The Cashflow Curriculum.pdf

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THE CASHFLOW CURRICULUM

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ELEVATE YOUR FINANCIAL IQ

By Robert T. Kiyosaki

Kim & Robert Kiyosaki

Making Fina

Our Job Is to Make Financial Education Fun

In 1994, my wife Kim and I retired. Kim was 37 and I was 47. We had enough cash flow from our investments to be financially free. What made our retirement a little unique was that we did not have traditional jobs, a government pension, a retirement plan, savings, or mutual funds. All we did was follow the lessons my rich dad had taught me about life, money, business, and investing. Kim was not ready for retirement so she started her own real estate investment company. She was a rich woman at 37 and has continued to become richer. Her commitment to support women to become financially independent led her to write her own book, Rich Woman. I bought a large tract of land on top of a mountain and built a cabin nestled in a canyon surrounded by oak trees. I was celebrating retirement. I swore I would never work again. Unfinished Work However, there was one problem. I felt I had unfinished work to do. The difference was, it was not about working for money. I had enough money. My soul felt unsettled. It was about my life’s work…a life’s purpose. My work was not yet done. That’s when I talked to Kim about creating an educational board game. The Rich Dad Company was born. Lessons from Great Teachers As I sat quietly in my valley, I began to recall the lessons I had learned from my real dad (a great teacher), my rich dad (a great business person), and Dr. R. Buckminster Fuller (considered to be one of our planet’s greatest geniuses.) The isolation gave me invaluable time to reflect on the lessons I learned from each of them, all three of them great teachers, each with different lessons. From my dad, who became the Superintendent of Education and Republican candidate for Lt. Governor of the state of Hawaii, I learned the importance of service to people. Not only did he dedicate his life to public education, he and my mom took two years out of their lives to serve in President John F. Kennedy’s Peace Corps. Both my mom and dad put being of service ahead of money. Maybe that’s why our family struggled financially. From my rich dad (my best friend’s father), I learned the fundamentals of business, money, and investing. He began teaching me at the age of nine and was a mentor to me into my 30’s. Dr. Fuller, often referred to as a futurist, once said that each of us is here with a special 2

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ancial Education Fun purpose with a special gift that is essential for the well-being of our planet and humanity. Since I did not do well in school, I found it hard to accept that I had any kind of gift, much less a special one. I had no idea which of humanity’s problems I was here to solve. Then one night, I realized that the problems I could help solve were the problems caused by money and the lack of financial education. Memories of my family struggling financially pained me. My dad earned more than most of my friends’ parents, but we were always short of money. Financial Storm Ahead Sitting in my cabin, I realized that the lack of financial education in our schools was going to cause one of the biggest economic tragedies in the near future. Today, most of us are aware of the financial shock waves (and their ramifications) that lie ahead. Some of them are: America, once the richest nation in the world, is now the biggest debtor nation in the world. 1. Millions of aging baby-boomers in industrialized nations are retiring and will be in need of government financial support. In America, Medicare is a huge financial time bomb. 2. Millions of people have no savings and are deeply in debt. 3. Big corporations, which once took care of employees for life, are now requiring employees to invest for themselves. I realized I could assist in solving this looming financial problem. For the next few weeks, I worked steadily at designing the CASHFLOW® board game and began writing my book Rich Dad Poor Dad which has been on The New York Times bestseller list for over six years. CASHFLOW® board game has been sold all throughout the world to like-minded people who want to learn what school will never teach about money. The game is fulfilling its purpose. It is simply people helping people solve their own financial problems. The lessons from my poor dad, my rich dad, and Dr. Fuller have proven to be valuable lessons. Each of us can make a difference in our world, in big and small ways, if we choose to do so.

www.richdad.com

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Financial IQ?

What is Financial IQ?

Financial IQ Is the Ability to Solve Financial Problems

When I was little, I thought if I were a millionaire, I wouldn’t have any more problems. Now that I am a multi-millionaire, I still have money problems. Rich or poor, we all have money problems. Let me give you some examples of different money problems. Not enough money – obviously, this is a problem. Deeply in debt – millions of people are earning money, but sliding deeper into debt. Not knowing what to do with their money – if you do not know what to do with your money, there are many people who think they do. Their solution is for you to turn your money over to them. Paying too much in taxes – taxes are our single largest expense. Knowing how to make more money and pay less in taxes legally requires a lot of financial intelligence. Too much money – being rich creates some big problems: how to hang onto the money, how to prevent friends and family from wasting your money, how to pass the wealth on to the next generation, and how not to spoil your kids. Knowing good from bad – many people do not know good investments from bad investments or good advice from bad advice. Young versus old – the older you are, the more important financial intelligence becomes.

Why the CASHFLOW® Curriculum Is Important The CASHFLOW® Curriculum is designed to elevate your financial IQ. With a higher financial IQ, you will be better able to tell good investments from bad investments, good advisors from bad advisors, and which investments are right for you. By increasing your financial IQ, you will be better able to solve your own personal financial problems and challenges. I encourage you to play this game, investing your time before you invest your money. You may also want to play this game with friends and family. Teaching others is one of the great ways to learn and elevate your own financial IQ. As my rich dad often said, “Money does not solve money problems. Financial intelligence does.” Your financial intelligence is more important today than ever before. In a world of financial turbulence, your best asset is your financial IQ. It’s time to get smarter with your money! 4

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Game of Money

At What Age Will You Win the Game of Money?*

The purpose of CASHFLOW® Curriculum: To assist you in winning your game of money as early as possible.

Pre-Game Show (Born Rich) 1st Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ages 25-35 2nd Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ages 36-45

Halftime Show (Mid-Life Crisis) 3rd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ages 46-55 4th Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ages 56-65

Overtime “I can’t afford to retire. I’ll just keep working.”

Out of Time “Now what do I do?”

*Winning the game of money means you are actually out of the Rat Race and financially free. www.richdad.com

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Reflection of Behavior

GAMES ARE A REFLECTION OF BEHAVIOR

An important educational aspect of the CASHFLOW® game is observing participant’s behavior. When I was playing Monopoly® with my rich dad, he would often correct my behavior, saying, “Games are a reflection of behavior.” As you are playing the CASHFLOW® game, make it a point to observe player behavior. It will tell you a lot about the person. For example: 1. If a player’s financial statement is sloppy and messy, they are probably sloppy and messy in real life. If a person is sloppy in real life, the accuracy of their real numbers is compromised. 2. If a player cheats in the game, they probably cheat in real life. If you find a person who cheats, don’t let them play banker in the game. If they are a banker in real life, find another bank. 3. If a player omits things during the game, they probably omit things in real life. For example, if the player fails to put the name of their auditor on their financial statement game sheet, they probably do not think an auditor is important and may not have an auditor in real life. If you are going to be rich, audits and auditors are important. If you are going to be poor or middle class, auditors can be omitted. 4. If a person is pessimistic and fearful in the game, they are probably the same in real life. A fearful pessimist in real life will always find out what is wrong with an investment or a deal. In real life, all deals have pros and cons, strengths and weaknesses. No deal or investment is perfect. The problem with a fearful pessimist is that they will only see what is wrong and make the whole deal wrong. In reality, a good investor wants to know the good and the bad and will figure out how to turn the bad into good. That is what real investors and entrepreneurs do. 5. If a person is too optimistic in the game and takes excessive risks, they are probably that way in real life. The problem with optimists is that they actually believe there is a perfect investment.

