC, or a limited partnership? Consult with your legal and tax advisors to make sure that you choose the entity that will provide the most legal protection and tax advantages to you. (Location 4541)
It is through the process of due diligence (the careful evaluation of a potential investment to confirm all material facts) that a sophisticated investor sees the other side of the coin. When people ask me how I find good investments, I simply reply, "I find them through (Location 4546)
the process of due diligence." Rich dad said, "The faster you are able to do your due diligence on any investment, regardless of whether it is a business, real estate, a stock, or bond, the better able you will be to find the safest investments with the greatest possibility for cash flow or capital gains." Once you have determined that a piece of real estate will generate a positive cash flow, you still need to perform due diligence on the property. Rich dad had a checklist that he always used. I use a due-diligence checklist as well. It is very thorough and includes items that did not exist years ago (such as "Phase I Environmental Audit"). If I have questions about the property, I often bring in the experts and have my attorneys and accountants review the deal. Due Diligence Checklist (Location 4547)
Natural Resources Many sophisticated investors include investments in the earth’s natural resources as part of their portfolio. They invest in oil, gas, coal, and (Location 4583)
precious metals, just to name a few. My rich dad strongly believed in the power of gold. As a natural resource, gold has a limited supply. As rich dad told me, people throughout the centuries have cherished gold. Rich dad also believed that owning gold attracted other wealth to you. (Location 4585)
Terry’s example will have taught her children that if they learn how to invest by starting small, minding their own business, and keeping their money working hard for them, they’ll be rich. (Location 4622)
is: "The rich invent money." Rich dad taught me to invent my own money with real estate or with small companies. That technical skill is the domain of the inside and ultimate investors. (Location 4648)
"Goals have to be clear, simple, and in writing. If they are not in writing and reviewed daily, they are not really goals. They are wishes." (Location 4706)
"To invest in a company before it goes public and acquire 100,000 shares or more for less than one dollar per share." (Location 4709)
I would read my goal in the morning and then go about my daily activities, which at that time was to produce my CASHFLOW board game. (Location 4719)
My wife Kim and I have a personality rule when it comes to business: "Never do business with pets you don’t trust." Over the years, we have discovered that people and their pets are very similar. (Location 4743)
I asked Frank if I could apprentice with him and be an inside investor with him. I told him that I would work for free if he would teach me what he knew about the process of taking a company public. I explained to him that I was financially free and that I did not need money to work with him. (Location 4753)
At this stage of the investment cycle, investors invest in the people on the team. The people—much more than the product, be it oil, gold, an Internet product, or widgets—are far more important than any other part of the equation. The golden rule that "money follows management" is extremely important at this stage of a company’s development. (Location 4823)
The founders are very, very important to the success of a start-up because their reputation and expertise give credibility, confidence, momentum, and legitimacy to a project that often exists only on paper. (Location 4835)
I explained that it is always less expensive to be a contrarian investor, which is an investor who seeks out-of-favor or out-of-cycle stocks. (Location 4895)
Some never get off the ground even after going public, and the investors lose most, if not all, of their front money. Investors therefore need to be accredited and are warned about the "all or nothing" type of investments we bring to market. (Location 4905)
It usually takes three to five years to bring a company to the public market. When that happened, I achieved my goal of becoming an ultimate investor. (Location 4938)
Our investors know the risks involved and also know that their investment plan is to put a little money in several of these smaller ventures. (Location 4941)
Yet if you follow the Forbes 400 definition (wealth is dictated by how many eyeballs you command), Martha Stewart qualifies to be a billionaire. Her company definitely commands many eyeballs. (Location 4974)
Mark was saying that, at certain times, the stock market favors certain businesses more than others. He went on, saying, "If you want to become very rich, part of your strategy as a business owner is to build the company the market wants, before the market wants it." (Location 5011)
Why Take a Company Public? Frank lists six primary reasons to do so: (Location 5050)
Both Frank and my rich dad have often said, "Don’t give your children money. It keeps them weak and needy. Teach them how to raise money instead." (Location 5131)
3. Private investors People who invest in private companies are called private investors. These accredited investors are hopefully more sophisticated than the average investor. They stand to gain, as well as lose, the most. Therefore, it is recommended to get both financial education and business experience before investing large sums of money into private companies. (Location 5154)
Frank also says the same thing my rich dad said: "If you want to be in this business, you must know how to sell. Selling is the most important skill you can learn and continue to improve. Raising capital is selling a different product to a different audience." People are not successful financially mainly because they cannot sell. They cannot sell because they lack self-confidence, they are afraid of rejection, and they cannot ask for the order. If you are serious about being an entrepreneur and need (Location 5198)
When you are ready, get a copy of Standard & Poor’s Security Dealers. This book lists security dealers by state. Get the book and find a person who would be willing to listen to your ideas and your business. (Location 5211)
To become a billionaire, I need to provide a lot for many, for very little. I need to find an area of business that today is fat, bloated, and inefficient, an area where people are dissatisfied with the current system and whose products need improving. (Location 5252)
Rich dad also had a joke about brokers, "The reason they are called ‘brokers’ is that they are broker than you." (Location 5343)
In essence, the money that would have been paid in taxes is used to buy additional assets, which provide another deduction against income, which reduces the taxes due, legally. (Location 5361)
If you understand the tax laws available to the B quadrant, you soon realize that one of the reasons the rich get richer is that the tax laws allow the B quadrant, more than (Location 5372)
other quadrants, to spend pre-tax dollars to build, create, or buy other assets. (Location 5373)
Today when my accountant calls and says, "You have too much money. You need to buy more investments," I already know where to move my money, the corporate structures to use, and what to buy with that money. I call my broker and buy more real estate. If I buy paper assets, I often call my financial advisor and buy an insurance product, which then buys my stocks or bonds. In other words, the insurance industry produces special insurance products for rich people who are business owners. When a business buys insurance, it is an expense to the company and it often becomes an asset to the owner with many tax advantages. (Location 5379)
During one of my meetings with rich dad, he said something that changed my thinking from a poor person to a rich person, "By having a plan to be rich and understanding the tax laws and corporate laws, I can use my expense column to get rich. The average person uses their expense column to become poor. That is one of the biggest and most important reasons that some people get rich and others become poor. If you want to become rich and stay rich, you must have control of your expenses." If you understand this statement, you will understand why rich dad wanted low income and high (Location 5394)
expenses. That was his way of getting rich. (Location 5398)
Once you can understand why a rich person would want high expenses and low income, you will begin to see the other side of the coin." (Location 5401)
why rich dad always said, "I use my expenses to get richer and richer. The average person uses their expenses to become poorer and poorer." (Location 5411)
What percentage of the money going out your expense column comes back in your income column in the same month? If you can understand how this is done, you should be able to see and create a world of ever-increasing wealth. (Location 5437)
Instead of building a business to buy assets, they often just build the business, sell it, pay the taxes, put the cash in the bank, and start all over again, I have had several friends who have built businesses just to sell them. (Location 5453)
A sophisticated business owner and investor will do their best to keep the business as long as possible and have it acquire as many stable assets as possible. As my rich dad said, "The main reason I build a business is for the assets the business buys me." For many entrepreneurs, the business they build is their only asset because they utilize a single corporation strategy and fail to harness the power of a multi-corporation investment strategy. (Location 5459)