The Consumer Economy and “Rich Dad. Poor Dad.” What The Wealthy Teach Their Kids About Money That The Poor And Middle Class Don’t.

The Consumer Economy Continuous growth through continuous consumption. Most of us define ourselves in terms of: How much and what we consume. Our role in the making of what we consume. Our ability to persuade others to consume. Its philosophy is spreading throughout the world. Is it truly satisfying? “If your reason for becoming rich is to look rich, you will never become rich.”

The Consumer Economy We are a free country, not necessarily a fair country. We are all free to fail. We’re being taught to be “Good Employees.” Go to school Get good grades Get a good “JOB” Work hard Maintain good credit So we can consume lots of stuff. “JOB” for most means “Just Over Broke.” Should we be taught how to become “Wealthy?”

Most of the following ideas about money and wealth creation are From Robert Kiyosaki and his partner and co-author, Sharon Lechter. I highly recommend that study their writings more deeply on your own.

Financial Intelligence It is not your boss’ job to make you wealthy or secure. It’s her job to give you a paycheck . . . nothing more. Making more money will not solve your problem if money management is your problem. Money is a drug.

Financial Intelligence Money pushes you around. You will obey money. Employers/Bosses Landlords Bill collectors Tax collectors Family and friends Can you push back? Are you smarter than your money? Answer: Do you work for money, or does money work for you?

Financial Intelligence When money works for you, every dollar is an employee. Each dollar works to bring you even more dollars while you’re asleep. Passive Income: Interest, dividends, real estate income, royalties, residuals, annuities Your money can work for you or it most certainly will work for someone else. “What do you do?” versus “What do you own?” The key is “What investments do you own that will bring you passive income?”

Financial Intelligence “Being Rich” versus “Being Wealthy” Being Rich is about how much money you possess in a specific moment in time. Being Wealthy is about . . . how much money you keep how hard it works for you how much is left for future generations (who know what to do with it) Being Wealthy is about exploding your Passive Income. (How long you can survive without ever having to go to work?)

Financial Intelligence Rich Dad. Poor Dad’s Basic Philosophy Know the difference between an ASSET and a LIABILITY, and only buy assets. A True Asset gives a positive cash flow each and every month. Live below your means, while constantly increasing your means. Make your PASSIVE INCOME cover your Lifestyle Expenses forever.

Financial Literacy Sadly, most of us have been taught to read words and books, but not numbers and financial statements. Two key personal and business financial statements we all must be able to read. The Income Statement shows the amount of money coming in and going out. The Balance Sheet shows the balance of what you own and what you owe.

Financial Literacy (continued) Income Income Statement Expenses (Payments) Assets (Own) Liabilities (Debts) Balance Sheet

Financial Literacy (continued) Income Paycheck, dividends, interest, rents, royalties, profits, advances Income Statement Expenses (Payments) Assets (Own) Liabilities (Debts) Balance Sheet

Financial Literacy (continued) Income Paycheck, dividends, interest, rents, royalties, profits, advances Income Statement Expenses (Payments) Taxes, mortgage/rent, cards, car, food, fun, rent, clothes, child care, insurance, medical Assets (Own) Liabilities (Debts) Balance Sheet

Financial Literacy (continued) Income Paycheck, dividends, interest, rents, royalties, profits, advances Income Statement Expenses (Payments) Taxes, mortgage/rent, cards, car, food, fun, rent, clothes, child care, insurance, medical Assets (Own) Liabilities (Debts) Balance Sheet Mortgage, car loan, credit cards, school loans

Financial Literacy (continued) Income Paycheck, dividends, interest, rents, royalties, profits, advances Income Statement Expenses (Payments) Taxes, mortgage/rent, cards, car, food, fun, rent, clothes, child care, insurance, medical Assets (Own) Liabilities (Debt) Balance Sheet Stocks, bonds, notes, real estate, business, intellectual property Mortgage, car loan, credit cards, school loans

How The Poor Live They only have small incomes and small expenses Statement Expenses Balance Sheet Assets = Zero Liabilities = Zero

How The Poor Live They only have small incomes and small expenses Statement $ Expenses The Wealthy Balance Sheet Assets = Zero Liabilities = Zero

How The Middle Class Live They buy expenses and liabilities they think are assets Income Income Statement Expenses Balance Sheet Liabilities Assets Assets

