Robert Kiyosaki and Tom Wheelwright on Why the Rich are Getting Richer – What Is Financial Education…Really?
Taken from kinokuniya.com

Robert Kiyosaki and Tom Wheelwright on Why the Rich are Getting Richer – What Is Financial Education…Really?

Doris Chow (周菽芬) Doris Chow (周菽芬)

Doris Chow (周菽芬)

Project Management • Stakeholder Engagement • Strategic Communications • Strategic Planning • Business Development

Published Nov 18, 2017
+ Follow
  1. The issue of wealth and income inequality is the great moral issue of our time. ~ Senator Bernie Sanders
  2. The growing gap between the rich and everyone else is a moral crisis and a social time bomb. Bernie Sanders believe in giving people fish; Donald Trump and I [Robert Kiyosaki] believe in teaching people to fish. Although we do not agree with Bernie Sanders politically, we do agree with him in principle. Our differences lie in the solution to this growing problem.
  3. Why “job security” is an obsolete idea. Globalization took out blue-collar jobs. Robots will take white-collar jobs.
  4. Income inequality has since soared to levels not seen since 1929, and it has become clear that the productivity increases that went into workers’ pocket back in the 1950s are now being retained almost entirely by business owners and investors. ~ Martin Ford
  5. Most threatening are sleeper attack viruses planted deep in stock exchange operating systems. One such attack virus planted by Russian military intelligence was discovered inside the operating system of the NASDAQ stock market in 2010. The virus was disabled. No one knows how many undiscovered digital viruses are lying in wait. Viruses can erase customer accounts without trace. Used offensively, these viruses can create an uncontrolled flood of sell orders on widely held stocks such as Apple or Amazon. ~ James Richards
  6. The average age of the world’s greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence: (1) From bondage to spiritual faith; (2) From spiritual faith to great courage; (3) From courage to liberty; (4) From liberty to abundance; (5) From abundance to selfishness; (6) From selfishness to apathy; (7) From apathy to dependence; (8) From dependency back to bondage once more. ~ Henning Webb Prentis Jr, The Cult of Competency (1943)
  7. Your Financial IQ is your ability to solve financial problems. Your Financial IQ is measured in dollars and in the size of your financial problem. Most average Americans can’t solve a $400 shortfall.
  8. People born in the 1940s had a 92 percent chance of earning more than their parents did at age 30. For people born in the 1980s, by contrast, the chances were just 50-50. There are two main reasons why today’s 30-somethings have a harder time than their parents did. First, the expansion of the gross domestic product has slowed since the 1950s, when growth was frequently above 5 percent a quarter. That means the economic pie is growing at a slower rate than it once did, so there’s less to go around. Second, the distribution of that growth is more unequal, and more benefits are accruing to those at the top. Those at the bottom, on the other hand, are not able to achieve as big a share as they once did. Their wages are not growing, so they are stuck at the same level as, or below, their parents. People at the bottom half of the income distribution are making, on average, $16,000 a year, while the average pre-tax income of the top 1 percent of adults is about $1.3 million. In other words, a society in which most of the poor stay poor and the rich stay rich.
  9. Many educated young people have found jobs, but are underemployed. The failure of young people to gain priceless, meaningful, challenging, real-life work and business experience is another time bomb for our future. [Page 3]
  10. All coins have three sides: heads, tails, and the edge. Intelligence is found on the edge of the coin, and in the ability to see both sides. [Page 13]
  11. The world is printing money. Our money is toxic. Our money is unstable causing instability in the world economy. The more toxic money that is created, the wider the gap between the rich, poor, and middle class. [Page 16]
  12. August 15, 1971 was the official start of today’s financial crisis. It was the day President Richard Nixon took the dollar off the gold standard. It was the date the United States began printing money. It was the official date the rich began getting richer – and the poor and middle class began getting poorer/ It was the day savers became losers. [Page 21-22]
