Here are my comments on the book:
How do you get smarter with your money? Robert Kiyosaki, American businessman, investor, self-help author, educator, motivational speaker, and activist, states that there are 5 parts to one’s financial IQ that you must learn in order to get smarter with your money. These 5 parts are: 1. Making more money 2. Protecting your money 3. Budgeting your money 4. Leveraging your money 5. Improving your financial knowledge. He then states that money itself isn’t what makes you rich but rather it’s your financial IQ that makes you rich. He strengthens his argument by giving examples of how the rich (celebrities, lottery winners, athletes, and etc.) have turned poor and how the poor have turned rich because of a lack of or an abundance of financial IQ. Here are some of the points to the book:
1. The amount of financial knowledge that you have is what will determine the outcome of your financial situation. One of the best sayings I’ve learned from a successful entrepreneur is, “Anything that you don’t understand, you won’t have.” This saying doesn’t just apply to money, but it applies to anything and everything in life. If you want to get better at tennis, learn about tennis. If you want to have better relationships, learn more about relationships. If you want your financial situation to change, you first need to understand what money is and how it works as you probably, like most practical things in life, weren’t taught about it in school. “The lack of financial education also causes people to do stupid things or be misled by stupid people. For example, in 1997, when I first published Rich Dad Poor Dad and stated that ‘Your house is not an asset… your house is a liability,’ howls of protest went up. My book and I were severely criticized. Many self-proclaimed financial experts attacked me in the media. Ten years later, in 2007, as the credit markets crumbled and millions of people were in financial free fall—many losing their homes, some declaring bankruptcy, others owing more on their house than it was worth as real estate dropped in value—these individuals painfully found out that their homes are indeed liabilities, not assets.” He later states, “It is this author’s opinion that the lack of financial education in our school systems is a cruel and evil shame. In today’s world, financial education is absolutely essential for survival, regardless of whether we are rich or poor, smart or not smart. As most of us know, we now live in the Information Age. The problem with the Information Age is information overload. Today, there is too much information. The equation below explains why financial education is so important. Information + Education = Knowledge. Without financial education, people cannot process information into useful knowledge, knowledge they can apply. Without financial knowledge, people struggle financially. Without financial knowledge, people do things like buy a house and think their home is an asset. Or save money, not realizing that, since 1971, their money is no longer money but a currency. Or do not know the difference between good debt and bad debt. Or why the rich earn more yet pay less in taxes.”
2. Whether you like it or not, money is an integral part in the game of life. Anything that you want to do requires money. Instead of complaining or bickering about others and how rich they are and/or about your financial situation, do something about it. As the saying goes, “Don’t hate the player, hate the game.” Unfortunately, this game can not be changed for most of us so why not learn how to become good at it otherwise it can cause other problems in your life. “Rich dad used the example of having a toothache to illustrate what he meant by one problem leading to other problems. He said, ‘Having a money problem is like having a toothache. If you do not handle the toothache, the toothache makes you feel bad. If you feel bad, you may not do well at work because you are irritable. Not fixing the toothache can lead to further medical complications because it is easy for germs to breed and spread from your mouth. One day you lose your job because you have been missing work due to your chronic illness. Without a job, you cannot pay your rent. If you fail to solve the problem of rent money, you are on the street, homeless, in poor health, eating out of garbage cans, and you still have the toothache.’ While an extreme example, that story stayed with me. I realized at a young age the importance of solving problems, and the domino effect caused by not solving a problem. Many people do not solve their financial problems when they are small and at the toothache stage. Instead of solving the problem they make it worse by ignoring it or not solving the root of the problem. For example, when they’re short of money, many people use their credit cards to cover the shortfall. Soon they have credit card bills piling up and creditors hounding them for payment. To solve the problem, they take out a home equity loan to pay off their credit cards. The problem is they keep using the credit cards. Now they have a home equity mortgage to pay off and more credit cards. To solve this credit problem, they get new credit cards to pay off the old credit cards. Feeling depressed because of mounting money problems, they use the new credit cards to take a vacation. Soon they cannot pay their mortgage or their credit cards, and decide to declare bankruptcy. The trouble with declaring bankruptcy is that the root of the problem is still there, just like the toothache. The root of the problem is a lack of financial intelligence, and the problem caused by a lack of financial intelligence is an inability to solve simple financial problems. Rather than address the root of the problem—spending habits, in this case—many ignore the problem. If you don’t pull a weed out by the root, and only cut off the top, it will come back quicker and bigger. The same is true for your financial problems.”
3. Becoming rich is a process, not a single event. Everyone wants the money but not the hard work that comes with it. It’s the hard work that makes you rich rather than the money itself. This is why you hear of lottery winners losing their winnings shortly after as they didn’t earn that money. “As we all know, every worthwhile goal has a process and takes work. For example, to become a medical doctor there is a rigorous process of education and training. Many people dream of becoming a doctor, but the process gets in their way. In the last few pages you read about my process and, let me tell you, it was work. One of the reasons people lack Financial IQ #1: making more money, is because they want the money but not the process. What many people do not realize is that it’s the process that makes them rich, not the money. One of the reasons many lottery winners or kids who inherit family wealth are soon broke is because they received the money, but didn’t have to go through the process. Many other people fail to become rich because they value a steady paycheck more than the learning process of becoming financially smarter and richer. They are held back by the fear of being poor. It is this very fear that keeps them from taking the chances and solving the problems required to become rich.”
By Ryan Timothy Lee
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