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BONUS

Bonus Info BONUS INFO

Do You Obey the Rules or Break the Rules? Many people hate rules… yet without rules, there is no asset. For example, when the leaders of Enron broke the rules, the asset—the business—was virtually wiped out. One of the reasons the SEC, the Securities and Exchange Commission, is so important is because it creates and enforces the rules. Again, we may not like the rules, but without rules and the enforcement of the rules, the asset value declines or disappears. In real estate, if the tenant refuses to pay and the rules do not support the landlord, the value of the asset greatly diminishes. For example, in Johannesburg, South Africa, property values plunged in the central business district when buildings were occupied with tenants who refused to pay the rent. Since there were so many people refusing to pay, the government was unable to enforce the rules, the good tenants moved out, and property values plummeted. One of the reasons I would rather own apartment houses in Arizona than in California is because Arizona is tougher on tenants who do not pay. This may sound cruel, yet tougher eviction rules actually keep rents lower. In many countries it is very difficult to fire bad employees. While the government or unions may think it is protecting employees, employers would rather move their businesses to countries where the rules favor the business owners. Hence, jobs move overseas. Taxes are a set of rules. If the government does not enforce the tax rules, people stop paying taxes. Without taxes, government services, such as police, fire, hospitals, and schools, shut down. The importance of rules affects everything of value. For example, if government leaders break the rules, the country suffers. If you break the rules of your body and consume excessive junk food, alcohol, tobacco, or drugs, your health is threatened. If a spouse cheats, a family is often ruined. Imagine driving a car without police enforcing the rules. For any organization to survive and thrive, the leader needs to create rules, get agreements, follow the rules, and, if necessary, enforce the rules. Personally, I dislike most rules. Yet I know rules are important and need to be followed and enforced. I do my best to avoid doing business with people who do not obey the rules. Without rules, there is chaos. www.richdad.com

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RichDad Wisdom

RichDad Wisdom

MONEY ALONE DOES NOT MAKE YOU RICH

Your Thoughts Are the Most Powerful Force on Earth The purpose of Rich Dad’s CASHFLOW® Curriculum is not to tell you what to do with your money. We are not investment advisors. We do not sell or recommend investments. We are a financial education company. We offer financial education. The purpose of the CASHFLOW® Curriculum is to expand your mind and your thoughts about money. If you expand your mental capacity about money, you expand your capacity to have more money and to have more power over your money. As you know, your thoughts are the most powerful force you have. The purpose of this game is to have your thoughts about money working for you, rather than working against you.

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Three Ways to Invest 1

Do Nothing

Choosing not to invest either time or money into the subject of money is the primary reason most people struggle financially. Unfortunately, our school systems invest little time or money into the subject of money. (That is one reason why there are more poor people than rich people).

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Turn Your Money Over to an Expert

Since most people think investing is risky, most people seek safe money strategies, such as saving money, getting out of debt, and turning their money over to people they hope are financial experts. The financial services industry thrives on fear, ignorance, and a lack of financial education. The financial services industry wants you to believe that investing is risky. The less financial education you have, the more fear you have, and the more you want to turn your money over to financial experts. The problem is, many people who profess to be financial experts are not rich people. They are sales people. Their job is not to educate you. They don’t get paid to be teachers. They get paid to sell you what their company wants them to sell you.

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Invest Your Time Before You Invest Your Money

Most of us are very busy today. For many of us, time is more valuable than money. This may be why so many people simply turn their money over to people who they hope are financial experts. We believe it is smarter to invest time in your financial education before you invest your money. It is smarter to know what a good investment is. It is important to know what good financial advice is and who are smart financial advisors.

www.richdad.com

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Bonus Info

BONUS

TO CHANGE YOUR LIFE

Sometimes We Want to Change… but Sometimes It’s Just Not That Easy For example: You may want to lose weight… but can’t. Or you may want to stop smoking… but can’t. The same is true for becoming rich. Many people want to become rich… but can’t. A friend of mine is a senior official in New York state prisons. She is in charge of training and rehabilitation. The core theme of her lessons is, “Environment is stronger than will.” She says, “If you go back to your old neighborhood and hang out with your same friends, you will return to prison. Environment is stronger than will.” In other words, if you want to change your life, change your environment. • • •

If you want to lose weight, spend more time at a gym. If you want a stronger spirit, spend more time in church and meet new people who spend more time in church. If you want to be a great golfer, spend more time at the golf course and hang out with people who love golf.

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Environments That Affect Wealth • • • •

It’s harder to become rich if you live in a poor neighborhood. It’s harder to become rich if you work in a poor work environment. It’s harder to become rich if you spend time with people who are not interested in becoming rich. It’s harder to become rich if your thoughts, your mental environment, are filled with poor thoughts.

CASHFLOW® Game Environment School is an environment. I did not do well in school. I found school too slow and too boring. Also, I did not want to learn how to be a better employee. I wanted to learn to be an entrepreneur and an investor. One of the purposes of The CASHFLOW® board game is to provide a rich educational environment that is more fun. Learning by making mistakes is encouraged. A CASHFLOW® game creates an environment where people who want to become rich come to strengthen their spirits and minds and meet others who share similar interests. Remember, a home is an environment. Just by creating a financially positive learning environment in a home, even if it is only for two or three people, you change the future of that family. Change the environment and lives will change.

www.richdad.com

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RichDad Wisdom

RichDad Wisdom

WEALTH IS MEASURED IN TIME... NOT MONEY

The Earning Curve Most of us have heard of the learning curve. Well, there are also earning curves. Three of the basic earning curves are pictured.

Earning Curve #3

#1 #2

Age 25

Age 45

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Age 65

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Earning Curve #1 This curve often applies to people who inherit money, or to sports stars and entertainers who earn millions of dollars early in their life. They earn a lot of money early in life, but due to lack of financial education or bad money management, their money supply dwindles over time. In fact, statistics show that 65% of all professional athletes are bankrupt five years after their athletic careers are over. This is also why so many family fortunes are gone by the third generation.

Earning Curve #2 This is my poor dad’s earning curve. He earned a lot of money while he was working. Every year he earned more money due to pay raises. Then suddenly his working days were over and his earnings plummeted. He had very little in savings to fall back on. This is the earning curve of millions of people today. The people are counting on the government or their family to take care of them.

Earning Curve #3

USA Today found the greatest fear in America is not terrorism, but running out of money during retirement.

This is my rich dad’s earning curve. Although he started out with nothing, his wealth and riches increased every year. The legacy of generational wealth continues to multiply. His income never went down… his income went up even when he was not working.

Wealth Is Measured in Time My rich dad did not focus on getting rich. Instead he focused on becoming wealthy. He said, “Most people focus on getting rich rather than becoming wealthy.” Explaining further he said, “Rich is measured in money and wealth is measured in time. For example, if you have $10,000 in savings and your expenses are $1,000 a month, then you are ten months wealthy.” Today too many people are working to become rich or look rich… rather than working to become wealthy.

www.richdad.com

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BONUS

Bonus Info AYTHING CAN BE AN ASSET

Anything Can Be an Asset My friend’s 14-year-old son understands the difference between assets and liabilities. When he was 11, he took money from his savings and purchased five gumball machines. Today he has about 50 machines from which he averages about $1 net profit per day per machine. He averages $50 a day, $350 per week, $1400 a month, which he reinvests to buy more gumball machines. He will soon pay for his own college education and more. This 14-year-old boy understands the power of leverage, cash flow rather than capital gains, investing rather than speculating, and the difference between assets and liabilities. In 1989, my wife Kim started with a 2-bedroom/1-bath house. She put $5,000 down and netted $25 a month in cash flow. She bought ten more homes. Once she had her experience, she then graduated to an 18-unit apartment building. Her banker loaned her all the money she needed. Today she only buys apartment complexes with over 100 units. Currently, she owns over 1,000 rental units and earns an average of $150 a month from each unit. She earns in a month more than many high-income people earn in a year, and pays much less in taxes. Like her book, she is a Rich Woman. I reference my friend’s 14-year-old son and my wife Kim to point out the importance of starting small and keeping things simple… especially at the start. When you look at the Cone of Learning, the top of the cone is doing the real thing. When you are ready to do the real thing, Keep It Super Simple (K.I.S.S.). Start with a few gumball machines or a single family home. You will make mistakes, and mistakes lead to experience, and real-life experience is priceless.

