rich education

Free book summary – Unfair Advantage: The Power of Financial Education – by Robert Kiyosaki

Robert Kiyosaki has one stark message. The United States needs financial education. Right now our education system is broken and nothing is being taught that prepares people for financial freedom. All of Robert’s books are good and teach the basics of financial education and the need for continuous learning. Rich Dad / Poor Dad is another popular book by this author. We will describe this book in a separate synopsis

The Cashflow Quadrant is a very important concept that people need to cement in their memory if they want to get a handle on financial freedom. The quarter consists of the following:

1.) e – stands for employee

2.) S – stands for Small Business or Self Employed

3.) B – Large companies (500 employees or more)

4.) I – stands for investor

A traditional education prepares us for the E and S quarters. The motto was go to school and then to college in hopes of getting a good job and saving a 401k for retirement. As many of you know, this is not a good role model in this day and age. On a side note, I was very lucky to have grown up with an excellent finance teacher. My dad taught the principles Mr. Kiyosaki teaches in his books Rich Dad/Poor Dad and the Cashflow Quadrant and this book is an unfair advantage. I can also tell you that most people are not financially literate. There is a real need for authors like Mr. Kiyosaki and Dave Ramsey and we are doing what should be taught in our school system at the national level.

Why is this important to me?

This can be answered by asking more questions. Do you know the difference between good debt and bad debt? Can you define assets and liabilities in simple terms?

Did you know that there are three types of income taxes?

If you are not clear about any of them, you need to read this book. In short, I will answer all these questions. Good debt is anything that spits out positive cash flow and increases in value. Thus, if you have debt on a rental home that is producing a positive monthly cash flow, then it is good debt. If you have a credit card debt that you don’t pay off each month, it’s bad debt. In short, good debt makes you money and bad debt costs you money.

Assets and liabilities! Anything that generates positive cash flow is an asset while anything that costs you money is a liability. Example: A business that generates a monthly profit is an asset. Your home is a responsibility. I know many of you will disagree with this but your house costs money every month. This is not a bad thing but because you need a place to live but it is a responsibility.

It includes the three types of income: ordinary, portfolio, and passive income. We’ll go into more detail about how these play a role in your financial freedom later in this summary. This book is important for you if you want to be financially free and escape the rat race of running out of money before the end of each month.

There are many more examples and details described in Unfair Advantage but for the sake of time we will cover each of them briefly.

1. Knowledge – Using knowledge equals power. There are many ways to make money be it in business, real estate, stock market, content creation, licensing deals, internet marketing or many other endeavors. The point here is that nothing happens without educating yourself. Warren Buffett, the second richest man in the world, is known for his constant reading and learning abilities. The unfair advantage hypothesis is very high financial education, where money flows in rather than out. You can pay zero taxes and make millions with very low risk using other people’s money in good or bad economics. This creates a very unfair advantage.

2- Taxes – Taxes are government incentives to get people to do what they want them to do. Thus, as corporations create jobs and wealth, they have tax strategies as incentives to keep the economy going. There is a huge premise that people need to understand. I will put the difference. When you’re employed, you work, pay your taxes, and then have your money to pay your expenses. When you’re a business, you work, pay all your expenses and then pay taxes on what’s left. This is completely legal and can legally boost your rates of return. Remember one thing – tax evasion is wise while tax evasion means jail time.

3. Debt – Good debt creates real wealth by allowing you to use OPM (Other People’s Money). This is very powerful and requires discipline. This is one area

I wish this book spoke in more detail. Please note that debt used wisely can create unlimited wealth and leverage. Too much debt used wrongly can create financial ruin. Also know that 85+% of the US population has very bad debt. This is not what we are talking about. This must also be taken care of to truly achieve financial freedom. Using debt is an advanced strategy and should be used wisely which requires financial literacy.

4. Risk – The biggest risk in investing comes from giving financially uneducated money to financial planners in the hope that things will work out. By far this has caused great losses to people. Inflation is running rampant at the moment even though the government says it is not. This is a greater risk for tax savers. Saving money as an investment is a bad idea because over time the value is eroded by inflation. 401K’s and mutual funds along with diversification are all considered risky. This could not be further from the truth. 1. Mutual funds are subject to double taxes plus fees which impair your returns. Also, you don’t control your money. Note: This does not mean that all funds are bad. This is where financial education comes in. Many financial planners will tell their clients to diversify. According to Warren Buffett – “Diversification is protection against ignorance.”

5. Compensation – Rich people don’t work for money. Think hard work for a moment. If you work overtime, you are trading hours for the dollar. The problem is that your marginal tax rate increases as your ordinary income increases. Your overtime is taxed the more you work. I am not against working hard. Just be sure to pair it with SMART and RIGHT WORK, too. The wealthy business of buying assets that create cash flow. Your goal should be to make your money work harder than you do and make more money as quickly as possible.

What assets will you pay for your liability? This concept was first covered in Rich Dad/Poor Dad. This simple question changes the whole frame of mind and if people follow it they will be better off financially. This means that if you want a new boat, what assets will you pay for the boat? Once you grasp this simple idea, your world will change.

I hope you found this short, concise video helpful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. I highly recommend that you solidify knowledge of syntax in your head. Answer the following correctly and you will understand the power of compounding. Would you rather have $1,000,000 in cash today or double a penny a day for 31 days? You can email me [email protected] with your answer.

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