Assets: Put money into my pockets.
Rich people focus on building their assets.
“An asset, whether you’re working or not, is something that puts money in your pocket.”
Liabilities: Take money out of my pockets
“Wealth is a person’s ability to survive so many numbers of days forward—or, if I stopped working today, how long could I survive?”
“A new car loses nearly 25 percent of the price you pay for it the moment you drive it off the lot.”
- “Keep expenses low, reduce liabilities, and diligently build a base of solid assets.”
- “The best thing about money is that it works 24 hours a day and can work for generations.”
Rule #1:
- You must know the difference between an asset and a liability, and buy assets.
- If you want to be rich, this is all you need to know. It is rule number one.
- It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is.
- Most people struggle financially because they do not know the difference between an asset and a liability.
- “Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.”
The poor and middle class work for money. The rich have money work for them.
Cash flow
‘The rich focus on their asset columns while everyone else focuses on their income statements.’
“Why the Rich gets Richer?”
The asset column generates more than enough income to cover the expenses, with the balance reinvested into the asset column.
The asset column continues to grow and therefore, the income it produces grows with it. The result is that rich gets richer!
- The rich buy assets
- The poor only have expenses
- The middle class buy liabilities they think are assets
[!IMPORTANT]
Rich dad believed that the words ‘I can’t afford it’ shut down your brain. ‘How can I afford it?’ opens up possibilities, excitement, and dreams.
The key to financial freedom and great wealth is a person’s ability to convert earned income into passive and/or portfolio income.
[!NOTE] ‘It’s not how much money you make. It’s how much money you keep.’
‘The poor and the middle class work for money. The rich have money work for them.’
[!IMPORTANT] ‘The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth.’
Getting Started
- Find a reason greater than reality: the power of spirit. Strong sense of purpose is needed to do most things in life.
- Make daily choices: the power of choice. We make a choice of what to think, what to do with our time and money, and so on.
- Choose friends carefully: the power of association. Having rich friends means you can learn from them about money.
- Master a formula and then learn a new one: the power of learning quickly. Being careful about what we study is important because we become what we study.
Rather than what we know, how fast we learn is more important in the information age.
“When you know you are ignorant in a subject, start educating yourself by finding an expert in the field or a book on the subject.”
- Pay yourself first: the power of self-discipline. Self-control and a high tolerance for financial pressure are necessary to become rich.
- Use assets to buy luxuries: the power of focus. Use assets instead of liabilities to buy luxuries.
“There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”
“Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth.”
“Often in the real world, it’s not the smart who get ahead, but the bold.”
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Kiyosaki sees one thing in common in all of us, himself included. We all have tremendous potential, and we all are blessed with gifts. Yet the one thing that holds all of us back is some degree of self-doubt.
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“The world is always handing you opportunities of a lifetime, every day of your life, but all too often, we fail to see them.”
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“Great opportunities are not seen with your eyes. They are seen with your mind.”
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“Job is an acronym for ‘Just Over Broke.’”
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“Education is more valuable than money in the long run.”
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“For most people, the reason they don’t win financially is that the pain of losing money is far greater than the joy of being rich.”
Kiyosaki reminds people that financial IQ is made up of knowledge from four broad areas of expertise:
- Accounting
- Investing
- Understanding markets
- The law
The main management skills needed for success are:
- Management of cash flow
- Management of systems
- Management of people
There are five main reasons why financially literate people may still not develop abundant asset columns that could produce a large cash flow. The five reasons are:
- Fear
- Cynicism
- Laziness
- Bad habits
- Arrogance
The most common form of laziness is staying busy.