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Assets Put Money in Your Pocket Most people invest in paper assets such as savings, stocks, bonds, mutual funds, index funds, ETFs, REITS, and insurance annuities. These assets are popular simply because they are the most advertised and aggressively marketed. Yet, anything can be an asset, just as anything can be a liability. For example, a gumball machine can be someone’s asset and it is also someone’s liability. In reality, all assets are also liabilities. That means, most retirement plans are really liabilities… taking money from workers’ pockets for years, hoping there is enough of an asset there when the person retires. Simply stated, assets put money in your pocket and liabilities take money from your pocket. An asset cannot exist without a liability. Assets can be as simple as gumball machines. Writing a book, building a network marketing business or a franchise are other forms of assets. Assets can also be intangible, such as trademarks, patents, hedge funds, or derivatives. As long as it ultimately puts money in your pocket with minimal effort once established, it may be an asset. This is why most jobs or ‘S’-quadrant businesses are generally not assets. One of the best movies I have ever seen on financial success is The Pursuit of Happyness starring Will Smith. It is a great story with many great lessons. Kim and I lived a similar story. So have many other people who started with nothing and turned nothing into fortunes. Even Donald Trump started by rehabbing small homes. Today, he builds skyscrapers. So when you are ready to start, remember to K.I.S.S.

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RichDad Wisdom

RichDad Wisdom

“I LEARNED TO GET RICH PLAYING MONOPOLY®.”

When I was nine years old, my rich dad began my financial education by playing the game of Monopoly®. We played it over and over again. When I asked him why we played the game so much, he simply said, “The formula for great wealth is found on this game board.”

Most of us know the formula. It’s four green houses, one red hotel. “The numbers on a deed from the Monopoly® game are similar to the numbers shown in the CASHFLOW® financial statement… but that’s where the similarity ends. CASHFLOW is the first educational game to take the boring subject of accounting and combine it with the often frightening subject of investing. Putting them together into a game makes it fun to learn.” – Robert Kiyosaki

FINANCIAL IQ : There Is Good Debt and Bad Debt People with high financial IQs use debt to make themselves rich. People with low financial IQs use debt to make themselves poor­. One reason real estate is such a great investment is because your banker will lend you money to invest. Ask your banker if they will lend you money to invest in mutual funds.

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RichDad Wisdom

RichDad Wisdom

CONTROL YOUR MONEY... CONTROL YOUR LIFE

The Crystal Ball When They Look at a Financial Statement, Many People Focus on Income. Rich Dad believed the most important part of the financial statement was expenses. He said, “The expense column is the crystal ball to a person’s financial future.” He also said, “When I look at a person’s expenses, I can clearly see what is important to them. If expenses are going to liabilities, such as a big house and nice cars, this person will probably struggle financially all their lives. If the person is investing in assets and their education, they will probably become richer and richer, regardless of how much money they earn from their job.” In other words, a janitor could become richer than a doctor if the janitor were more careful about his expenses… about how he spends his time and money. Many people believe that if they get a higher-paying job, they will become richer. In most cases, more money will not make a person with poor spending habits rich.

STRUGGLES FINANCIALLY www.richdad.com

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“The expense column is the crystal ball to a person’s financial future.”

BECOME RICHER AND RICHER 18

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BONUS

Bonus Info

WHERE ARE YOU ON THE FOOD CHAIN OF MONEY?

When you listen to professional investors talking, you often hear them ask, “What position are you in?” Position is another way of asking, “Where are you on the food chain? Are you the big fish or the little fish?” The problem I personally have with mutual funds or stocks has to do with the investor’s position… where they are on the food chain. When I was in high school, my rich dad used this diagram of the investor food chain.

CAPITALIST Banker Bond Holders Preferred Share Holders Stock Holders Mutual Fund Investors

WORKERS Being at the bottom of the food chain means the mutual fund investor is in last position. If the business collapses, as Enron and Arthur Andersen did, the stockholders and mutual fund investors are in last position. That means they get paid last (if there is anything left) after the banker, bondholders, and preferred stock holders pick over the carcass. One of the greatest tragedies of the Enron collapse was the devastation of the retirement accounts of employees who were invested in Enron stock or had invested in Enron via a mutual fund. Now you know why your banker will not give you a loan to invest in mutual funds. You can also see why your insurance agent will insure your car and house but not your retirement plan. It is a matter of what position you are in or where you are on the food chain. When my poor dad advised me to get my master’s degree, work for a big company or the government, save money, get out of debt and invest in mutual funds, his advice was directing me to the bottom of the food chain. My rich dad, on the other hand, was a teacher and mentor, guiding me to become a capitalist… at the top of the food chain. One of the purposes of The Rich Dad Company and The CASHFLOW® game is to show you a path to the top of the food chain. www.richdad.com

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Little Fish Feed the Big Fish When I asked my rich dad, “Where do savers fit in?” he drew this diagram. Saver Banker Capitalist In the diagram above, the saver deposits their savings with the bank, and receives, let’s say, 5% on their money. The banker then lends the saver’s money to the capitalist at, let’s say, 8%. Capitalist: Real Estate Investor The following diagram explains how the capitalist wins in real estate. For simplicity, I will use an example of a 100% – financed investment.

Capitalist: Entrepreneur A dream of many entrepreneurs is to build a company and take it to the public market via an Initial Public Offering (IPO). One of my greatest thrills was the first company I took public. Going public was a dream come true. Who did I sell the company to? Large mutual fund companies.

CAPITALIST

BANKER

Takes title

100% of the money

100% of the income

0% of the income

100% of the depreciation

0% of the depreciation

100% of the amortization

0% of the amortization

100% of the appreciation

0% of the appreciation

Little Fish Feed the Big Fish In nature, the little guys feed the big guys. The same is true in financial markets. In financial markets, the little fish invest their hard-earned money, take the biggest risk, receive the smallest returns, and pay the highest tax rates. To me, this is not fair. Yet this is the capitalist system. One great thing about a capitalist country is you have the freedom to choose to be a capitalist or not. It is a matter of knowing what you want to be when you grow up—and then choosing the appropriate education. My poor dad wanted me to go to school and become a good employee. My rich dad trained his son and me to be capitalists… to be at the top of the food chain… to be big fish rather than little fish… to be financially smart rather than financially gullible.

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RichDad Wisdom

RichDad Wisdom

EDUCATE ALL THREE PARTS OF YOUR BRAIN

It’s Important to Educate All Three Parts of the Brain The human brain is made up of three parts: the left, right, and subconscious brain, pictured below. Traditional school systems focus heavily on left-brain memorization of facts and learning the three R’s: reading, ‘riting, and ‘rithmetic. The system forces educators to emphasize left-brain learning in order to produce higher test scores. Students strong in left-brain skills are generally considered smarter in school than those with creative right-brain skills.

