Two Easy Strategies to Pay Less Taxes

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Scottsdale, Arizona
November 25, 2019

Editor’s note: We hate to bear poor tidings this Saturday, but tax season is just around the corner. How can you reduce your tax bite? Today, “Rich Dad” Robert Kiyosaki shows you two strategies. Hint: the rich use them to take advantage of the tax code.

Dear Reader,

In the big picture of personal finance, there are four financial forces that cause most people to work hard and yet struggle financially. They are:

  1. Taxes
  2. Debt
  3. Inflation
  4. Retirement

Take a moment and reflect briefly on how much these four forces affect you personally. For example, how much do you pay in taxes?

Not only do we pay income tax, but also sales taxes, gasoline taxes, real estate taxes, and so forth. More important, to whom do our tax dollars go and for what causes?

Many years ago, I was asked by a newspaper reporter how much money I’d made in the last year. I told him that I made about a million dollars that year.

The reporter’s follow-up question was, “How much did you pay in taxes?”

To his surprise, I said that I paid nothing.“How could that be?” he asked.

I then went on to explain that I had sold three pieces of property and was able to defer my income by placing the proceeds into what’s called a 1031 exchange. The money was never technically income but instead reinvested into new, larger properties.

Later, when the reporter published his article, the headline read, “Rich Man Makes $1 Million and Admits to Paying Nothing in Taxes.”

While he had the facts right — I did pay nothing in taxes — he got the spirit all wrong.

The reality is that the IRS tax code is written to encourage and reward certain types of behaviors.

At a high level, the IRS wants people doing activities that spur growth and that provide jobs.

Thus, they have many tax breaks for entrepreneurs and investors.

On the other hand, the IRS has little value for people who make a lot of money but don’t create anything for the economy in terms of growth or jobs.

So, it is not surprising that the top 1% of earners pay the largest share of taxes rather than the top 0.01%. Why?

Because most of those in the top 1% are not entrepreneurs or investors. They are high-paid employees who earn the highest-taxed type of income: earned income.

The ultra-rich, on the other hand, are those whose wealth is often built on starting a company or investing professionally.

These activities are rewarded by the IRS and so they have many more tax breaks than even those making hundreds of thousands of dollars a year. The ultra-rich know how to limit their earned income and instead make most of their money via passive income vehicles like their companies and investments.

Thus, they pay a substantially lower tax percentage than high-income earners.

High-income employees, and the ultra-rich is the mindset. And the good news is that you can start thinking like the ultra-rich when it comes to taxes and money, and your wealth will grow.

First, stop looking for a high-paying job and start thinking about how you can create them instead. The IRS will reward you if you take entrepreneurial risks.

Second, invest your earned income into assets that produce passive income via cash flow every month. The IRS will also reward you for that.

By this, I do not mean your 401(k), which is taxed at an earned income level. You have to find true assets like rental properties, businesses, and commodities that are taxed at the passive income level.

You do not have to start big. Just do what you can and continue to build into larger and larger opportunities. The most important thing is to think like the ultra-rich, not like an employee.

At the end of the day, there are two groups who pay the least in taxes: the poor and the ultra-rich. If you don’t want to pay taxes, but you’re also not interested in being an entrepreneur or an investor, then your only choice is to become poor.

Playing by the Rules of the Rich

There are many ways that the rich make a lot of money and pay little to no money in taxes, and anyone can use them. As an illustration, here’s a real-life situation in which I played by the rules of the rich and minimized my taxes:

    • My wife, Kim, and I put $100,000 down to purchase 10 condominiums in Scottsdale, Ariz. The developer paid us $20,000 a year to use these 10 units as sales models. So, we received a 20 percent cash-on-cash return, on which we paid very little in taxes because the income was offset by the depreciation of the building and the furniture used in the models. It looked like we were losing money when we were, in fact, making money.
    • Since the real estate market was so hot, the 380-unit condo project sold out early. Our 10 models were the last to go. We made approximately $100,000 in capital gains per unit. We put the $1 million ($100,000 x 10 units) into a 1031 tax-deferred exchange. We legally paid no taxes on our million dollars of capital gains.
    • With that money, we purchased a 350-unit apartment house in Tucson, Ariz. The building was poorly managed and filled with bad tenants who had driven out the good tenants. It also needed repairs. We took out a construction loan and shut the building down, which moved the bad tenants out. Once the rehab was complete, we moved good tenants in and raised the rents.
    • With the increased rents, the property was reappraised and we borrowed against our equity, which was about $1.2 million tax-free because it was a loan—a loan that our new tenants pay for. Even with the loan, the property still pays us approximately $100,000 a year in positive cash flow.
    • Kim and I then invested the $1.2 million in another 350-unit apartment house in Flagstaff, Ariz., a hot property market, all tax-free.

Move Money, Don’t Park It

This is an example of an investment strategy known as the velocity of money. As I’ve written before, moving your money makes more sense than parking it in cash, bonds, equities, or mutual funds — the strategy most financial advisors recommend.

Kim and I have several such scenarios active at any one time. We have lots of monthly cash flow, which we reinvest, but we rarely have any liquid cash sitting around to be taxed.

In the above example, we started with $100,000 we earned tax-deferred from another investment. The $100,000 eventually allowed us to borrow over $20 million from banks, tax-free. How long would it take you to save $20 million by parking your money somewhere, as most financial advisors recommend.

Chipping Away at Taxes

Clearly, one of the reasons the rich get richer is because they earn a lot of money without paying much, if anything, in taxes. They know how to use banks’ tax-free money to become richer.

Anyone can do the same. For instance, instead of paying capital gains tax on the sale of our condo units, real estate laws allowed us to defer paying these taxes and invest them into another property instead.

The cash that does come from this property goes into our pockets at a lower tax rate because there’s no Social Security or self-employment tax to pay, and the tax rate is further reduced by the depreciation of the property.

On the flip side, the poor and middle-class toil away for their money, pay more in taxes the more they earn, and then park their earnings in savings and/or retirement accounts.

In the meantime, they receive little or no cash flow on which to live while waiting for retirement — when they’ll live on their meager savings.

But if you want to be finan‌cially free and pay little-to-nothing in taxes, you’ll need to choose the path of the ultra-rich. Speaking as one who has walked that path, it is one of the most rewarding journeys you can take.

Because at the end of the day, it’s not about how much money you make, but how much money you keep.

That’s why I’ve written the Rich Dad Tax Guide, updated for 2020. Here’s a small sample of what you’ll learn inside:

The “paycheck loophole” that could boost your bottom line by $13,300 or more (page 17)…

How to use Section 933 and LEGALLY pay ZERO in federal income tax! (No you don’t have to give up your U.S. citizenship.) It’s all on page 20…

The one-time move to “upgrade” your retirement account and “ERASE” up to $55,000 in taxable income (Page 27)…

In all, you could get up to $23,966 back this tax season.

Go here to learn how you can claim your copy today. Don’t even think about preparing your taxes until you read it.


Robert Kiyosaki
for The Daily Reckoning

The post Two Easy Strategies to Pay Less Taxes appeared first on Daily Reckoning.

Robert Kiyosaki’s #1 Rule for Getting Rich

This post Robert Kiyosaki’s #1 Rule for Getting Rich appeared first on Daily Reckoning.

Robert Kiyosaki, here. I’m filling in for Nilus today.

A lot of people come to me asking how they can get rich quick…

It’s the most disturbing question I get.