  13. There are many reasons why the rich do not work for money. One reason is taxes. Rich dad often said, “The people who work for money pay the highest percentage in taxes.” The primary reason is because after 1971, the U.S. dollar stopped being money. It became a fiat currency. A Fiat currency is valueless money, and not backed by anything of value except by government decree. The government creates laws, saying that a piece of paper is money, legal tender. People must pay their taxes in a country’s fiat currency. Governments tend to spend more than they collect in taxes. So they print fiat currency to pay their bills, making that fiat currency worth less and less. [Page 22-23]
  14. Paper money eventually returns to its intrinsic value – zero. ~ French philosopher Voltaire
  15. Ironically, the banks today have too much money. Yet people are getting poorer. The reason for this is that our money is toxic. Money is making people poorer. People who work for money and save money are getting sick. [Page 25]
  16. In 1976, $1 million in savings x 15% interest = $150,000 annually. You can live well on $150,000 a year in 1976. Today, $1 million in savings x 2% interest = $20,000 annually. That is how much the value of money has gone down. And 2% interest is high today. If inflation is at 5%, you’re looking at losing 3% on your money per year. There is inflation because governments continue to print money. In 30% of the world, interest rates are below zero. [Page 25]
  17. One reason why the rich are getting richer is because the rich love debt. The rich know how to use debt to get richer. Low interest rates are saying to me, “Please come borrow money. Money is on sale.” [Page 26]
  18. After 1971 – the year Nixon took the dollar off the gold standard – the economy took off. Printed money blew the United States and the World into a bubble. In 2000, the bubble started to leak. To prevent a crash, the government printed more money. The bubble began to burst again 2007, with the real estate crash and then, in 2008, the banks crashed. All the while the printing presses kept running. After 2008, the U.S. Federal Reserve Bank along with the U.S. Treasury began the biggest printing of money in world history, an event known as quantitative easing. This is what happens to fiat currency when governments print money. The U.S. dollar lost nearly 90% of its value between 1913, the year the Federal Reserve Bank was created, and 1971, the year Nixon took the dollar off the gold standard. Between 1971 and 2016 the dollar has lost another 90% of its value. [Page 28-30]
  19. The main reasons for the gap why the rich get richer, while poor and middle class get poorer: (1) Globalization: Jobs move to lower wage countries. (2) Technology: If a person who works for money wants more money, an enterprising engineer will create a robot, or software, or AI to replace the worker. (3) Financialization: the science of printing money known as financial engineering. (4) Kleptocracy: crony capitalism. Financialization cannot take place without kleptocracy. (5) Baby Boom bust: This generation’s peak earning and spending years are behind them. They will live longer, act younger, and shake and rattle the global economy until 2050, many taking more out of the economy than they put in. There are 75 million American baby boomers. The next baby boom is the millennial generation (1981-1997). There will be 81.1 million in the United States by 2036. [Page 30-33]
  20. The Western World is old; the New World is young. The New World is the emerging markets such as India, Vietnam, Middle East, South America, Africa, and Eastern Europe. The New World is the millennial generation’s world. They are tech savvy and born into a cyber world. Just as American baby boomers shook up the world, the New-World millennial generation is already shaking up the world. Terrorism, vast migrations of people, Uber, AirBnB, and cyber warfare are the start of the changes. [Page 33]
  21. If we really want world peace, just uses taxes to pay for war. In 1961, during his farewell address to the nation, President Dwight D. Eisenhower warned the world of the growing power of the military industrial complex. America has been at war ever since because war is profitable. War creates jobs and makes many people rich. Eisenhower, a 5-Star Army General, knew firsthand the horrors of war. He was the last President to fight a war with taxpayer dollars. Taxpayers demanded that the war end soon. Eisenhower knew taxpayers did not mind war, but they hated higher taxes. America pays for wars with debt, not taxes. Future generations will eventually pay the taxes for today’s wars. The military industrial complex was spending money on a war we could not win. War may be stupid, but war is profitable. The poor and middle class send their sons and daughters to fight wars, and the rich get richer. The rich on both sides are getting rich while innocent people die. [Page 39-40]