Left

Right

Subconscious

Right-brained students usually excel in art, music, theater, and other creative subjects, but they have limited opportunities in academics to be creative or “think outside the box.” Is this the best way for schools to prepare students for life in the real world?

FINANCIAL IQ : The Fear of Failing The fear of failing is the number one reason that most people are not rich. The number two reason is greed. When people get emotional, they do foolish things with their money. They either play it too safe and lose, or they get too greedy and lose. If you are going to be rich, you must learn to control your emotions. That is why Rich Dad’s CASHFLOW® board game is important. The game teaches you to control your emotions of greed and fear.

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Fear Comes from the Subconscious

What is the emotional result of this left-brain focus in our system? The very small percentage of left-brain dominant students is rewarded. The right-brained students who excel in creative pursuits generally learn that it’s risky to think differently and creatively. They may be ridiculed by some teachers or other students for being different. If they fail required subjects, they are often labeled “below average” or “stupid.” The little voice in their subconscious starts telling them, “Be careful. What if you’re wrong again? What are people going to say? Is it worth being humiliated again?” Fear comes from the subconscious, the most powerful of the three parts of the brain. When there is fear, the left and right brain often shut down. Instead of thinking logically or creatively, the subconscious brain takes over.

The Power of Emotional Intelligence

Financial intelligence is directly related to emotional intelligence. Emotional intelligence is how we control that nagging little voice in our subconscious. The emotion of fear can dominate both the left and right brain. Little voices in the subconscious tell us to avoid risk because we have been taught to fear making mistakes. Instead, we must learn how to manage our emotions and those little voices rather than be paralyzed by them. People with high emotional intelligence learn to control fear, to take educated risks, and to learn from their mistakes. Not all education takes place in school. The real world is a great teacher.

Rich Dad Develops the Whole Brain

By using games, cooperative learning, and interactive global technology, Rich Dad’s financial education focuses on developing the whole brain: the left, right, and subconscious. The CASHFLOW® game teaches analytical skills to your left brain. The right brain is engaged by coming up with creative solutions to solving financial problems. The most powerful part of the brain, the subconscious, is developed by working in harmony with both the left and right brain. Each of us has a unique God-given genius. When you learn to control all three parts of your brain and have them work together, you have a much better opportunity to develop your own genius.

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BONUS

Bonus Info Emotional Intelligence

Emotional IQ Is the Foundation of Financial IQ If you want to elevate your financial IQ, it is important to learn to control your emotions. In fact, emotional IQ is the foundation of financial IQ. High emotional IQ simply means you have control over your emotions and can use emotions to make your life better.

Money Is an Emotional Subject Money can be a very emotional subject. Many people argue and fight over money. The emotion of fear is the primary reason many people cling to job security and low-paying jobs. They may be terrified of investing because they fear failing or losing money. Even the emotion of joy can cause financial problems. When people come into a large sum of money such as a bonus, or an inheritance, or lottery jackpot, they may go out and get deeper into debt or squander their windfall. They buy a big house and nice cars and their friends and relatives may come begging, hat in hand. A lot of money, as well as the lack of money, can cause emotional problems. That’s why emotional IQ is an essential part of financial IQ.

Stop Playing Not to Lose My rich dad used to say, “The reason so many people are financial losers is because they play not to lose. They do not play to win. The biggest failures I know are people who have never tried.” In the real world there are winners and losers. My rich dad taught his son and me to see losing as good. Winners are defined by how they handle their losses.

Winners Learn from Their Mistakes Many people either lie about their mistakes, or deny they made a mistake, or pretend they never make mistakes. In school we are taught that the person who makes the most mistakes loses. Yet in the real world, the people who make the most mistakes — and learn from their mistakes — are the real winners. The key to success is to make mistakes and be humble enough to learn from those mistakes.

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The Year the Dollar Died

The Year the Dollar Died

“In 1971 the US dollar died. Since then prices have been going up and the purchasing power of the dollar has been going down. That is why savers are losers.” “While it looks like stock prices are going up, when compared to gold the purchasing power of the DOW is going down.” Why Mutual Funds Are Risky In his book, The Battle for the Soul of Capitalism, John Bogle, founder of The Vanguard Group, Inc., states that mutual fund investors are putting up 100% of the capital, taking 100% of the risk and only receiving 20% of the gains. That means that mutual fund companies are pocketing 80% of your gains without putting up any money or taking any of the risk. This is another example of why savers are losers.

You

Mutual Fund Company

100% of the Risk

0% of the Risk

100% of the Capital

0% of the Capital

20% of the Return

80% of the Return

In 2007, the U.S. Congress began investigations into mutual funds and retirement plans, questioning hidden fees and commissions. * *See pages 82 and 83 for the complete Wall Street Journal article.

FINANCIAL IQ | Inflation doesn’t mean prices are going up. Inflation means the purchasing power of the dollar is coming down. That is why savers are losers.

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RichDad Wisdom

RichDad Wisdom

THEY’RE NOT LYING... THEY’RE UST NOT TELLING YOU THE TRUTH

The Power of Words Words are gasoline for the brain. If you improve your financial vocabulary, you will become richer and richer. The good news is, words are free. This shows once more that it does not take money to make money. To expand your vocabulary beyond the financial terms in the glossary, you may consider acquiring a financial dictionary. When you look up financial words on a regular basis, you may find yourself becoming richer and richer. An example of the power of words: When people advise you to get out of debt, do they know what they are talking about? When you buy a bond, you are buying debt. For example, a U.S. T-bill is a bond, an I.O.U. from the U.S. government. So when you buy a bond, you are buying debt… debt that is an asset to you and a liability to the government. So debt can be good. Some of the richest people and financial institutions get richer because they invest in debt. When a banker says your house is an asset, whose asset is it? By definition, assets put money in your pocket and liabilities take money out of your pocket. When you look at your financial statement and the bank’s financial statement, you can better see whose asset your house really is.

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“Money is not the most important thing, but it affects everything that is important. It affects your education, health, and the quality of your life. Unfortunately, the subject most couples argue about is money. Why would you want to argue with someone you love?”

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As you can see from the diagrambelow , your mortgage is your liability and it is your bank’s asset. That’s why when your banker says, “Your house is an asset,” he’s not lying. He’s just not telling you the truth. In this example, your mortgage is taking money out of your pocket and putting money in your banker’s pocket. Your mortgage is your liability and your bank’s asset. This is only one example related to understanding the definition of words and their importance. To improve your brain’s financial power, invest in a financial dictionary and look up words you do not understand. Remember that words are gasoline for the brain.