Why? It’s the wrong question. It tells me that they don’t have the foundation of financial intelligence required to use their money well if they do—somehow—become wealthy.

This is because most people don’t understand that, when it comes to being rich, it’s not about how much money you make. It’s about how much money you keep.

If you’re interested in learning about how to increase your wealth and keep it, I strongly suggest you check out my brand-new Weekly Cash Flow broadcast. In it, I explain to the audience why everyday folks like you face roadblocks on their quest to get rich. I also reveal a never-before seen way to collect passive income, boosting your cash flow every week…

There are dozens of rags-to-riches-to-rags stories about fallen stars and historical figures who died dead broke. Lottery winners are a prime example of such stories.

Lottery winners are more likely to declare bankruptcy within three to five years than the average American, according to a report from MIT.

Economist Jay L. Zagorsky agrees. He writes for U.S. News and World Report: “Studies found that instead of getting people out of financial trouble, winning the lottery got people into more trouble, since bankruptcy rates soared for lottery winners three to five years after winning.”

Shockingly, the stories of rising then falling from the top aren’t just about average folks who had some luck. Some of the most successful businessmen have also lost it all.

The Richest Businessmen

The following comes from a Forbes article, “The Nine Financiers, a Parable about Power”:

Legend has it that in 1923, a group of some of the greatest leaders and richest businessmen at the time held a meeting at the Edgewater Beach Hotel in Chicago, Illinois.

Among them were Charles M. Schwab, head of the largest independent steel company; Samuel Insull, president of the world’s largest utility company; Howard Hopson, head of the largest gas company; Ivar Kreuger, president of International Match Co., one of the largest companies in the world at the time; Leon Fraser, president of Bank of International Settlements; Richard Whitney, president of the New York Stock Exchange; Arthur Cotton and Jesse Livermore, two of the biggest stock speculators; and Albert Fall, a member of President Harding’s cabinet.

Twenty-five years later, nine of these titans ended their lives as follows: Schwab died penniless after living for five years on borrowed money. Insull died broke in a foreign land, and Kreuger and Cotton also died broke. Hopson went insane. Richard Whitney and Albert Fall were released from prison, and Leon Fraser and Jesse Livermore committed suicide.

Forbes contributor, Joshua Brown, said, “The life of a professional speculator is an unpleasant one, filled with highs and lows but ultimately unsatisfying an, in all probability, mentally ruinous. Look no further than the example of history’s greatest speculator for proof of this.”

Be Careful Who You Idolize

Life and success seem easy for some people, but I do not know any of these people. As my rich dad often said, “Success requires sacrifice.” I have yet to meet a successful person who didn’t sacrifice tremendously for that success.

For example, medical doctors pay a steep price in terms of time, money, energy, and relationships to become doctors. So, do most high-performance athletes, movie stars, music idols, political leaders, and social leaders. Success in investing is no different.

Sacrifice is the price a person pays for success. Unfortunately, most people are not willing to pay the price. It is easier to be average, comfortable, safe, secure, and live life just below success.

The Greatest Wealth

The story of the wealthiest businessmen illustrates that in life, it’s not about how much money you make. It’s about how much money you keep.

Most people are too focused on making money. What they should really be focused on is their financial education.This is because while money is great, you can’t become truly wealthy without a sound financial foundation—and you certainly can’t keep your money.

Rich dad said, “If you want to be rich, you need to be financially literate.”

My poor dad always told me, “You need to read books.” My rich dad always told me, “You need to be financially literate.” I believe both were right. Books and learning are important and so is a strong financial education. And if I had to choose one over the other, I’d choose financial education.

The importance of a firm, financial foundation makes sense when you think of construction. If you want to build the Empire State Building, the first thing you do is dig a deep hole and pour a strong foundation. If you want to build a McMansion in the suburbs, you pour a six-inch slab.

The problem with most people who want to get rich quick is that they’re trying to build the Empire State Building on a six-inch slab of concrete. They haven’t gone deep. They don’t have a firm, financial education to shore up their financial foundation. Thankfully, my rich dad took the time to teach me about money and poured a strong, financial foundation for my life.

And the number one rule he taught me was: “You must learn the difference between an asset and a liability and buy assets.”

It’s so simple a rule that it’s almost anticlimactic. But, if you want to be rich, this is all you need to know. It’s rule number one. It’s the only rule.

The reality is that most people struggle financially because they don’t know the difference between an asset and a liability. Partly, this is because schools don’t teach people what an asset and a liability is. And partly, this is because those who do learn the concepts learn them from accountants who make them much too complicated.

My rich dad gave me a very simple definition of an asset and a liability.

An asset puts money in your pocket. A liability takes money out of your pocket.

I find this is best understood by looking at the following pictures.

Income Statements

Very simply, the rich invest their money in assets that put more money in their pockets, such as real estate, stocks, bonds, notes, and intellectual property. The middle class and poor invest their money in liabilities that take money out of their pockets such as mortgages, consumer loans and credit card debt.

If you want to be rich, I encourage you to begin investing in your financial education today. And your first assignment is to begin studying the differences between assets and liabilities.

By building this firm foundation, you’ll understand more about money than 99% of the world and be on your way to not just getting rich and making money but keeping it too.


Robert Kiyosaki

Robert Kiyosaki

The post Robert Kiyosaki’s #1 Rule for Getting Rich appeared first on Daily Reckoning.

Time to Chuck Conventional Financial Advice

This post Time to Chuck Conventional Financial Advice appeared first on Daily Reckoning.

Dear Reader,

I’m often asked, “How can I get rich in real estate?”

Behind this question is a different question: “How can I get the money I need to invest in real estate?”

More often than not, the people asking me these questions have had ingrained into them from an early age that saving was a means to getting rich and that if they wanted to invest, they needed to use their own money.

Both are myths that I want to discuss as a foundation on how the rich use debt to get rich in real estate — and how you can too.

There’s no doubt about it, from an early age we teach our children the value of saving money.

“A penny saved is a penny earned,” we chime. And when they are a bit older, we spin tales of the magic of compounding interest. Save enough, children are told, and you’ll be a millionaire by the time you’re ready to retire.

Of course, we don’t tell them about historically low interest rates.

Or the power of inflation to eat away at the value of money over time so that being a millionaire is worthless by the time you retire.

Those are inconvenient financial truths.

It seems as if the “wisdom” to save your money is timeless in that it won’t go away, even though it’s proven to be wrong.

It was true during the era of the gold standard because gold was real money that held its value. But it stopped being true after Nixon took us off the gold standard and left us with the unbacked fiat dollar.

I still buy gold to help preserve my wealth. I’m a big advocate of gold because of that reason. But I don’t save paper money that only loses value with time. Neither should you.

But even today you find “financial experts” who push the “save to be a millionaire” myth.

The other side of the save to get rich myth is that you need to use your own money (and a lot of it) in order to invest. This is a byproduct of the cultural belief that debt is bad and savings are good.

Often, people will say that investing in real estate is risky, but if you’re going to do it, try to keep your debt as low as possible. Use your own money and pay off the debt as fast as you can.

Nothing could be more wrong. And it stems from a fundamental misunderstanding about debt, which can be both good and bad.

Let’s take a moment to define what I mean by bad de‌bt and good debt.

Bad de‌bt is money that takes money out of your pocket. It makes you poorer. This can be credit card debt from purchases for things like clothes or TVs. It can even be the mortgage for your personal home.

