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Robert Kiyosaki: Cash Flow Quadrant

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I love the 'Rich Dad' book series! When you got it, you got it! I am a huge fan of Robert and Kim Kiyosaki

I have already explained in our SOS system that once in awhile a guru (guru means teacher) comes along that says something that you are finally ready to hear. Robert did that for me. Robert' s book Rich Dad Poor Dad is so important because it strikes at the very core of financial controversy and fiscal responsibility. Robert has created simple 'models and systems' for the absolute beginner. he doesn't speak like a sophisticated investor. He seems to understand the deepest problem facing our society and our financial institutions, namely 'financial illiteracy'. The problem is not merely greed. It is not merely a lack of belief in oneself. Confronting the problem of financial illiteracy requires more than another 'empowerment' seminar. It is not about more schooling. Schools are not teaching our kids how to handle cash-flow. It is not about learning more and more about less and less. It is about learning how to read a financial statement.

Another thing I love about the Robert Kiyosaki material is that it is actually very very radical. But because he is such a soft spoken man and appears so commercial friendly, many people actually miss how radical he really is. He says things like: "Money is not the root of all evil, lack of money is".  "Rich people are not greedy, poor people are"!

Now don't take these things out of context, he is simply exposing the different thought systems that motivate financial behavior at the deeper psychological level. Yet his material is not another 'self help' course. He will pretty much tell you exactly what to do with whatever money you have right now. Really good stuff.

1. "Rich people are not greedy, poor people are".

With this comment he is referring to the ignorance of the poor. "Steal from the rich and give back to the poor". This is the verbal  reaction that poor people use to determine what should be done about their condition.  Robert points out that this 'poor person' ideology is what created income taxes in the first place. The people who wanted the rich to be taxed heavily were the ones who suffered from it the most. This still occurs today. It happens because the rich will always have the money and the resources to write the laws and form corporations. Now some of us understand this, but Robert puts it into plain English.

2. "Money is not the root of all evil, lack of money is".

More importantly, Robert attempts to deprogram you from any hidden childhood beliefs. You parents may have put many weird ideas into your mind.  Money is a cognitive illusion. Money is not real. It is an idea. Money will be whatever you believe it is. He explains that calling money 'evil' is usually an approach used by those who not only misunderstand it- but don't have any. He points out that evil has nothing to do with being rich or poor. We have all met people who are rich and evil and poor and evil. Money is not the primary determiner of that.

The Controversy.

The main controversy generated by Robert Kiyosaki is his idea that your home is a liability and not an asset. Matt Gagnon explains in the article below his thoughts about this theory. Matt makes more money than me so I respect his opinion! On the other hand, I have finished ALL of Roberts material, including about 10 hours of audio CD material. So, here is what I understand:

It's not such a big deal that your home is a liability. Just face it. It is. This does not mean you don't want a house! Yes, you may leverage debt with the equity on your home in order to purchase real assets which will put cash into your pocket. This STILL does not mean that your house is an asset. I admit that that is the fiscally conservative way to look at assets and liabilities. But the whole point is that most people use the idea "my house is an asset" as a survival tactic, not as a strategic decision. In the big picture your home is an emotional asset.

In my opinion, a better way of looking at this idea it is in terms of 'good debt' versus 'bad debt'. "The rich only take a loan when they don't have to".  What he means by this is good debt allows you to accumulate more assets, while bad debt purchases cash-eating doodads. Very few people have doodads that 'appreciate' in value because of collector status. When they do own luxury doodads, these fall under the category of investments. "The poor take loans because they have too". This means if you use the equity on your home to leverage 'good debt' to buy a franchise and something goes awry with the business, you are further in the hole. Your own home is a liability without question.

I would recommend the Rich Dad Poor Dad material to the financially uneducated masses. I would recommend his board game Cash-Flow for kids, Cash-Flow 101 and Cash-flow 202 to every educational system in America. We have included a review of this game. The point is not how 'true to life' the Cash-flow board games are, because they still use dice. The point is that they teach financially uneducated people to think in terms of positive cash-flow and fiscal responsibility so that leaving the 'Rat Race' becomes a real possibility in the mind of an ordinary person!

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