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BONUS

Bonus Info

GOD-MADE MONEY VS. MAN-MADE MONEY

Subprime Crime Most people are aware of the word “subprime” and the credit mess that subprime debt has caused across the world in 2007. Many people blame Wall Street, mortgage companies, banks, real estate agents, and borrowers with poor credit for being the cause of the recent real estate and credit meltdown. They are not entirely to blame. Historically, financial turbulence and instability have occurred every time a government plays games with money. There are two kinds of money. God-made money is gold and silver. Man-made money is currency. A government plays games with money when it replaces God-made money with man-made money. When games are played, financial turbulence and financial instability follow. One sign of financial turbulence is inflation, which is really when the purchasing power of money goes down and wages are destroyed. As workers struggle to earn more money to keep up with a declining currency, they are pushed into higher and higher tax brackets. To keep up with rising taxes and expenses, people borrow to survive. Personal debt explodes; personal wealth plummets. Savers become losers, and the stock market becomes more volatile as people take greater risks, hoping for higher returns. During their days of power, the Greek, Roman, Spanish, German, Chinese, French, and English empires eventually began to play games with money in order to fund their military and keep their empires growing. Once an empire destabilized their money, economic turbulence followed. On August 15, 1971, President Richard Nixon led America down the same path of history. The U.S. dollar ceased being an asset and technically became a liability, an instrument of debt, a government I.O.U. The rules of money changed. Suddenly debtors became winners and savers became losers. The only way to keep the economy expanding was to keep finding more and more debtors… which eventually led banks to lend money to subprime borrowers… people who had no business borrowing money. In 2007 the expansion of debt that began in 1971 began to back up, just as a clogged toilet backs up no matter how many times you flush.

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Historically, a toxic money system has led to a marked increase in violence as well as an increase in business and political crimes. As the gap between the rich and everyone else widens, morality declines and personal civility weakens. Flames of ethnic hatred are also fanned as a currency disintegrates. For example, in 1933 as the German Weimar government and currency collapsed, Adolf Hitler rose to power and went on to murder millions of Jews and other ethnic minorities. It takes a strong leader to restore economic stability and a stable currency. Alexander the Great restored stability and unified the Mediterranean world under a silver coinage. Napoleon returned France’s currency to the gold standard and the French made him emperor. Lenin returned hyper-inflationary Russia to the gold standard and statues of him were erected throughout the land. Mao Tse-tung returned China to the gold standard and the country rallied around him. Alexander Hamilton helped launch the U.S. gold dollar and his face is now on the $10 bill. After World War II, the U.S. put the hyper-inflationary Japanese yen back on the gold standard and their economy boomed. When Richard Nixon took the world off the gold standard and put it on the U.S. dollar standard in 1971, the world began its descent into financial chaos. This was the first time in history that a currency replaced gold as the world’s standard for money. Nixon remains the only U.S. president ever torn from office. If history is a guide, it will take another very strong leader to put the world back on the gold standard. The problem is, I have not yet seen such a leader and I doubt if the world would follow one leader. So, it seems for the next few decades, maybe forever, we will have more financial turbulence. That means financial intelligence is more important than ever…. in fact, it is essential. Always remember that, during financial turbulence, even savers can be losers. Long-term investors can be wiped out in one market swing, equity in real estate can vanish, and even investors in gold and silver, God’s money, can lose money. This is why your financial IQ is your best asset.

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RichDad Wisdom

RichDad Wisdom

GAMBLERS INVEST FOR CAPITAL GAINS

Are You a Speculator or Investor? There Are Two Objectives for Investors: 1. Cash Flow 2. Capital Gains Cash flow is the income you receive from your investment. For example, if I collect rent from a house for $1,000, that is gross income. After I subtract my expenses and mortgage payment, I have net income or cash flow. If I invest in a stock, I might receive a dividend. This is also a form of cash flow. If I keep money in a bank, the interest I receive is cash flow. Capital gains is the appreciation or increase in the price of an asset’s value. For example, if I buy a stock for $10 and sell it for $15, I have a capital gain of $5. The same is true if I buy a house for $100,000 and I sell it for $150,000. I have $50,000 in capital gains. Speculators invest for capital gains. So do gamblers. They’re both betting on the future. An investor invests for both capital gains and cash flow. As Warren Buffett says: “The dumbest reason in the world to buy a stock is because its (price) is going up.”

FINANCIAL IQ : OPM (Other People’s Money) One of the reasons the rich are getting richer is because they know how to use Other People’s Money, also known as leverage. Leverage is the ability to do more with less. The higher your financial IQ, the more other people will want to give you their money. But a word of caution: Debt is a double-edged sword.

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There Are Two Points I Want to Make About Cash Flow and Capital Gains: 1

Cash flow and capital gains are taxed at different rates. In many cases, cash flow is taxed at a much lower rate than capital gains.

2

Cash flow often dictates the value of capital gains. In other words, the more cash flow, the higher the capital gains. For example, if I have a bond that pays 3% interest (cash flow), it is less valuable than a bond that pays 6%. Another example is, if I buy a bond for $50 and it pays a 3% interest, the price of the $50 bond will drop if interest rates rise to 6%. In this example, a bond you paid $50 for may drop in price to $25 because 3% interest is not as good as 6%. This also debunks the myth that bonds are safe. My point is that cash flow is more important than capital gains.

Investor vs. Speculator Most investors are not really investors. Most people who invest are speculators, betting that the price of a stock, mutual fund, or piece of real estate will go up or down. When someone is betting on price, they are betting on capital gains, not cash flow. The next time you meet a stock broker or real estate broker and they recommend you buy a stock or piece of real estate because the price will go up, you know they are talking about capital gains. The next time someone says to you, “The price of this stock or real estate will go up,” ask them this: “Will you guarantee it?” If they are not willing to guarantee it, you know they are treating you like a speculator rather than an investor.

What Real Investors Do As an investor, I invest for both capital gains and cash flow if possible. Ideally, I want to have control over my cash flow and my capital gains. Sometimes I do lose, but each loss is an opportunity to learn something which adds to my financial education. If somebody else invests for me, I don’t learn very much even if I win financially.

What the CASHFLOW® Game Teaches You

In the CASHFLOW® game, you learn to invest for both cash flow and capital gains because that is what investors do and speculators do not. It teaches you to take risks, make some mistakes and learn from them with play money. 30

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BONUS

Bonus Info MONEY FOR NOTHING

Infinite ROI There is a line from a song by the rock group Dire Straits that goes, “Money for nothing… chicks for free.” Since I have always been awkward and shy around women, I do not know about the “chicks for free” part… but I do know that money for nothing is possible. In fact, that is my objective for investing. There is something called an infinite ROI, an infinite Return On Investment. An infinite ROI is similar to money for nothing. The following are some of the ways to achieve money for nothing.

Real Estate | Let’s say I purchase a house for $100,000. I put 20% or $20,000 down

and borrow $80,000. Before buying the property, my objective is to improve the property and increase the rent. When my rent is high enough to afford more debt, I borrow out the $20,000, tax free, and reinvest it in another property or investment. I now have no money invested, still control the property, and receive the net income. This is an infinite ROI because I continue to receive money with none of my money invested. All I’ve invested is my financial IQ.

Paper Assets | Let’s say I buy 100 shares of a stock for $10 per share, investing

$1,000. The stock eventually increases to $25 per share. I then sell 50 shares and receive $1,250. The remaining 50 shares are, technically, free. Again, this is an infinite ROI, or money for nothing.

Stock Trading | I can short a stock by borrowing shares of stock from the brokerage

company and then selling them. When the price of the stock falls, I buy back the stock at a lower price and replace the stock I borrowed. Using the Paper Assets example above, let’s say I borrow 100 shares of stock that are trading at $25 a share and sell them. I receive $2,500. When the stock price goes back down to $10 a share, I buy 100 shares for $1,000. I replace the 100 shares I borrowed and keep the $1,500 profit. Again, I receive money for nothing, an infinite ROI. Obviously, to be successful at shorting, a person needs a high financial IQ. The CASHFLOW® game gives you an opportunity to practice this technique, using play money.