In short, if it’s not making you money, it’s bad de‌bt.

Good debt is another story, and most people aren’t even aware that it exists. Good debt puts money in your pocket month in and month out. How can this be? Glad you asked. Let’s talk about a concept called OPM, or other people’s money.

Those who are the most successful investing in real estate understand that the best way to get a high return is to have as little of their own money in a deal.

Rich real estate investors spend their time finding the best deals and then present them to other investors who are willing to use their money to fund the deal.

When structured right, OPM allows a real estate investor to secure a valuable, high-return, cash-flowing asset for little to nothing.

(If you want to learn the secret to getting rich in real estate without much money and without working hard, go here now).

Below, I show you why using other people’s money is the best way to get rich in today’s world, much better than using your money. Read on to learn more.


Robert Kiyosaki
for The Daily Reckoning

P.S. Volatility has returned to the stock market. The Dow was down another 500 points today. And with impeachment swirling around President Trump, it will likely get worse.

How about an alternate strategy to make money outside the stock market… like real estate?

Did you know you could earn monthly real estate income… WITHOUT the hassle of being a landlord… WITHOUT having to invest in REITs … or even WITHOUT spending a dime of your own money upfront?

It’s true. And I’m living proof. I’ve made a fortune in real estate using these strategies.

Now — for the first time ever — I’m giving away my greatest secrets for earning real estate income…

The LAZY way.

It’s also the cheap way. You can learn how to start making money from real estate with as little as $10!

My strategy has already helped people like:

Brett S. from Indianapolis who says he earned $5,000 the first time he tried this type of strategy….

And Adriel H., who insists you can make $10,000 a month with it…

While Matt M. from Ontario knows someone who used a similar strategy to earn $30,000… for a single day’s effort.

You’ll find over a dozen “lazy” real estate secrets inside my brand new book, The Lazy Way to Invest In Real Estate.

So hurry and click on this link now to learn how to claim yours. Only 495 copies are available today. Don’t let your copy go to someone else.

Click here now for all the details.

Use Other People’s Money for Infinite Wealth

There are two ways to get rich. One way is to use your own money. The other way is to use other people’s money, or as we call it at Rich Dad, OPM. One (using your own money) provides small-to-modest returns, takes a long time to pan out, and requires some financial intelligence.

The other (OPM) provides large-to-infinite returns, creates incredible velocity of money, and requires a high financial intelligence.

Which one would you prefer to use?

Good Debt and Other People’s Money?

Other people’s money (OPM) is a fundamental concept of my wealth strategies and a sign of high financial intelligence. By using both good debt and OPM, you can dramatically increase your Return on Investment (ROI) — and you can even achieve infinite returns.

Good debt is a type of OPM. By way of reminder, good debt is any debt that puts money in your pocket. By contrast, bad de‌bt takes money out. So, a car loan, for instance, is bad de‌bt. You pay for it each month while the car provides no income and in fact depreciates the minute you drive it off the lot.

Good debt, by contrast, would be a loan for an investment property where the rental income pays for the expense of the property, including the debt service, while also providing monthly income.

The downside to good debt is that you can generally only borrow a certain percentage of an asset’s purchase price. In keeping with our real estate example, that is generally around 70 to 80 percent of the purchase price.

Breaking this down, let’s use an example of a $100,000 property for simplicity’s sake. In a traditional deal with a bank, you can only borrow around $70-$80K towards the property. The rest of the money must be made up of equity from another source.

Other People’s Money for Higher ROI

Because of this, you have two choices when you find a worthy investment: use your own money or use other people’s money for the equity needed above and beyond the loan. Provided you structure the deal well, the more you can use other people’s money, the higher your return will be.

In the case of our real estate example, let’s run a few scenarios.

Scenario 1

$100,000 purchase price

$80,000 loan at 5% interest

$20,000 of your own money for equity

Running through a simple mortgage calculator, your annual cost for this loan would be about $8,500.

Assuming you have an income from the property of $11,000 a year after expenses are paid, your total net income would be $2,500 ($11,000 – $8,500).

Your return on investment for this would be $2,500/$20,000 = 12.5%.

Scenario 2

$100,000 purchase price

$80,000 loan at 5% interest

$20,000 OPM at 7% interest

You get paid 50% of net operating income as the finder of the deal.

In this case, your annual loan costs would still be $8,500, but you’d also have an additional cost of around $1,500 for the other people’s money you borrowed for equity based on an assumed 7%. So, total loan and OPM costs would be $10,000.

Again, assuming you have an income from the property of $11,000 a year after expenses are paid, your total net income would be $1,000 ($11,000 – $10,000).

Your fee for putting the deal together would be 50% of the NOI, in this case, $500 (50% x $1,000).

Your return on investment for this would be infinite because you’re making $500 without any money in the deal.

These, of course, are just small numbers for example. In the real world of investment, you can do this at scale and make massive returns and also, as in this example, infinite returns. But it takes high financial intelligence.

Would Anyone Really Give You Their Money Like This?

Many people think it’s a fantasy world that people would just give you money to invest, but that couldn’t be further from the truth. The reality is that most people don’t have time to find good deals. Instead, they rely on people with proper financial education, skill set, and drive to bring deals to them.

My real estate advisor, Ken McElroy, has perfected using OPM. His company, MC Companies, buys apartment buildings. He does all the hard work of finding deals, doing the due diligence, negotiating with owners and lenders, and handling management. In return, people line up hoping to invest their money with him.

Today, Ken does big deals that require a certain type of investor. Not just anyone can invest with Ken. But he started with small deals, like the ones I’m writing about today and worked his way up to big deals.

The Power of Other People’s Money At Scale

As I mentioned earlier, you can use OPM to substantially increase your returns and secure even more assets at scale. Let me show you an example of how that works.

Let’s say that I have $100,000 to invest. I could use that to put down 20 percent on five properties. But using the concept of OPM, I’d rather use that $100,000 to put down 5 percent on 20 properties. I can do this by finding 20 great deals and lining up investors to invest in them.

Here’s how the math works out.

The bank would lend $80,000 for each property, and I would divide my $100,000 into twenty $5,000 segments, using OPM to raise the other $15,000 needed for each property. Again, at 5 percent interest, the payment on the loans would be around $500 per month.

Let’s assume that we’ll pay a little more for our investors’ money and give them 7 percent interest. The money owed to them would be a little less than $100 per month — but we’ll go with $100 to make it simple. So, our total costs would be about $600 per month.

That means we’ll have a cash flow of about $200 per month, which we’ll split with our investors 50/50. We’ll pocket $100 per month or $1,200 per year, and our investors will pocket $100 per month or $1,200 per year.

Adding up the total return for all 20 deals, that’s $24,000 per year cash flow, a return of 24 percent. Not only am I making 6 percent more per year than if I just used my money, but I also have ownership in 20 assets instead of just 5.

Later I can refinance these properties, pay off my investors, get my investment back, and continue to receive cash flow from the 20 properties — an infinite return.

Again, I’m using very simple math here. In real life, the numbers are more complicated and much larger. But the principles are the same. Investing with Other People’s Money takes a high level of financial intelligence. But both Ken McElroy and I both started small and worked into the big apartment deals we do today. You can do the same.

(To learn how to make serious money in real estate starting with as little as $10 and without working hard, go here now).

Be diligent. Continue to increase your financial education. Work hard. And master the fundamentals of good debt and OPM, and you will become wealthy.


