“Rich Dad Poor Dad” by Robert Kiyosaki

Financial Literacy is something that isn’t commonly taught to people and Kiyosaki believes is it the single most important thing for young people to learn. The biggest difference between the rich and the poor is that the rich let money work for them and the poor work for money. In my paper I will explain how important it is for you to become financially literate and let money work for you. You have to get out of the Rat Race and join the few that are actually financially successful. You say how is it possible to allow money to work for you? Well I will show you how the rich and poor balance their assets and liabilities against their income, the history of taxes and corporations, how the rich actually invent money, how to manage cash flow, systems and people, and why it important to work to learn not just for money.

Are you really preparing your children for the real world? Many parents tell their children to study hard, make good grades and you will find a high paying job and make lots of money. Truth is that no amount of school can really be helpful without financial literacy with it. There is a definite difference between what the rich teach their children verse the poor. In my paper I will explain the differences and why it’s so important.

First you have to discover a way to live on the “Right Side of the Street”. You have to ultimately make the decision of whether or not you want to be rich or poor. Then realize that different lifestyles create bad habits and barriers. Also, you have to discover and learn about the laws that govern making money. When you have figured out these contrasting ideas you are well on your way to being on the “Right Side of the Street”. The “Right Side of the Street”, isn’t necessarily being either rich or poor, it’s learning the literacy of finances and letting money work for you rather than you work for money.
One difference between the rich and poor is that the poor and middle class work for money whereas the rich do not. They are passionate, driven and energetic about making money work for them almost downright greedy. The biggest challenge the poor and middle class have is fear, fear keeps them from letting money do the work, because they have bills to pay and you have to work to pay bills right? Wrong!
Rich dad teaches that money always works for you. He makes you work for no money to teach you that.

Always pay yourself first and see what opportunities others miss out on. Poor dad teaches you to work for money and to pay everyone else first (taxes). The middle class should have found some happy medium, but all they teach is when your income or assets go up then so should your liabilities, this is even worse. It creates a higher more dangerous amount of debt.

I bet your wondering how to let money work for you when all you know is how to work for money. Well its simple really, learn how money works. The school system doesn’t teach how money works, and most “educated” people don’t know how it works either. You have to start with the basics of money management and the differences between assets, liability and income. Then you have to sacrifice it all, not let fear hold you back and go for it. Sometimes you may fail, but we learn mostly by mistakes and can only grow from them.

An Asset is what puts the money in your pocket. There are three types of assets paper, real-estate and businesses. Along with that are three types of income Portfolio income, passive income and earned income. Portfolio income is derived from paper assets like stocks, bonds, mutual funds and insurance and is the easiest to manage. Passive income is derived from real-estate or royalties from patents. Earned income is derived from paychecks and is the most highly taxed type.

With everyone there is a cash-flow pattern and this determines whether or not you are on the “Right Side of the Street”. The poor spend every penny and have no assets only liabilities. The Middle class had an increase in income and so does their spending creating more liabilities. The Rich let their assets pay for themselves; they have control over their expenses and usually have little or no personal liabilities.

Be about the business of building assets and having no liabilities. Your business should revolve entirely around your asset column and not your income column. Many owners of a business own more than one business, because they use their assets to buy other assets not just use them on personal liabilities. Key goals to remember is to be a good leader have a mission and work as a team. In a business you must be savvy about the product you’re selling and endorse it well. Communication is also one of the biggest contributing factors in running a reputable business. Also, always follow the legal rules of the business and never cut corners. Your business will grow and in turn buy you many more assets.

Taxes are a tricky thing; we are taxed when we work for money and when we buy things. They were originally designed to generate government income from the rich. Like I said earlier, the rich are greedy and financially smart and they found ways to make loopholes in the tax laws and in turn the government began taxing everyone. One thing about the rich is that they will always find a way to pay them first and everyone else second. The power of a corporation is a great thing; it protects your assets from the government.

When people own corporations, they earn, spend and then pay taxes. People who work for corporations earn, pay taxes and then spend. See the difference. You have to learn to invent money because working for it will never get you anywhere. You have to have financial literacy, investment strategies and learn how to work the market of supply and demand. Find out what people want/need and get it to them. Make assets for yourself.

Don’t let fear be your guide in the Rat Race forever. Learn how to accept and deal with change. You have to know the financial skills for success; the management of people, the management of systems, and the management of cash-flow. With these tools you will be able to succeed and become better at building your assets to sustain you rather than your liabilities you have to maintain.

In conclusion the rich don’t work for money. You have to become financially literate like I have said a thousand times and figure out the way money works and let it work for you. Mind your own business and build it with ethics and honesty, let it buy you more assets. You must study the tax laws and let the tax laws of corporations be your shelter. Invent money, work to learn not work for money.