Creativity | When I write a book today, I have almost no money invested in writing the book. After the manuscript is finished, I offer my book for sale to publishers throughout the world. Publishers that want my book send me an initial down payment and pay my company royalties for years to come. Today, I earn millions of dollars each year from www.richdad.com

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books I wrote years ago. The author of the Harry Potter book series, J.K. Rowlings, became a billionaire and the richest person in England using this same process.

Business | When I formed The Rich Dad Company, I raised $250,000 from investors. I

invested no money of my own. Today, my investors have received back all their money plus a sizeable return. The Rich Dad Company earns millions of dollars a year and has no debt. Again, this is an example of an infinite return on investment, a.k.a. money for nothing. I have formed oil, gold, silver, and real estate companies using the same process.

FIVE LESSONS 1

The higher your financial IQ, the higher your returns, with less money and less risk. That is why your best investment is in yourself and in your financial education.

2

Most financial experts will say that investing for an infinite return on your money is very high risk… and it is, especially if you are not financially educated. So your choice is, get financially educated, or turn your money over to people you hope are smarter than you are.

3

The more of your own money you use, the lower your return. For example, if I invest $10 to receive a $10 return in a year, then my ROI is 100%. If I invest $5 of my money and use $5 of my banker’s money to receive a $10 return in a year, my ROI is 200%. Plus, the money I borrow from the bank is tax-free money.

4

The best kind of borrowed money is borrowed money that someone else (such as a tenant) pays back for you.

5

Don’t borrow what you cannot pay back.

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RichDad Wisdom

RichDad Wisdom

CONTEXT IS MORE IMPORTANT...THAN CONTENT

What Is Context? There are many definitions for context. Sometimes, context can be an attitude or opinion such as, “I’ll never be rich,” or “I’m not interested in money,” or “The rich are evil,” or “Investing is risky.” Not much changes until there is a shift in context. For example, if you believe “I’ll never be rich,” the chances of you becoming rich are slim. Employees in the ‘E’ quadrant of the CASHFLOW® Quadrant® have a different context from business owners in the ‘B’ quadrant. An employee’s context is often “Job security is important” or “I will work only if I get paid and receive good benefits.” A person in the ‘S’ quadrant may say, “If you want it done right, do it yourself.” Often times, for a person to change quadrants, they must first change their context. For many people that may be difficult because a person’s context is often linked to core beliefs and values, likes and dislikes.

How Context Affects Content When it comes to money, context affects content in two important ways. 1. Context determines content. For example, if a person’s context is, “I’m not interested in real estate,” their context will reject most content about real estate. In other words, context screens or filters content. 2. Context determines capacity. A person can only be as rich as their context. For example, a five-gallon gas tank can only hold a maximum of five gallons of gas. When it comes to money, a person may have a $100,000 capacity. That is all the money they can hold. If you want to become richer… expand your context. Simply put, a billionaire has a bigger context than a millionaire.

FINANCIAL IQ : The Higher Your Financial IQ, the Less Money It Takes to Get Rich. One of the main reasons so many people invest in paper assets (such as savings, stocks, bonds and mutual funds) is because it does not require much financial IQ to purchase or manage them. Real estate requires more financial IQ — and less of your own money to be successful. Entrepreneurship requires the highest level of financial IQ. If you are a successful entrepreneur, people will give you money to start or grow your business. www.richdad.com

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A Unique Benefit of CASHFLOW® Curriculum Both context and content are important. One of the benefits of the CASHFLOW® Curriculum is to expand your context so you can receive more content. By expanding your context, you increase your capacity to become richer. Many financial experts focus on content. They want to tell you what to do. That is why they advise you to “Save money,” or “Get out of debt,” or “Diversify.” Rarely do they focus on first expanding your context. Rarely do they focus on which quadrant you are in and changing quadrants so you can earn more money and pay less in taxes. That is not their job. Their job is to sell you what their company has for sale. They want you to invest, but are not interested in training you to be an investor.

Schools Focus on ‘E’ and ‘S’ Contexts Schools focus on the contexts of the ‘E’ and ‘S’ quadrants. That is true even for MBA (Master of Business Administration) students. One of the reasons I dropped out of the MBA program was because most of my professors were advising the students to “work their way up the corporate ladder.” That is not what I was going to school for. I wanted the context of the ‘B’ and ‘I’ quadrants. I wanted to learn how to build or buy the corporate ladder… not climb it.

Context Is a Mental Environment

In simple terms, context is often just a mental environment. As rich dad said, “Change your environment… change your life.” Changing or expanding your context can also change your life. For example, it is hard to become rich, regardless of how much you study and learn, if you have a poor person’s context. And it is harder to become an entrepreneur or investor with an employee’s context. That is why rich dad also said, “Context is more important than content.”

Water is Content

The Water Glass is Context 34

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BONUS

Bonus Info ARE YOU AN ENTREPRENEUR?

The 8 Integrities of Business Statistics show that 9 out of 10 new businesses fail within the first five years. While there are many reasons for a business to fail, one big reason is because the entrepreneur does not put all eight integrities of a business together, as illustrated in the B-I Triangle diagram.

1. Mission | The most important reason for starting a business is the mission of the business. For a business to be successful, it must have a mission to serve people… not just make money.

2. Team | Business is a team sport. To be successful, businesses need different technical skills, such as legal, accounting, sales, marketing, design, and systems. Even if a person starts out as a one-person operation, a team of technical specialists is essential, even if only hired part-time or by the hour.

3. Leadership | The job of an entrepreneurial leader is to get people to operate as a team… focused on fulfilling the mission of the business.

4. Product | Most new entrepreneurs focus on the product. As you can see from the B-I Triangle, the product is the least important element. The world is filled with products, but there are only a few great business teams.

5. Legal | Legal advice and following the rules are essential for personal and business success. As stated earlier, without rules, there is chaos. Too many entrepreneurs get into hot water when they 1) do not know the rules, 2) do not create rules, 3) do not follow rules, or 4) do not enforce the rules.

6. Systems | A business is a system of systems, just as a car or the human body is a system of systems. For example, a car has a brake system, fuel system, hydraulic system and more. The human body has the blood system, digestive system, nervous system, and more. If one of the systems is weak or broken, the entire car or body may stop. The same is true in business. Before starting a business, it is best to ask an experienced entrepreneur about the many different systems that make up a business, such as computer systems, accounting systems, communication systems, etc.

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7. Communication | The primary job of an entrepreneur is to sell. If the entrepreneur cannot sell, the business will be weak, struggling and poor. There are three main groups of people an entrepreneur must sell to: customers, employees, and investors. Before becoming an entrepreneur, take courses in sales, marketing, public relations, and how to raise capital.

8. Cash Flow | Cash flow is also known as “the bottom line.” If an entrepreneur’s business does well in all eight integrities of a business, the bottom line will be strong. If one or more of the eight integrities is weak, the bottom line will be weak.

FINAL THOUGHT

If these eight business integrities have scared you off because it sounds like too much work, then it is best that you do not become an entrepreneur. If this list of eight has inspired you to learn more, then you might have the heart and mind to become a great entrepreneur. Successful entrepreneurs are active learners who realize that becoming a great entrepreneur is a lifelong learning process.

Note: The B-I Triangle refers to the Business owner and Investor side of the CASHFLOW Quadrant®.

