sunnuntai 25. huhtikuuta 2010

Robert T. Kiyosaki

According to Robert T. Kiyosaki, there is only one rule in wealth creation. Kiyosaki's Rule One is that "You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. An asset is something that puts money in my pocket. An liability is something that takes money out of my pocket."

Buy assets

For many years I refused to read Kiyosaki's books. I just didn't like the concept and the way his books were advertised. Somehow, I didn't like "Rich dad, Poor dad"-idea. Finally, after many recommendations, I decided to give a go and picked up some of his book from the library. I still don't like the way the books are written, I mean the concept of having rich dad and poor dad giving advice how to live a life. Anyway, I still can recommend at some point to read one book from Kiyosaki. One is enough (Either Rich dad, poor dad or Cashflow recommended) because it seems that the story is mostly the same in all his books. You can describe his main idea in one picture, which is above. The picture presents a kind of personal financial statement. The idea is to buy assets, because they create income and avoid liablilities, because they create expenses. The reason why most people can't do this is that they don't know what the assets are.

According to Kiyosaki, the Real assets are:
  1. Businesses that do not require my presence. I own them, but they are managed and run by other people. If I have to work there, it's not a business. It becomes my job.
  2. Stocks
  3. Bonds
  4. Mutual funds
  5. Income-generating real estate
  6. Notes
  7. Royalties from intellectual property such as music, scripts, patents
  8. Anything else that has value, produces income or appreciates and has a ready market
House is not an asset

Instead of buying assets people buy liabilities like a house or a car. You take a loan, buy a big house and pay your salary for the bank. In Kiyosaki's listing a house is not an asset, because it doesn't generate cash flow. For Kiyosaki "A bigger home means bigger expenses, and the cash flow keeps going out through the expense. When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house."

Rat Race

He also talks about Rat Race describing how most of the people live: "Most people have a price. And they have a price because of human emotions named fear and greed. First, the fear of being without money motivates us to work hard, and then once we get that paycheck, greed or desire starts us thinking about all the wonderful things money can buy. The pattern of get up, go to work, pay bills, get up, go to work, pay bills... is then set up. Their lives are then run forever by two emotions, fear and greed. Offer them more money, and they continue the cycle by also increasing their spending. This is what I call the Rat Race."

Financial IQ and management skills

Kiyosaki also calls for financial IQ. Financial IQ is made up of knowledge from four areas of expertise:
  1. Accounting: Accounting is financial literacy. A vital skill if you want to build an empire. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down. This is the left brain side, or the details. Financial literacy is the ability to read and understand financial statements. This ability allows you to identify the strengths and weaknesses of any business.
  2. Investing: Investing is the science of money making money. This involves strategies and formulas. This is the right brain side, or the creative side.
  3. Understanding markets: This is the science of supply and demand. There is a need to know the technical aspects of the market, which is emotion driven. The other market factor is the fundamental or the economic sense of an investment.
  4. The Law: For instance, utilizing a corporation wrapped around the technical skills of accounting, investing and markets can aid explosive growth. An individual with the knowledge of the tax advantages and protection provided by a corporation can get rich so much faster than someone who is an empolyee or a small-business sole proprietor.
According to Kiyosaki, the main management skills needed for success are:
  1. The management of cash flow
  2. The management of systems (including yourself and time with family)
  3. The management of people
Some quotations of Robert T. Kiyosaki

Kiyosaki's way to express thing is quite black and white. Anyway, I personally like his style as being a bit provocative and express things as simple as possible. Here are some quotations picked up from his books:
  • The lack of money is the root of all evil.
  • There is a difference between being poor and being broke. Broke is temporary, poor is eternal.
  • I don't work for money. Money works for me.
  • If you don't first handle fear and desire, and you get rich, you'll only be a high-paid slave.
  • Money without financial intelligence is money soon gone. A fool and his money is one big party.
  • High emotions tend to lower financial intelligence.
  • If you want to be rich, you need to be financially literate.
  • Accounting is possibly the most boring subject in the world. It also could be the most confusing. But if you want to be rich, long term, it could be the most important subject.
  • In accounting, it's not the numbers, but what the numbers are telling you. It's just like words. It's not the words, but the story the words are telling you.
  • Wealth is person's ability to survive so many number of days forward.
  • If you don't love your asset, you don't take care of it. Acquire assets that you love.
  • Rich people buy luxuries last while the poor and middle class often buy luxuries first.
  • Land was wealth 300 years ago. So the person who owned the land owned the wealth. Then, it was factories and production, and America rose to dominance. The industrialist owned the wealth. Today, it is information. And the person who has the most timely information owns the wealth.
  • Many rich families lose their assets in the next generation simply because there is no one trained to be a good steward over their assets.

1 kommentti:

  1. Kiyosaki is frank, but that's not always a bad thing. I definitely don't agree with his dualistic concepts, but I do think he has helped tons of people with his simplistic graphs, stories and quotes. It's not the academic, but that doesn't mean it couldn't work.


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