Robert Kiyosaki
for The Daily Reckoning

P.S. Volatility has returned to the stock market. The Dow was down another 500 points today. And with impeachment swirling around President Trump, it will likely get worse.

How about an alternate strategy to make money outside the stock market… like real estate?

Did you know you could earn monthly real estate income… WITHOUT the hassle of being a landlord… WITHOUT having to invest in REITs … or even WITHOUT spending a dime of your own money upfront?

It’s true. And I’m living proof. I’ve made a fortune in real estate using these strategies.

Now — for the first time ever — I’m giving away my greatest secrets for earning real estate income…

The LAZY way.

It’s also the cheap way. You can learn how to start making money from real estate with as little as $10!

My strategy has already helped people like:

Brett S. from Indianapolis who says he earned $5,000 the first time he tried this type of strategy….

And Adriel H., who insists you can make $10,000 a month with it…

While Matt M. from Ontario knows someone who used a similar strategy to earn $30,000… for a single day’s effort.

You’ll find over a dozen “lazy” real estate secrets inside my brand new book, The Lazy Way to Invest In Real Estate.

So hurry and click on this link now to learn how to claim yours. Only 495 copies are available today. Don’t let your copy go to someone else.

Click here now for all the details.

The post Time to Chuck Conventional Financial Advice appeared first on Daily Reckoning.

No. 1 Proven Way to Keep Your Money

This post No. 1 Proven Way to Keep Your Money appeared first on Daily Reckoning.

Dear Reader,

Pop quiz: When you receive a paycheck, who do you pay first? If you’re like most Americans, you’re probably paying everyone else first — your rent/mortgage, groceries, utilities, car payment, insurance, etc.

Once you’re done paying all those bills, you stick whatever you have left (if anything) into savings — that’s the classic “paying yourself last” scenario. Then you patiently await your next paycheck and repeat the process all over again. But if you ever want to get out of the rat race, then I’m here to tell you you’re doing it wrong.

The philosophy of paying yourself first came from George Clason’s book, The Richest Man in Babylon, which was written nearly a century ago. And its message still holds true today, despite how the world has changed.

In fact, Nasdaq has named it the No. 1 proven way to save money.

People who choose to pay themselves first allocate money to the asset column of their balance sheet before they’ve paid their monthly expenses. Essentially, you set aside a specific amount of money right off the bat, and then live off what’s leftover. And that’s how wealth grows.

If you aren’t doing this now, have no fear — it’s never too late to ditch your bad habits. Learning to manage your money properly now with a “pay yourself first” mindset will ensure you have it to invest later.

How to Pay Yourself First

If you cannot get control of yourself, do not try to get rich. It makes no sense to invest, make money, and blow it. It is the lack of self-discipline that causes most lottery winners to go broke soon after winning millions. It is the lack of self-discipline that causes people who get a raise to immediately go out and buy a new car or take a cruise.

I would venture to say that personal self-discipline is the number-one delineating factor between the rich, the poor, and the middle class.

Simply put, people who have low self-esteem and low tolerance for financial pressure can never be rich. As I have said, a lesson learned from my “rich dad” was that the world will push you around.

The world pushes people around, not because other people are bullies, but because the individual lacks internal control and discipline. People who lack internal fortitude often become victims of those who have self-discipline.

If you have the necessary self-discipline, when you begin paying yourself first, it will feel totally backwards because you’ve been doing it wrong for decades. But trust me, it’s the only way to go.

My wife Kim and I have had many bookkeepers and accountants who have balked at our approach, because they too have grown accustomed to paying themselves last. Even during times when my cash flow was less than my bills, I still paid myself first. And you can too. How?

First, don’t get into large debt positions that you have to pay for. Keep your expenses low. Build up assets first. Then buy the big house or nice car later.

Second, when you come up short, go ahead and let the pressure build — don’t dip into your savings or investments as a bailout. You see, poor people have poor habits. And one of those poor habits is dipping into savings to pay bills.

Use the pressure to inspire your financial genius to come up with new ways of making more money, and then pay your bills with that. Bonus: You will have increased your ability to make more money and boosted your financial intelligence.

So, let’s say you’re taking home about $4,000 a month. If you first pay yourself $500, then you have $3,500 left for living expenses. After one year’s time, you’ll have saved $6,000. You can even set this up automatically with your bank, to remove the temptation of spending the money.

But How Can I Save When I Have Debt?

Kim and I had about $400,000 of debt when we started our lives together in 1984 — but by 1990 we were debt free. Here’s how we did it, and thus, here’s my advice for you:

Step 1: Immediately stop accruing debt that doesn’t help you. Stop adding to your credit card balances.

Step 2: Make a list of all the debt you owe (credit card, school loans, car loans, IOUs to people, your personal residence, etc.) so that everything is clearly organized and accounted for.

Step 3: Hire a bookkeeper so you can’t hide from the truth—he or she will keep meticulous records each month, so you always know where you stand (even if you don’t want to admit it).

Step 4: Kim and I decided that with every dollar that came into our household, we’d take a set percentage off the top and set it aside. Yes, this was the beginning of us paying ourselves first.

We set up three piggy banks: one for savings, one for tithing or charity, and one for investing. We then set the percentage for each piggy bank at 10% each, for a total of 30% of all income we received.

If we received $100, then $10 went into the savings bank, $10 into the charity bank and $10 into the investing bank. We did this with every dollar we received. You don’t have to start off with 30%, but whatever percentage you choose, stick with it each month and increase when possible.

Step 5: Determine the order for paying off each debt by starting with the lowest and working toward paying that off. For all other debt, just pay the minimum amounts due each month. Once your first (lowest) debt is paid off, then work on the next debt (second lowest) and so on.

You Can Still Survive With a Small Cash Flow

There have been times in my life when, for whatever reason, cash flow was far less than my bills. I still paid myself first.

My accountant and bookkeeper screamed in panic,

“They’re going to come after you. The IRS is going to put you in jail.”

“You’re going to ruin your credit rating.”

“They’ll cut off the electricity.”

I still paid myself first.

“Why?” you ask.

Because that’s what the story, The Richest Man In Babylon, was all about: the power of self-discipline and the power of internal fortitude. As my rich dad taught me the first month I worked for him, most people allow the world to push them around.

A bill collector calls and you “pay or else.”

A salesclerk says, “Oh, just put it on your charge card.” Your real estate agent tells you, “Go ahead. The government allows you a tax deduction on your home.”

It’s important to have the guts to go against the tide and get rich. You may not be weak, but when it comes to money, many people get wimpy.

None of My Money Is For the Government

I am not saying be irresponsible. The reason I don’t have high credit-card debt, and doodad debt, is because I pay myself first. The reason I minimize my income is because I don’t want to pay it to the government.

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


Robert Kiyosaki
for The Daily Reckoning

The post No. 1 Proven Way to Keep Your Money appeared first on Daily Reckoning.

The Investing Mystery Solved

This post The Investing Mystery Solved appeared first on Daily Reckoning.

For many new investors, the numbers of investing are a mystery.

They may even appear intimidating and mind numbing. The reality, however, is that they are just the opposite! Numbers are the clues for solving the mystery.

Every investment has a story. Every time someone approaches you to invest money in his or her particular investment, whatever it may be, they will tell you that story.