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RichDad Wisdom

RichDad Wisdom

EXCUSES KEEP YOU POOR

Invest Time Learning About Money Before You Invest Money The most important objective of this curriculum is not to give you answers… but to expand your mind to the infinite investment and business possibilities that are available today. It would be like taking a coffee cup and expanding it into a swimming pool. Many people ask me, “I have $10,000. What should I do with it?” My first response is, “Stop telling people you have money and do not know what to do with it.” My reason for saying this is because if you do not know what to do with your money, there are many people who do. And what they will tell you to do is turn your money over to them and let them invest it for you. My second response is, “Get financially educated.” The reason I say this is because, once you play CASHFLOW®, you will be better able to tell good investments from bad ones, and good investment advice from bad advice.  ost financial experts love to tell you what to do with your money. They will tell M you exactly what to do and what you should invest in. And, generally, they make a commission or receive a fee for what they recommend you do with your money. The philosophy of The Rich Dad Company is that there are only two things you can invest: time and money. We recommend you invest some time studying before you invest your money.

Greed and Fear An important aspect of financial intelligence is emotional intelligence. There are many people who seek security rather than freedom. The problem with security is that the more security you have, the less freedom you have. The people with the most security are in jail, in an area known as Maximum Security. When it comes to money, the two most powerful emotions are greed and fear. For many people their fear keeps them paralyzed and poor. For still others, it is the emotion of greed that keeps them flaky, risky, untrustworthy, and often poor.

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Booms and Busts When people are fearful and afraid of failing, they often sit around doing nothing. Their fear has paralyzed them. Then one day, they start to hear of a real estate boom or a stock market boom. Still fearful, they sit and wait... doing nothing. A year or so later, they hear that the real estate boom or the stock market boom is real. Everyone on television is talking about it. Still, the fearful, cautious, conservative person waits. This hesitation, and excuses, keeps them poor. A year later, their next-door neighbor comes over and tells the fearful person that he just made a fortune in the stock market or the real estate market. Suddenly the lights go on. The fearful, conservative person realizes that he is missing out on the action. Overnight, their fear turns to greed and they jump into the booming market. The once fearful person, now turned greedy, quits their job and bets the ranch. As soon as they are “all in,” as poker players say, the market crashes. Greed again returns to fear. And that is why emotional intelligence is an important part of financial intelligence.

Boom

Boom Boom

Bust Bust FINANCIAL IQ | Smart investors make money regardless of

whether the market goes up or down. In fact, smart investors make even more money in market crashes. 38

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BONUS

Bonus Info ARE YOU SELFISH?

Origin of the Word “Selfish” In any civilized society, there are two opposing forces: capitalism and socialism. Simply stated, capitalism is about inequality. Socialism is about equality. A capitalist wants to get ahead. Capitalists may study harder, send their kids to the best schools, climb the tallest ladder, start their own businesses, live in the best neighborhood, drive the nicest cars, stay at the best hotels, fly first class or by private jet, and belong to the best country club. Socialists will strive for equality. This person wants all kids to have access to the best education and health care possible. They worry about the poor, elderly, and the handicapped. They may join a labor union as protection from the capitalist. They value rights and benefits more than a big paycheck. Socialists strongly believe the government should take care of people.

A Sign of Intelligence

“Giving people money doesn’t make them rich. I would rather share what I know and let people make themselves rich.”

Most of us are both capitalists and socialists. We can have both viewpoints. As F. Scott Fitzgerald wrote, “The test of a first-rate intelligence is the ability to hold two opposing ideas in the mind at the same time, and still retain the ability to function.” Although most of us can hold both opposing points of view, some of us lean to one side more than the other. My rich dad leaned much more to the capitalist side, yet he gave vast sums of money to his church and to charities. My poor dad leaned more to the socialist side and worked tirelessly for social causes. He donated a lot of his time but very little money.

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The Gap Between the Haves and Have–Nots The gap between the rich and everyone else is too wide… dangerously wide. As Alan Geenspan, former Chairman of the Federal Reserve Bank, said, “The income gap between the rich and the rest of the U.S. population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself.” Upheaval and revolutions occur when the gap is too wide. The Roman Empire fell because taxes got too high and the monetary system became corrupted. Marie Antoinette went to the guillotine during the French Revolution when the gap between the rich and poor grew too wide. Adolph Hitler rose to power when the middle class lost its savings.

Government Legislation Cannot Solve the Problem Most socialists believe government legislation should solve the financial social problems that are brewing. The problem is many governments cannot solve their own financial problems. In the U.S. we have Social Security and Medicare, monstrous entitlement burdens that need to be fixed. If the problem is not fixed, the gap between rich and poor will soon tear America apart. If America falters, the world economy falters. Chaos and violence will erupt. It is doubtful whether government legislation can solve the coming economic problems. But financial education might give individuals a chance to solve their own financial problems rather than expect the government to take care of them.

Why I Teach Most socialists believe in giving people fish. Some capitalists believe in teaching people to fish. Many capitalists do not teach… they just sell financial products. That may be where the term “sell-fish” comes from.

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FOCUS on Winning

FOCUS on Winning

INVESTORS WHO DIVERSIFY FOCUS ON NOT LOSING

Asset Income Income from property is called passive income, from stocks it is called a dividend, and income from savings is called interest.

Depreciation This looks like an expense, but it is really income. It is also known as phantom cash flow.

Amortization Somebody else (such as a tenant) pays down your debt.

Appreciation The increase in price of the asset is appreciation. By controlling the three other components, you can control the appreciation of your asset.

Note: These additional cash flows are sometimes known as Internal Rates of Return (IRR). Very few investors comprehend the importance of IRR.

FINANCIAL IQ: Smart Investors F.O.C.U.S. Smart investors F.O.C.U.S. on asset income, depreciation, appreciation and amortization. That is why they make so much more money. The average investor only invests for asset appreciation, hoping the price of the asset will go up. CASHFLOW® game provide the knowledge to win in all four areas of the financial statement.

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Rich Dad Wisdom

Rich Dad Wisdom

GETTING RICH IS A TEAM SPORT

You Can’t Do a Good Deal… with Bad Partners One of the most important lessons I had to learn is the importance of partners. It is a lesson I continue to learn. Simply put, if you have good partners, getting rich is easy. If you have bad partners, getting rich is hard… sometimes painful… often costly. When I find someone who is struggling financially, it often is because they too have bad partners. For example, the person who is struggling could be married to a spouse who is lazy, does not study, spends too much money on food, alcohol, sports, hobbies, or clothes. Or the person could be surrounded by friends who have bad habits, or a negative attitude about money, even to the point of criticizing the person’s desire to improve themselves or their financial position. So a bad partner does not necessarily have to be a business partner. One of the reasons I have made a lot of money — easily and painlessly — is simply because I have had the good fortune to have good partners. When I have good partners, the deals seem to fall into our lap and things go right. Even though we may have problems, I do not have to know all the answers if I have smart partners. I have also had bad partners. They were not bad people, just bad partners. And I must confess, that some of my past partners thought that I was the partner from hell… and in those cases I was. Whenever my partners or team members are not in tune, playing by the same set of rules, same ethics or morals, the business or investment will be sluggish and profits drop, expenses go up, and stupid mistakes are made.

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Choose Your Partners and Your Team Carefully As an entrepreneur and investor, one of the most important personal development skills I have had to cultivate is how to handle people, especially partners. I wish I could give you the magic wand… but I don’t have one. As the old saying goes, “Sometimes you kiss a lot of frogs to find a prince or princess.” So start kissing.