  22. In 1974, President Nixon signed an agreement with the royal family of Saudi Arabia. The deal was that, from that point forward, all oil in the world must be traded in U.S. dollars. The U.S. dollar became the Petrodollar. Because after 1971, the year Nixon broke the promise to the world that the U.S. dollar would be backed by gold, the hegemony of the United States – the power and influence of the U.S. dollar – was threatened. By forcing the entire world to buy and sell oil in dollars, the United States and dollar regained its status in the world. Remember, oil is the lifeblood of the world economy. Oil replaced gold as money. The nations that controlled oil controlled the world. World War II was about oil. Japan attacked the United States because it cut Japan off from oil. Vietnam was about oil. The United States did not want Vietnam selling oil directly to China. [Page 40-41]
  23. Rich Dad often said, "Mistakes are god's way of talking to you. Mistakes are saying, 'Wake up. Pay attention. There is something you need to know.'" [Page 56]
  24. Changing quadrants (From E[mployee] to S[elf employed/specialists], S to B[usiness owner], and B to I[nvestor]) requires four things: (1) Spiritual intelligence... your quiet intelligence knows there is a greater person in you, a person who can achieve their dreams. (2) Mental intelligence... the knowledge that you can learn anything you want to learn. (3) Emotional intelligence... your ability to learn from your mistakes. In certain situations, emotional intelligence is at least three times more powerful than mental intelligence, especially when you are angry. Resist blaming others, even if it was their fault. Blame is a sign of low emotional intelligence. Blame stands for Be Lame, a lame being. Remember all coins have three sides, heads, tails, and the edge. Emotional intelligence is the ability to stand on the edge of the coin and learn from the two sides. (4) Physical intelligence... your ability to take what you learn, turn your ideas into action, and stand back up when you fall. If you can engage all four of your intelligences, you will win - no matter what happens in the economy. If you can do it everyday, no matter what happens, you will become a strong and great person, greater than you are today. [Page 67-68]
  25. There have been three major crashes in the first 10 years of this century, between 2000 and 2010: (i) 2000: the Dot-com Crash; (ii) 2007: the Subprime Crash; (iii) 2008: the Big Bank Crash. Three giant crashes - thousands of times bigger than the Giant Crash of 1929. [Page 79]
  26. The rich shop for bargains that make them richer. They wait for stock market crashes to buy the best stocks at bargain prices. They're poised for crashes so they can buy real estate at bargain prices. They buy gold and silver, and businesses, at bargain prices. The rich do not invest for the long term or diversify and buy a little of everything... or buy anything that someone tells them to buy. This is what Warren Buffett says about diversification: "Diversification is protection against ignorance. It makes little sense if you know what you are doing." [Page 83]
  27. Debt is money. One reason why the rich grow richer is because they use debt to become richer. Unfortunately, without financial education, debt makes the poor and middle class poorer. Donald Trump summed it up, saying: You know I am the king of debt. I love debt, but debt is tricky and it is dangerous." [Page 85]
  28. One reason is that the economy grows when you and I create money by borrowing money. When you pay off your debt, the economy gets smaller. Another reason is that debt makes the rich richer. If debt did not make the rich richer, the rich would not issue you a credit card. The rich don't issue credit cards because they like you. They give you credit because they will make money, via interest, when you use your credit card. They'll make even more when you make only minimum payments on credit card balance. [Page 87]
  29. Two very important words in financial literacy are debt and equity. In simple terms, equity is your money. Debt is OPM, other people's money. When a person buys a property, they generally start the process with a down payment. In most cases that down payment, the owner's equity, is made with after-tax dollars. The owner has already paid the income tax on that money. When you used debt as a down payment, there was no income tax to pay. Debt can be very inexpensive money if you know how to use it to make money. Debt is extremely expensive if you use debt to buy liabilities with a credit card and make only minimum payments. [Page 91-92]
  30. The gap between the rich and the poor is caused by these things: (1) Financial advisors; (2) Taxes; (3) Debt; (4) Mistakes; (5) Saving money; and (6) Crashes. [Page 99]