  • “This company has just discovered the cure for cancer and will be coming out with its new wonder product in five months. The stock will explode!”
  • “This 24-unit apartment building is where the growth in Texas is moving. Boeing is opening a new plant there next year, so the demand for rentals will be extremely high.”
  • “My partner and I have created a new clothing line geared for women at colleges and universities. We’ve been in the fashion world for 25 years. So far, 30 of the major universities have picked up our line. We have verbal agreements that that number will double in the next six months.”

Where people get into trouble with investments is when they act upon the story without getting into the facts that the numbers tell. The numbers may tell the same story or a very different one. It’s up to you to uncover the true story and to solve the mystery.

Rich dad often said, “It is through the expense column that the rich person sees the other side of the coin. Most people only see expenses as bad, events that make you poor. When you can see that expenses can make you richer, the other side of the coin begins to appear to you.”

He said, “One of the reasons so few people become rich is that they become set in one way of thinking. They think there is only one way to think or do something.

“While the average investor thinks, ‘Play it safe and don’t take risks,’ the rich investor must also think about how to improve skills so he or she can take more risks.” Rich dad called this kind of thinking, “Thinking on both sides of the coin” by standing on the edge.

Numbers as Clues

Consider every investment you pursue as a mystery to be solved. The numbers that make up that investment’s story by themselves means nothing. I never see numbers from an investment analysis as just numbers. Instead, I look at the numbers as clues to guide me to discovering the truth about the investment. What is the investment? How is it really performing? How can we expect it to perform in the future?

Many investment pitches show you pretty brochures. They give you lots of facts about the industry and not the specific company, city, or property.

Here’s a general rule: The bigger the brochure, the worse the deal.

If the offering is not clear and concise, then chances are, the investment is anything but great. Don’t baffle me with your BS (blue sky).

Finding a Good Deal in the Numbers

Imagine you are told a story like this: “For the past two years, my business sold $5,000 worth of product. My projection for this next year, with your investment money, is that we will sell $100,000 worth of product!”

At that point, you have only one question to ask, “How?” Everyone knows you do not go from $5,000 to $100,000 without a strong plan in place. If she can’t show you how she will get there, then the $100,000 prediction is meaningless.

If an investment opportunity is a good deal, then:

  • Show me the numbers—past operating numbers, as well as the worst-and best-case scenario of future numbers.
  • Explain why and how this investment will increase in value in the future.
  • Give me the expected rate of return on the money I invest in this investment.

Use the three bullets above to obtain information and start your research. Even if you trust someone, check to see if their numbers are correct. It’s a good learning experience. Plus, people trying to sell something tend to expand the truth… even if they are powerful and respected.

For example, according to an article in Harvard Business Review, a study done by Dana Carney from Columbia University Graduate School of Business found that, “a sense of power buffers individuals from the stress of lying and increases their ability to deceive others.”

The purpose of the numbers is for you to identify the red flags, the possible inconsistencies, of what you are being told. The numbers help you discover what the facts really are and raise the right questions.

Untangling the Numbers

Let’s say you are considering the purchase of a rental duplex. The seller tells you that the property has very low operating expenses. That sounds like a good thing, right?

You review last year’s numbers and see that the owner has indeed spent very little on maintenance and repairs for this duplex. It raises a question (could be a clue) in your mind, so you dig a little deeper. The owner is telling you part of the truth.

Yes, it’s true his expenses to maintain the property were very low. Upon further inspection, however, what he did not tell you is that, because he has spent so little to maintain the property, there are many repairs that need to be done to the building to keep it operating.

His maintenance-and-repair expenses are low, but yours, especially when you first buy it, will be very high.

The numbers are just as important if you are purchasing shares of stock in a publicly traded company. Most people buy and sell stocks based upon rumors, tips, and current news. When you buy shares of stock in a company, you own a piece of that company.

If you are going to invest in a company, wouldn’t you want to review its past performance numbers and future projections, just as you would a privately-held company?

The numbers don’t lie. Keep this in mind as you move forward on your journey to independence, financially. Learn to overcome your fear of numbers and use them to uncover the mysteries of a good investment versus a bad investment.

The more comfortable you become through practice and experience at understanding the numbers of any investment, the greater success you will have as an investor.


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post The Investing Mystery Solved appeared first on Daily Reckoning.

The 6 Real Estate Trends to Watch in 2019

This post The 6 Real Estate Trends to Watch in 2019 appeared first on Daily Reckoning.

In case you weren’t paying attention, 2018 was an exciting year in real estate—full of twists and turns. Obviously, I don’t have a crystal ball—but after spending decades as a successful real estate investor, I am pretty well versed in reading the tea leaves. So, what does 2019 have in store for real estate investors?

According to Zillow, “rising mortgage rates will set the scene for the housing market in 2019. They will affect everyone, driving up costs for home buyers and creating more demand for rentals. Even current homeowners could start to feel locked into their mortgage rates.”

Here are some interesting trends that will affect the real estate market in 2019:

1. Technology Advancements

Technology in the real estate industry has been changing rapidly. Companies like Redfin, Zillow, Trulia and Homesnap have been changing the way sellers and buyers perceive the market and it is crucial for investors looking to buy properties to understand the difference between price and value.

2. New Buying Patterns

The baby boomers who once purchased all the traditional two-story homes are now ready to downsize. But they don’t just want less space, they are also looking for ranch-style homes, so they don’t have to navigate stairs as they age. What does that mean? Single-story homes will increase in value as demand rises.

Millennials are finally ready to purchase their first homes despite headlines saying they “can’t afford them.” But because they are largely seeking affordability and quality of life, they are having to trade in the urban life they crave and head out to the suburbs. In 2017, the undeniable shortage of affordable entry-level properties created a real barrier for this group, the nation’s largest buyer segment.

During the Great Recession, more than 10 million Americans were forced into foreclosure—and their ten years of waiting to purchase another property (due to foreclosure law) is over. According to the National Center for Policy Analysis, approximately 1.5 million Americans will become eligible to re-enter the housing market this year. While some might still be licking their wounds, many are sick of renting and itching to own again.

3. Continued Dive in Retail Assets

We all know online sales are killing some malls, but we’ve seen few attempts at repurposing these empty properties. Many of these struggling retail locations have excellent economics for multifamily redevelopment. I’m shocked we haven’t seen more mall-to-multifamily conversions.

4. Steady Stream of New Construction

The top trend I’ve seen so far has been a steady stream of new construction, which is kept rent prices mostly in check for 2018. Where I live in Arizona, you can’t drive down any street without seeing some sort of new construction happening. A stable pipeline of new buildings means we’ll see the impact of lower rent growth but still above long-term averages when it comes to rent across the U.S.

5. Low Available Inventory

After the real estate bubble burst in 2008, and foreclosure properties were abundant, inventory wasn’t a concern. Fast forward 10 years, and the economy back to a comfortable level, inventory levels are back to pre-2008 numbers.

6. Rise of The Single-Family Rental Asset Class

A total of 3.6 million single-family rental homes (SFR) have been added from 2006-2016. The SFR industry has risen to the challenge to escape a “mom-and-pop” dominated market. As the demand from more sophisticated renters who choose not to rent increases, so does the demand from the sophisticated investor requiring a higher level of service.

Investing Is A Lifestyle

Many people want to be successful real estate investors. The problem is that the average person starts at the last step of the investment cycle rather than at the beginning. Because of this, they often fail.

What is the last step? The property.