My Team

The player positions on my team are: 1. A bookkeeper. A bookkeeper keeps my financial records clear and accurate. 2. A banker. I have two great friends who are also my bankers. They keep me abreast of the changes in the banking business and they know my financial situation as well as I do. When I need money, they will take my call. 3. An accountant. An accountant’s job is to increase your profits, minimize your taxes, and keep you free from disagreements with the tax department. 4. An attorney or attorneys. Like it or not, attorneys are essential today more than ever before. Financial success requires strong legal agreements. More importantly, you need an attorney to interpret legal documents for you. 5. Brokers. I want the best real estate and paper asset brokers I can find. Brokers earn their commission by keeping you abreast of what is happening in the market. I often pay my brokers a higher commission to ensure that I get the first call on the best deals. 6. A coach or mentor. A coach is someone who keeps you on track, keeps you accountable. A coach expects more of you than you do of yourself. Obviously, good partners such as friends and family are vital to health, wealth, and happiness. My wife Kim is the most important partner in my life.

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Bonus Info

BONUS

GOALS VS. PROCESS

When I was a kid, I wanted to be rich…I wanted to be a millionaire. So I set my goal to become a millionaire. My problem was, I became a millionaire in my twenties and then lost all my money. I did not realize that losing millions was part of my process to becoming a real millionaire. After losing my money, I was upset and depressed. Thank goodness I had my rich dad who reminded me that many rich people have lost once or twice along the way. He then recommended that I go through the wreckage of my business and learn from my mistakes. That was some of the best advice I ever received. Many people recommend you set goals. Goals are important… but not as important as the process. Today I realize that it was not the goal that made me rich… it was the process. One of the things that kept my going through years of failure, doubt, despair, and criticism was this saying from a Buddhist monk:

“If you must begin, then go all the way because, if you begin and quit, the unfinished business you left behind will haunt you for all time.”

Personally, the bad luck, the losing, and misfortune were essential elements in my process to becoming a rich person. I had to learn to turn bad luck into good luck, turn losing into winning, and turn misfortune into fortune. If you can learn to do that, you will be rich for the rest of your life… regardless of what life throws at you.

The Most Expensive Words in the World “I can’t do it.” “What if I fail?” “It’s not my fault.” “The government should do something.” “God will provide.” “I don’t have to worry… I’m still young.” “I’m too old.” “I don’t have any money.”

FINANCIAL IQ | By the time you complete the CASHFLOW board game, you will have a good foundation about the world of money. Now it is up to you to decide what you are most interested in and where your greatest chance for success lies. By FOCUSing on what you are interested in, you have a better chance of awakening your Financial Genius. The Rich Dad Company offers advanced courses in all three asset classes: paper assets, real estate, and entrepreneurship. 44

The CASHFLOW CURRICULUM | Elevate Your Financial IQ

Rich Dad Wisdom

Rich Dad Wisdom

CHANGE YOUR ENVIROMNENT...CHANGE YOUR LIFE

I Have Learned More from My Mistakes Than My Successes One of the more stupid things many schools do is punish kids for making mistakes. When those kids grow up, many are terrified of making mistakes… clinging to job security, trusting their money to strangers, and living in fear of failing. Mistakes are how we learn. Mistakes are really learning experiences. Most of us have learned to ride a bicycle by falling off a number of times. Each time we fall off, we get smarter, better able to balance and ride. Once we learn to ride a bicycle, a whole new world opens to us. The same is true with money. The best way to remember what we learn is “Doing The Real Thing.” The reason many do not do the real thing is because they are afraid of making mistakes. Ironically, the students who do well in school are often students who read and listen well, the worst way of learning. Active students are often classified as problem learners, with problems such as Attention Deficit Disorder (ADD). I am certain I have ADD, also known as a strong dislike of boredom. I could never sit still and quietly for very long. I did not like being labeled stupid. I was just bored. Rather than punish people for making mistakes, I believe it is more intelligent to teach people to learn from their mistakes. Personally I am rich because I have made lots of mistakes and learned from them. One of the reasons I recommend people start small and make as many mistakes as possible and then learn from those mistakes is because it is better to learn from small mistakes than big ones. If you avoid failing… you also avoid success.

FINANCIAL IQ By FOCUSing on what you are interested in, you have a better chance of awakening your Financial Genius. Now it is up to you to decide what you are most interested in and where your greatest chance for success lies.

www.richdad.com

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CASHFLOW CURRICULUM CASHFLOW CURRICULUM ®

®

Why We Need to Be Both Pessimists and Optimists In the real world of money, we need to be both pessimists and optimists, which makes us realists. In the real world, you know you are being sold a bill of goods when the sales person only tells you about the good and downplays the bad. A good sales person should inform you of the good and the bad, the risks and the rewards of the investment. If the sales person says “You can’t lose,” or “The market goes up every year,” or “The price will be higher in five years,” don’t walk… run!

Two Points on Sales Pitches 1 Most great investments are never advertised. The best investments go quietly. If a

person has glossy brochures and fancy sales presentations or advertises extensively, the deal is probably overpriced or a bad deal.

2

Many times people lie with numbers. Whenever I receive what is known as a pro-forma statement that looks like a financial statement, I know I am looking at a sales document, not a real financial statement. In other words the numbers are made to look official. The numbers will paint a rosy picture to get you excited about investing in the asset. Whenever you receive a pro-forma financial statement, the next question is, “When can I see the real numbers?”

 et me give you an example of the difference between a pro-forma financial statement and L a real financial statement. One day a golfing buddy was asking me to invest in his business. He handed me a pro-forma financial statement, showing me a bright and optimistic future for the company. After going over the numbers, I put down the pro-forma and asked him, “What if I told you I was going to make ten birdies and eight pars playing golf tomorrow. What would you say?” His reply was, “I know how you play golf. I would say you can’t do it.” Handing back his pro-forma, I said, “And that is what I say to you about your business pro-forma.”

An Important Point on Learning Environments  ou may want to ask permission of your study group to give people feedback on their Y behavior. The reason for this is, if they are behaving a certain way in the game, they are probably behaving that way in life. Only give feedback if you have permission to give it first.

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The CASHFLOW CURRICULUM | Elevate Your Financial IQ

One Final Thought

One Final Thought

ELEVATE YOUR FINANCIAL IQ

Elevate Your Financial IQ We all have money problems. Kids, students, adults, families, churches, businesses and governments have money problems. Even the rich have money problems. How well we do in life depends upon how well we handle our money problems, and that depends directly upon our financial IQ. The higher our financial IQ, the better able we are to handle our financial problems. The good news is that we grow richer by solving our money problems. So many people come up to me and say, “Tell me what to do,” or “Give me the answer.” My rich dad said, “The only place where there are right answers is in school.” What he meant by this is that many people come out of school looking for the right answers to life. Many people come out of school waiting for someone to tell them what to do. It is these people who subscribe to “You should get a safe secure job, work hard, save money, get out of debt, and invest for the long term in a well-diversified portfolio of mutual funds.” Like sheep, these people blindly follow the shepherd believing the shepherd has the right answers. Henry Ford once said, “Thinking is the hardest work there is. That is why so few people engage in it.” If you are going to be an entrepreneur or an active investor, you will need to think… not follow. Thinking and solving money problems requires financial IQ. The good news is, the more problems you solve, the higher your financial IQ. And the higher your financial IQ, the richer you become. The purpose of this game is not to give you answers. It is not to tell you what to invest in. Money is a gigantic subject with so many ways to become wealthy. The purpose of this game is to first, inspire you to learn more and think more clearly about money. Secondly, this game is to empower you to find the right answers for you, knowing that what is right today may not be right tomorrow. As you know, things change as you change. Thank you,

Robert Kiyosaki www.richdad.com

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