  31. When banks lower interest rates as they are doing today, they are saying, "We do not want savers. We want debtors." Low interest rates on savings are forcing the middle class into the stock market and real estate markets, hoping for a better return on their money. The middle class is chasing "bubbles" in financial markets. If the bubbles burst, many in the middle class may lose everything. Low interest rates mean this message: Please come and borrow money. Money is on sale." [Page 110]
  32. There are six words at the core of financial literacy. They are: (1) Income; (2) Expense; (3) Assets; (4) Liabilities; (5) Cash; and (6) Flow. Ask any entrepreneur what the two most important words are, and they will say cash flow. Because cash and flow determine if something is income, expense, asset, or liability. Assets put money in your pocket whether you work or not. Liabilities take money from your pocket even if they go up in value. The difference between your assets and liabilities, or cash inflows and outflows, is called your net worth, or wealth. [Page 128, 131]
  33. Money is a language. Learning to be rich is much like learning a foreign language. It takes time, practice, and dedication. The rich, those with financial education, speak different languages. The good news is that real financial education begins with words, the real language of money - the language of the rich. And the best news of all: Words do become flesh and words are free. [Page 137-138]
  34. The rich work for portfolio income and passive income. Portfolio Income is also called capital gains. A capital gain occurs when you buy low and sell high. Portfolio income occurs any time you buy low and sell high... when your money works for you, instead of you working hard for money. Passive Income is cash flowing from an asset. Your asset is producing money. In real estate, passive income is called rental income. Passive income from real estate is the lowest-taxed income, sometimes at 0%. [Page 148-149]
  35. Phantom cash flow is the real income of the rich. Phantom income is the income the poor and middle class cannot see. Phantom cash flow is not ordinary, portfolio, or passive income - income you can see. Phantom cash flow is invisible to people without financial education. Phantom cash flow is invisible income, a derivative of debt and taxes. [Page 161]
  36. Debt is tax-free money. The phantom income from debt is the time and money you save renting money rather than working to earn it, paying taxes on it, and saving it. You can get rich faster if you know how to use debt as money. [Page 165]
  37. Appreciation is phantom income. Appreciation occurs when the price of a property goes up. A $100,000 property increases in value to $150,000. The $50,000 is phantom income known as appreciation. The problem is that most people have to sell the property to get their hands on the $50,000. Selling triggers a taxable event, capital gains taxes. Rather than sell a property, we pull out our $50,000 in appreciation through debt. Homeowners do this all the time - it's called a home equity loan. The appreciation, the phantom income, comes out as debt and into our pockets tax-free. [Page 165-166]
  38. Amortization is phantom income. Amortization is the reduction of your debt. Every time you make a mortgage, car, or credit card payment, your loan balance is being amortized, or paid off. Mom and pop amortize their debt with after-tax, ordinary income dollars. That's very different than real estate investors' debt, debt that a tenant amortizes. The reduction in debt is another source of phantom income for professional investors. Remember good debt is your debt that someone else pays for. [Page 167]
  39. Depreciation is phantom income. Depreciation is also known as wear and tear. The tax department gives you tax write-offs because, in theory, your investment property is going down in value due to wear and tear. Even if your property is appreciating, going up in value, the taxman gives you a tax break for depreciation, as if the property's going down in value. Depreciation is a major source of phantom income for professional real estate investors. [Page 167-168]
  40. Turning zero into millions of dollars is known as the velocity of money... how fast can I keep my money moving, acquiring more assets, then pulling the money out of those assets, without selling the assets, and buying more assets. Another reason why the rich get richer is because the poor and middle class park their money in savings or invest for the long term in a pension. Rather than park their money, the I-quadrant investor keeps their money moving. [Page 180]