It seems counterintuitive, but the property is actually the least important part of becoming a successful real estate investor. In fact, you could have one of the best properties in the world, but if you don’t complete three crucial steps prior to buying that property, chances are that, for you, the property will be a huge disappointment.

Many people think they need to invest in their own backyards. While that may be a good idea, it’s not a necessary one. Rather, you should find a market that meets the needs of your personal investment philosophy.

For instance, if your personal investment philosophy were to invest for monthly cash flow, it would make no sense invest in a number of properties with an aggressive, highly leveraged debt ratio that allowed for no cash flow. Nor would it make sense to invest in a high appreciation market where prices didn’t pencil out for positive cash flow.

Rather, you would need to find the right market that provided affordability and cash flow, even if it didn’t appreciate much. For cash flow investors, that’s a great market. For flippers or appreciation investors, it’s a nightmare market. But you only know that if you understand what kind of investor you want to be.

As rich dad said, “Business and investing are team sports.” In order to be successful in any market, especially ones that you don’t live in, you need to have the right team.

This team should include an attorney, a CPA, a bookkeeper, and a real estate agent and/or broker, and you should rely on them heavily to give you expert advice about your market and the properties you’ll be looking at.

Without a team in place to give you expert advice, the chances of you making a huge mistake are high.

So, if you’re looking into becoming a real estate investor, 2019 could be a great time to do so. Investing in single-family rental properties may deliver strong returns. How do you begin? Do your research and read everything you can—this will automatically increase your financial literacy. Learn how to invest using other people’s money in order to minimize your risk. Then, take action, so that you can lead the rich life you absolutely deserve.


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post The 6 Real Estate Trends to Watch in 2019 appeared first on Daily Reckoning.

Your New Year’s Plan: Top 3 Lessons from 2018

This post Your New Year’s Plan: Top 3 Lessons from 2018 appeared first on Daily Reckoning.

Around this time of year, it’s a good idea to stop and look back, taking stock of all the incredible and difficult things that happened over the last 365 days.

The Internet is full of “Top 2018” lists that span the best books, movies, music, celebrity moments etc. to allow you to reflect on the past year.

This week, I’m looking forward to the top trends and predictions for 2019, and how you can position yourself to make it your best year yet.

There’s no way to know for certain what will happen in the new year. As we know from previous experience, things can drastically change overnight. But there are a few trends we will probably see carrying over from 2018.

1) Embrace The Tech

I for one am very excited to see what technology advancements 2019 brings. For some, technology spells doom as robots threaten to replace workers and cut jobs. But for entrepreneurs, technology promises to address problems and make running a business easier than ever.

As an entrepreneur, using the wide array of tools out there to help you improve or create your business is one of the best ways to excel in 2019. Make it a part of your New Year’s resolutions to incorporate further learning and tech adoption into your financial plan.

2) President Trump’s Economic Outlook

2018 was a year for some major economic growth in the U.S., largely due to Trump’s tax cuts, consumer confidence, and companies re-investing in their business.

According to many economists, the economy is expected to slow down, and as financial conditions tighten, the impact of the tax cuts passed will fade.

Some economists are expecting more than a slowdown and are saying there’s a 50% chance of a recession by 2020.

Again, we can’t know for sure what will happen, and things are always liable to drastic change. That’s why maintaining a strong financial knowledge base will be the best way to navigate the coming year. Don’t wait around until the government implements new financial policies. Take charge of your financial plan now and position yourself for a great year.

3) Debt Will Increase To An All-time High

Debt has been on the rise for years. 2018 was a record high for consumer credit card debt, and I have a feeling the problem is only going to get worse.

According to, “Credit card balances carried from month to month continue to inch up, reaching $420.22 billion in late 2018, according to NerdWallet’s annual analysis of U.S. household debt. That’s an increase of about 5% over last year. And for Americans carrying that debt, the impact is significant.”

Today, it’s easier than ever to make money running your own business or investing in assets, but it’s also easier to get into debt. Still, bad debt is not inevitable. There’s no reason you shouldn’t be able to get out and stay out of debt. Remember the two rules of staying out of bad debt: Don’t swipe the small stuff and credit keeps charging.

Go into 2019 with open eyes regarding your spending habits and debt. Are you carrying over debt from last year? What’s your plan to pay it off? Do you have a clean slate? What steps will you take to avoid bad debt? Ask yourself these questions and get your plan together early.

What does this mean for you?

Instead of wringing your hands in fear or sitting back comfortably because you think everything will go your way, take 2019 into your own hands. Start crafting a strong financial plan that can sustain you no matter what happens.

Start by identifying what you hope to achieve. I find the act of physically writing down my goals is the best way to make my dreams a reality. Putting my vision on paper gets it out in the open. Once it’s written down, I’m committed to it.

As we all know, it’s all too easy to fall off the wagon with our New Year’s resolutions. That’s why you have to set up goals that in turn set you up for success. Setting SMART goals with the new year approaching is more important than ever. Remember, SMART goals are: Specific, Measurable, Attainable, Realistic, and Timely.

When your goal meets these five characteristics, it becomes much easier for you to stick to them. And remember, every goal should be working you towards a greater vision of where you want to be.

Another way to make sticking to your goals easier is by getting others involved. Whether it’s your spouse, your kids, your friends, or a mentor, you can find a partner to help keep you dedicated to your goals. We all know it’s easier to go to the gym when we have a friend going with us. The same holds true for true freedom in your finances.

With your goals in mind, you can start making a list of what you’ll need to attain them. Maybe you need increased understanding of real estate. Maybe you need to understand how to invest for cash flow. By knowing where you are, and where you want to go, it should quickly become apparent the things you must learn to get there. Increasing your financial education is the first step.

Why I’m optimistic for 2019…

This year for many people was full of ups and downs. The presence of disruptive technology led to extensive job cuts, not to mention a still recovering economy, political turmoil, higher interest rates, and more.

But despite a less-than-ideal landscape, the people coming out of 2018 on top are the ones who have a strong base of financial education.

It was confirmed this year that financial education is more important than ever. With every twist and turn, every “impossible” act, every astounding technology that revolutionized the market, only those with a deeper financial understanding, and the right mindset, came out ahead.

While the masses were panicking over every setback, those on the path to freedom kept their eyes on the long journey ahead, never wavering or allowing the day-to-day challenges to deter them.

Education breeds confidence. And in these ever-changing times, confidence is more important than ever.

Anything can happen in 2019. To the glass-half-empty folks out there, that might be a little scary. But to the rest of us, that’s great news. Anything can happen, like getting out of debt, starting your business, quitting your job as an employee and making the shift to business owner and investor, purchasing your first asset, and so much more. If you haven’t started the journey to complete independence, 2019 is your time. You just have to take it.


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post Your New Year’s Plan: Top 3 Lessons from 2018 appeared first on Daily Reckoning.

Brace Yourselves: A Crash Is Coming

This post Brace Yourselves: A Crash Is Coming appeared first on Daily Reckoning.

I know we are in the midst of a joyous time of year, but that doesn’t mean the world has stopped turning. And the start of 2019 brings us to a critical moment. We’re on the brink of the third wave crash.

Let’s take a gander at recent history: First, there was the 1980’s savings and loan crisis. Then, in 1987, the stock market crashed, and the Dow Jones index lost 23% of its value. The next major event was the dotcom bubble and subsequent crash from 1999 to 2000. And the most recent event was the global financial crisis in 2007-08, which was triggered by the subprime mortgage crisis and collapse of the U.S. housing bubble. I’m leaving out a few smaller ones in between, but those are the true highlights (or lowlights, really) of the crash cycle in the past forty years.