How The Middle Class Live They buy expenses and liabilities they think are assets Income Income Statement The Wealthy Expenses $ Balance Sheet Liabilities Assets Assets

How The Wealthy Live They take the income of the poor and middle class, and buy assets that produce more income Income Income Statement Expenses Balance Sheet Assets Liabilities

How The Wealthy Live They take the income of the poor and middle class, and buy assets that produce more income Income $ Poor and middle class income Income Statement Expenses Balance Sheet Assets Liabilities

Rich Dad’s Cash Flow Quadrant (modified) Note: Kiyosaki calls the D Quadrant the “Big Business Owner” Quadrant. I S

Rich Dad’s Cash Flow Quadrant (modified) Developer Employee Works with Body. Loves to Do. Works with Mind. Loves to Deal. Investor Self-Employed

Rich Dad’s Cash Flow Quadrant (modified) Employee You have a job. Someone else is the boss. Security before money.

Exempt vs Non-Exempt Jobs Considered non-professional Up to 100% doing routine, non-thinking tasks Does only what is told to do Has a pre-set schedule Punches a time clock Paid hourly Receives overtime pay Management/Exempt Considered a professional At least 50% of time using intellect, directing, creativity Has discretion with decisions Sets own work schedule Receives a salary No overtime pay

Rich Dad’s Cash Flow Quadrant (modified) Employee You have a job. Someone else is the boss. Security before money. Self-Employed You own a job. Loner/”boss.” Perfectionists. Small bus. owners: Drs. Restaurateurs. Independence before money.

Rich Dad’s Cash Flow Quadrant (modified) Employee Developer You have a job. Someone else is the boss. Security before money. You own a system that others operate. Coordinator. Delegator. Franchiser. Use other people's time and money. Self-Employed You own a job. Loner/”boss.” Perfectionists. Small bus. owners: Drs. Restaurateurs. Independence before money.

Rich Dad’s Cash Flow Quadrant (modified) Employee Developer You have a job. Someone else is the boss. Security before money. You own a system that others operate. Coordinator. Delegator. Franchiser. Use other people's time and money. Self-Employed Investor You own a job. Loner/”boss.” Perfectionists. Small bus. Owners: Drs., restaurateurs. Independence before money. Your money works for you. Make money with money. Other’s liabilities are your assets.

Rich Dad’s Cash Flow Quadrant (modified) Developer Employee Works with Body. Loves to Do. Works with Mind. Loves to Deal. Investor Self-Employed

Rich Dad’s Cash Flow Quadrant (modified) Developer Employee Job Security Financial Freedom Rat Race Side Wealth Side Investor Self-Employed Financial Security Ultimate Financial Freedom

Sample Paths To Financial Freedom Developer Employee Start Rat Race Side Wealth Side Investor Self-Employed End or Start

Sample Paths To Financial Freedom Developer Employee Start Rat Race Side Wealth Side Investor Self-Employed End

Sample Paths To Financial Freedom Developer Employee Start Rat Race Side Wealth Side Investor Self-Employed End

In Which Quadrant Are You Headed? What are your financial goals? Which would you choose? Job security Financial security Financial freedom

Systems and Discipline Are The Key For All Quadrants “Am I hauling buckets or building a pipeline?” Can you make a better hamburger than McDonald’s? Can you build a better system for making hamburgers than McDonald’s? There are tons of great ideas, but few great systems. You must also have the discipline to diligently work the system.

Some Final Thoughts Risk Money It’s risky not to build a business or not to invest. 9 out of 10 business fail; so I need to fail 9 times. Money There are two problems associated with money: You can have too little or too much. Money comes from inside out, not the outside in. So, money is an idea, not a thing. Thus, your ideas can create money out of nothing. You create money in your spare time. Creating ideas and searching for bargain assets. It’s not how much money you make; it’s about how much you keep.

Some Final Thoughts (continued) Emotional Intelligence Practice “delayed gratification.” Buy assets first, luxuries last. Ask “how can I afford it?” This stimulates your creativity.

Some Books and Stuff by Robert Kiyosaki and Sharon Lechter Rich Dad. Poor Dad. Cashflow Quadrant Cashflow Game Cashflow, The E-Game Rich Dad’s Guide to Investing Retire Young. Retire Rich. Rich Kid. Smart Kid.