  41. My rich dad had suggested I get a job in sales, saying, "The number one skill of an entrepreneur is his or her ability to sell." He would repeatedly say, "Sales = Income" and "If you want more income, sell more." As rich dad taught: "Your life transforms, when you learn to love what you fear." I had learned to love my fear of rejection. Overcoming rejection and turning around a customer's objection became a game. [Page 182]
  42. When you reach the I[nvestor] quadrant, you become a Master of Money. You are no longer a slave to money. Masters of Money do not need money to make money. Masters of Money are alchemists. They turn ideas into gold. They turn ideas into international businesses. When you develop your Midas touch, when everything you touch turns into gold... in today's world, money. Then you teach. The world needs great entrepreneurs. Without great entrepreneurs, the world economy begins to collapse. Capitalism will evolve into socialism, possibly communism... a world of terror, a world of limited freedom, a world of dictators and despots. [Page 188-189]
  43. MBAs are trained to lead via numbers, spreadsheets and quarterly reports. They never learn that kindness is the greatest trait of a leader. They forget that manners are not trivial and respect is everything. They work hard, hoping to one day to join the rate few in the I quadrant, but few will make it. [Page 193]
  44. Real-world education requires: a willingness to learn; choosing your teachers wisely (For example, be careful who teaches you about money. You do not want someone from the E quadrant teaching you about the I quadrant); practice (Practice is the most important word). Practice is the environment where you make mistakes and correct. The more important the lesson, the more you should practice. [Page 211]
  45. Real education should inspire. It should touch the student's spirit. Real education should also encourage. The word courage is derived from the French word la coeur, the heart, the ability to overcome the emotions of fear and doubt. Real education should empower. It should give the student the ability to operate effectively, making a difference in the real world. Real education should enlighten. Real education should open the student's mind to the wonders of this world and make them a student for life. [Page 221]
  46. Real financial education must be about being an employee in the E quadrant to gain real world experience, as well as an entrepreneur in the S quadrant, having a part-time business, as well as a professional investor in the I quadrant. It is not enough, and financially ignorant, to simply say, "I have a job." [Page 224]
  47. The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function. ~ F. Scott Fitzgerald.
  48. What is Financial Education? (1) Attitude: Attitude is at least 80% of financial education. (2) Choose your teachers wisely: Your most important asset is your mind, so be careful and choose wisely regarding who puts information into your head. (3) Learn the language of money: The best thing about the language of money is that words are free. (4) What do you want to be when you grow up? The richest and most powerful people live life in the I[nvestor] quadrant. It takes financial education to live in the I quadrant. (5) Taxes make the rich richer. Those in the I quadrant pay the least in taxes... because it is the people in the I quadrant who makes the rules. Tax laws are fair. Everyone is allowed to use the tax rules of the I quadrant. (6) Debt is money.There is good debt and bad debt. The rich use good debt to acquire assets. (7) Your report card is the financial statement: income statement, balance sheet, and cash flow. (8) The cone of learning - doing the real thing and simulating the real experience. [Page 272-276]
  49. Rich dad's lesson number one: The rich don't work for money. The people working for money are falling behind financially, and millions are falling into the gap. Savers are losers. Debt makes the rich richer. The global financial system is built on debt. Money is only created when people borrow. People who know how to use debt as money to acquire assets are the richest people in the world. Taxes make the rich richer. The tax system is an incentive program, encouraging people to partner with the government to do what the government wants and needs done. Mistakes make the rich richer. That is why games or simulations are the best way to "practice" making mistakes, learning from your mistakes, then doing the real thing. Crashes make the rich richer. The best time to get rich is when markets crash. Your words become flesh. Become a student of subjects schools do not think are important. [Page 278-279]

To view or add a comment, sign in

More articles by this author

See all

Insights from the community

Others also viewed

Explore topics