Essentially, the economic cycle is longest period of tranquility took place during the 1990s when the economy went an entire decade without a down cycle. That was a rare—and glorious—decade.

As you can see, it’s been 10 years since the last major event—if history repeats itself, we’re due for a crash. And soon. That is if we’re not already seeing the needle headed toward the bubble.

Let’s examine the evidence: Both the Dow Jones Industrial Average and the S&P 500 are up for their worst December performance since 1931, when stocks were battered during the Great Depression.

December is typically a very positive month for markets. The Dow has only fallen during 25 Decembers going back to 1931.

The S&P 500 averages a 1.6 percent gain for December, making it typically the best month for the market, according to the Stock Trader’s Almanac.

Bitcoin, the highly volatile cryptocurrency, has created a complete frenzy in recent weeks. Last year at this time, Bitcoin saw a 1600% increase in value. That being said, Bitcoin’s bubble literally popped and millennials, like generations before them, just got a painful lesson about speculation. Also, in the news there’s talk of housing bubbles and auto loan bubbles forming left and right.

Do you know what bubbles always do? Pop!

Preparing for The Pop

I’m not trying to end the year on a note of doom and gloom. We don’t know when this bubble will burst, but we can certainly start preparing for it. How? It all comes down to financial education.

You see, it all begins with understanding that money doesn’t make you rich. Your financial IQ is what makes you rich. I guarantee that if you give the same $100,000 to a person with a low financial IQ and a person with a high financial IQ, you’ll see an immense difference in how they spend and grow that same money.

Central to the difference between those with low and high financial IQs is a simple but profound literacy: the ability to understand a financial statement—an income statement and balance sheet.

balance sheet

Strangely, accounting classes teach how to read an income statement and balance sheet separately. But, it’s actually the understanding of the relationship between them that’s crucial. After all, how can you tell what an asset or liability really is without the income column or the expense column? Understanding the relationship between the two allows you to easily see the direction of your cash flow so you can effortlessly determine if something is making you money or not.

Bottom line: If something is making money, it’s an asset. If not, it’s a liability. The reason most people with low financial IQs suffer money-wise is that they purchase liabilities and mistakenly list them under the asset column.

Cash Flow is the Only Way to Go

It’s this simple insight that explains why those with a low financial IQ are still poor even when they make a six-figure income. They have no clue how to move their money into assets that make them more money. And cash flow is king.

Because financial subjects have a way of turning unnecessarily complicated, let’s keep the concepts simple and use diagrams for added clarity. If you can understand the following diagrams, you have a better chance of acquiring great wealth.

Cash flow patterns

cash flow pattern

An asset is something that puts money in your pocket. This is the cash-flow pattern of an asset:

A liability is something that takes money out of your pocket. This is the cash-flow pattern of a liability:

cash flow pattern

The Confusing Part

Now, confusion can happen because accepted methods of accounting allow for the listing of both assets and liabilities under the asset column.

To explain this, look at this diagram:

cash flow pattern

In this diagram, we have a $100,000 house where someone has put $20,000 cash down and now has an $80,000 mortgage. Confusing indeed! How do you know if this house is an asset or a liability? Is the house an asset just because it is listed under the asset column?

The answer is, of course, no. In order to know for sure, you would need to refer to the income statement to see if it was an asset or a liability.

To illustrate this, let’s look at a diagram that depicts the house as a liability:

cash flow pattern

You can tell it is a liability because it’s only line items are under the expense column. Nothing is in the income column.

Next, let’s look at a diagram with the addition of a line that reads “rental income” and “net rental income”—the key word being “net.” Do you see how that addition to the financial statement changes that house from a liability to an asset?

cash flow pattern

Put simply, if the rental income of the house, minus the expenses of the house, equal positive net rental income, then the house is an asset. If not, it’s a liability.

Did you find this lesson profound? It’s essentially the basis for building all great wealth. Going back to my earlier comment, a person with a high financial IQ and $100,000 would be able to know how to invest it in assets that are true assets—ones that put more money back in the pocket each month. The person with the low financial IQ would spend that same money on liabilities but wouldn’t be able to diagnose what was wrong. Instead, they would try and work harder to make more money—a vicious cycle we call the Rat Race.

Back to The Bubble

Understanding the relationship between the income statement and the balance sheet allows you to quickly understand if an investment is an asset or a liability—and this understanding will allow you to make the right investment every time. While you can’t control how the economy behaves or when this unavoidable bubble will occur, you can absolutely control your ongoing education and financial prowess to minimize its impact.


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post Brace Yourselves: A Crash Is Coming appeared first on Daily Reckoning.

The #1 Secret to Being a Winner

This post The #1 Secret to Being a Winner appeared first on Daily Reckoning.

I have never met anyone who likes losing money. And in all my years, I have never met a rich person who has never lost money.

But I have met a lot of poor people who have never lost a dime—investing, that is.

The fear of losing money is real.

Everyone has it. Even the rich.

But it’s not the fear that is the problem. It’s how you handle fear. It’s how you handle losing. The primary difference between a rich person and a poor person is how they manage that fear.

It’s okay to be fearful. It’s okay to be a coward when it comes to money. You can still be rich. We’re all heroes at something and cowards at something else.

My rich dad understood phobias about money.

“Some people are terrified of snakes. Some people are terrified about losing money. Both are phobias,” he would say.

So, his solution to the phobia of losing money was this: “If you hate risk and worry, start early.”

If you start young, it’s easier to be rich.

But what if you don’t have much time left or would like to retire early? How do you handle the fear of losing money?

My poor dad did nothing. He simply avoided the issue, refusing to discuss the subject.

My rich dad, on the other hand, recommended that I think like a Texan. “I like Texas and Texans,” he used to say. “In Texas, everything is bigger. When Texans win, they win big. And when they lose, it’s spectacular.”

“They like losing?” I asked.

“That’s not what I’m saying. Nobody likes losing. Show me a happy loser, and I’ll show you a loser,” said rich dad. “It’s a Texan’s attitude toward risk, reward, and failure I’m talking about. It’s how they handle life. They live it big.”

Rich dad went on, “What I like best is the Texas attitude. They’re proud when they win, and they brag when they lose. Texans have a saying, ‘If you’re going to go broke, go big.’ You don’t want to admit you went broke over a duplex.”

He constantly told Mike and me that the greatest reason for lack of financial success was because most people played it too safe.

“People are so afraid of losing that they lose.”

Fran Tarkenton, a once-great NFL quarterback, says it still another way: “Winning means being unafraid to lose.”

In my own life, I’ve noticed that winning usually follows losing.

I’ve never met a golfer who has never lost a golf ball. I’ve never met people who have fallen in love who have never had their heart broken.

For most people, the reason they don’t win financially is because the pain of losing money is far greater than the joy of being rich.

Rich dad used to tell Mike and me stories about his trips to Texas. “If you really want to learn the attitude of how to handle risk, losing, and failure, go to San Antonio and visit the Alamo.

“The Alamo is a great story of brave people who chose to fight, knowing there was no hope of success. They chose to die instead of surrendering. They got their butts kicked. So how do Texans handle failure? They still shout, ‘Remember the Alamo!’”

Mike and I heard this story a lot.

He always told us this story when he was about to go into a big deal, and he was nervous.

It gave him strength; it reminded him that he could always turn a financial loss into a financial win.

Rich dad knew that failure would only make him stronger and smarter.

It gave him the courage to cross the line when others backed out. “That’s why I like Texans so much,” he would say. “They took a great failure and turned it into inspiration….”

But probably his words that mean the most to me today are these:

“Texans don’t bury their failures. They get inspired by them. They take their failures and turn them into rallying cries. Failure inspires Texans to become winners. But that formula is not just the formula for Texans. It is the formula for all winners.”

Failure inspires winners. And failure defeats losers.

It is the biggest secret of winners. It’s the secret that losers do not know.

There is a big difference between hating losing and being afraid to lose.

Most people are so afraid of losing money that they cannot help but lose. They go broke over a duplex.

Financially, they play life too safe and too small.

The main reason that over 90% of the American public struggles financially is because they play not to lose. They don’t play to win.

They go to their financial planners or accountants or stockbrokers and buy a balanced portfolio.

Most have lots of cash in CDs, low-yield bonds, mutual funds that can be traded within a mutual-fund family, and a few individual stocks. It is a safe and sensible portfolio.

But it is not a winning portfolio. It is a portfolio of someone playing not to lose.

Don’t get me wrong. It’s probably a better portfolio than more than 70 percent of the population has, and that’s frightening.

It’s a great portfolio for someone who loves safety.

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

The concept of winning and our desire to win in all areas of our lives were themes of the 2016 U.S. Presidential election.

It’s a mindset, a goal to which we can all aspire, and that motivates us to embrace our mistakes, learn from them, and keep our sights focused on winning.

It’s something President Trump understands, something rich investors understand…

And now it needs to be something you not only understand, but act on.


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post The #1 Secret to Being a Winner appeared first on Daily Reckoning.

There Are 5 Levels of Investing… Here’s How You Reach the Top One

This post There Are 5 Levels of Investing… Here’s How You Reach the Top One appeared first on Daily Reckoning.

I recently read an article on “Retirement Success: focus on the paycheck, not the savings number.” I was intrigued. I didn’t know exactly what it meant, so I read it.

The article features an actuary named Vernon who is an expert in numbers, and also a retirement educator. I always like to hear what those guys have to say.

Vernon’s strategy is to not to focus so much on the retirement number, but instead setting up “retirement paychecks that are guaranteed to last the rest of your life.” I thought “Oh, maybe he’s talking about cash flowing assets.”

I read on.

I didn’t have to get much farther down the page before I realized this “retirement educator” was teaching what most finance-gurus teach: a retirement filled with basics and necessities.

“The big picture is to get a feel for what your basic necessities are each month, and your discretionary expenses,” Vernon said. “Then, you want to insure an income that exceeds your basic expenses.”

What he called “retirement success” was simply living to pay for your necessities. By his logic, a retiree who probably worked a majority of their adult life was to live the rest of their life only with the basics. That’s not the way I’d want to live. That’s not the way anyone should live.

Social Security, Pensions, Annuities and Reverse Mortgages were his strategy for success.

This is no way to live.

5 Levels of Investors

Below is my Cashflow Quadrant…


cash quadrant

The image informs every different kind of person out there when it comes to their understanding of money.

The E and S side are where 90% of the population live. Uneducated financially. It’s not where you want to be.

Level 1: The Zero-Financial-Intelligence Level

Over 50% of the population in America is the Level 1 investor. The results of a lack of financial education in the school system can be found in this level. Simply put, they have nothing to invest.

Zero financial intelligence = Zero money to invest

There are many people who make a lot of money who fall into this category. They earn a lot—and spend more than they earn.

Level 2: The Savers-Are-Losers Level

As the Federal Reserve and central banks throughout the world print trillions of dollars at high speed, every printed dollar means higher taxes and more inflation. In spite of this fact, millions of people continue to believe saving money is smart. It used to be smart when money was money. Now savers who park their money are the biggest losers.

Level 3: The I’m-Too-Busy Level

This is the investor who is too busy to learn about investing. Most likely a highly educated person who is too busy with a career, family, and vacations. They rely on the expertise of an “expert” to manage it for them. They hope and pray their expert is really an expert.

Level 4: The I’m-a-Professional Level

This is the do-it-yourselfer (they’re from the S quadrant investing in the I quadrant). This investor may do their own research and make their own decisions before they buy and sell a few stocks, often from a discount broker. If they invest in real estate, the do-it-yourselfer will find, fix, and manage their own properties. And if the person is into commodities, they will buy and store their own gold and silver. In most cases, the do-it-yourselfer has very little, if any, financial education.

Level 5: The Capitalist Level

This is the richest people in the world level. The Level-5 investor, a capitalist, is a business owner from the B quadrant investing in the I quadrant.

The capitalist uses other people’s money (OPM) to invest. Once a person knows how to build a business in the B quadrant, success attracts money and it becomes easy to raise money in the I quadrant.

They get their money from Level 2 and Level 3 investors who save their money in banks and pension plans.

5 Types of Investors

Investors, like investing plans, are not created equal. There are different investor types.

  1. Accredited Investors: As defined by the Securities and Exchange Commission (SEC), this investor earns at least $200,000 in annual income ($300,000 for a couple) and/or has a net worth of $1 million. An accredited investor has access to many lucrative investments that, because of their risk, may be legally off-limits to people of lesser income. Although usually financially educated, accredited investors are not necessarily fully literate. They may be content with security and comfort rather than wealth, and may rely on advisors to develop and implement their financial plans.
  2. Qualified Investors:  This investor is well versed in either fundamental or technical investing. Fundamental investing requires the ability to assess a company’s potential by reviewing financial statements, tracking the company’s industry, and calculating how changes in interest rates and the economy could affect profitability. Fundamental investors use financial ratios (which you’ll learn about later) to assess the strength of a company being considered as  an investment.
  3. Sophisticated Investors: Sophisticated investors build wealth by developing a foundation of assets that generate high cash returns with minimum payment of taxes. Sophisticated investors exercise control over the timing of taxes and the character of their income. They know, for example, to defer paying taxes on capital gains from real estate by rolling over profits to more expensive property. They look at economic downturns as opportunities to pay bargain-basement prices for quality paper assets, and they create deals instead of simply waiting for the right one to come along.
  4. Inside Investors: Building or owning a profitable business is the primary goal of this investor. Whether as an officer of a corporation or owner of a majority of its shares of stock, the inside investor exercises some degree of management control. By running business systems from the inside, he or she learns how to analyze them from the outside and thereby becomes a sophisticated investor as well.
  5. Ultimate Investors: The goal of the ultimate investor is to own a business that is so successful that shares are sold to the public. Making an initial public offering (IPO) is expensive and full of risks, yet it allows business owners to cash in on the equity they have built up in the company, while also raising money to pay down debt and fund expansions. The ultimate investor is one who has mastered every rule and enjoys playing the game for its own sake.

Average investors buy packaged paper assets such as mutual funds, treasury bills, or real estate investment trusts (REITs). Professional investors are more aggressive. They create investment opportunities or get in on the ground floor of new offerings, build businesses and marketing networks, assemble groups of financiers to fund deals too large for them to undertake alone, and pick the companies with the most promise for initial public offerings (IPOs) of stock.

Each level of investor and type of investor that you are will determine if your retirement is secure, comfortable, or rich. Which do you choose?


Robert Kiyosaki

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