Jump to content
Pickup Asia Forums

Robert Kiyosaki - Cashflow Quadrant NOTES

French Ben

Recommended Posts

Cash Flow Quadrant, Robert Kiyosaki

Lots of people are stuck in job they don’t like because they have mortgages to pay and kids going to college. They have lives they don’t like. CASHFLOW game teaches you to get out of the rat race.

Many of us, especially A students, don’t act because of analysis paralysis. Our education punishes students for making mistakes – A students were the ones who made the fewest mistakes. But in the real world, people who take action are the ones who make the most mistakes and learn from them.

Edison said “I did not make 1,014 mistakes. I found out what didn’t work 1,014 times”


You need emotional education. Do not let fear stop you.



A village needed water. They hired 2 contractors to get some. Ed would go and get water to the fountain twice a day. Bill disappeared for 6 months and came back with a team to build a pipeline. His water was cheaper and cleaner. Ed cut his price to compete and walked to the fountain more often. He hired people to walk to the fountain too but they started to unionize and protested. Bill developed pipelines to neighboring villages too. He lived happily ever after. Ed worked hard for the rest of his life and had financial problems forever after. The end.


Do not work hard; work smart. Do not haul buckets, build a pipeline. Do not be employed or self-employed. Be an entrepreneur and an investor.

Part 1: the Cashflow Quadrant

1.     Why don’t you get a job?

When Kiyosaki and his wife were homeless, people would ask them why they didn’t get a job. But they didn’t want job security, thy wanted financial freedom. Five years later, they were millionaires. Five years later again, they were financially free.


The ESBI quadrant: a doctor could work in a hospital (E), work for himself (S), open his own clinic (B) or invest in someone else’s business (I). You can be rich or poor in all four quadrants. But B and I give you tax advantages and tax breaks.

2.     Different quadrants, different people

ES and BI people are different people at the core. While both have fears, beliefs, strengths, weaknesses, they respond differently. Many people try to become business owners; when things don’t go smoothly and they start losing money, they don’t know what to do to solve the problems, so they go back to the quadrant they feel the most comfortable in. They choose security when BI people choose freedom.

Changing quadrants means changing how you look at the world.


Rich Dad had little education but he had the ability to bring together smart people and work as a team was one of his primary skills.

If you listen to a person’s words, you can see into their souls.


Employee words :

I am looking for a safe job with good pay and benefits


Self-employed words:

My rate is 6% or 75 $ per hour

I can’t find people who want to work and do the job right

I’ve got more than 20 hours of work in this project


Business owners words:

I’m looking for a new president to run my company


Investor words:

Is my cash flow based on an internal rate of return or net rate of return?


Words are tools

A word like “risk” can excite an investor but scare an employee. Listen to the words people use to know who you are talking to.


Core differences

-        The employee: wants security, certainty, strong agreements. He responds to fear by craving security.

-        The self-employed


He is a do-it-yourselfer, wants to be his own boss, doesn’t like to have his income dependent on other people. Expects to be paid well for hard work. He responds to fear by taking control of the situation and doing it on his own. He wants to take the bull by the horns. He can be someone who spent years in school, like a doctor, a lawyer. He sometimes took additional education. He ca nbe a small business owner, like retails shopkeepers, consultants, car mechanics, carpenters, electricians and artists.

They are often hard-core perfectionists. They don’t trust someone to dothings better than them. They are true artists with their own style and methods of doing things.

This is also why we hire them, because they are perfectionists. They do not want money, they want independence, freedom to do things their way, and being respected as experts in their field.

When hiring them, it’s better to tell them what you want done and let them alone to do it. They don’t need or want supervision. If you meddle too much, they will walk off the job and tell you to hire someone else. They want independence over money.

They often have a hard time hiring other people. Since they often want to stay alone, they are sometimes reluctant to hire or train new people, because once trained, these new hires often end up as competition… which keeps the self-employed working even harder.


-        The business owner

They are the opposite of the self-employed. They surround themselves with people from 4 categories. Unlike the self-employed, he loves to delegate.

Ford was criticized for not knowing much. He challenged a panel of scientists to ask him lots of hard questions. He simply dialed his phone and called some of his assistants to answer. He’d rather leave smart people come up with answers so he could focus on his business.

Leadership is the ability to bring out the best in people. The technical skills of business are easy. The hard part is working with people.


The self-employed downs a job. If he leaves for a year, then he has no business left. The business owner owns a system and hires competent people to run it. To be a successful business owner requires ownership of control systems and the ability to lead people. Self-employed need to convert what they know into a system.

Many prospective business owners say their product is better than competition, but that’s coming from the ES side. Lots of people can make a better burger than McDonalds but only McDonald’s has created the system that has served billions of burgers.

Bill Gates didn’t make a great product. He bought a product and built a system around it.


-        The investor

Their money is working for them. They don’t have to work. It’s in the I quadrant that money gets converted to wealth. Here, money works for you.

Your retirement account is a form of investment, but it is not without risk and the rate of return will never make you financially free.

Stockbrokers are not investors; they sell their time and work. They just trade. There is one way to find out how good your advisors are. Ask them what percentage or their income comes from commissions or fees versus the percentage that comes from passive income from their investments or other businesses they own. Most of them do not practice what they preach.

Making money in the asset column instead of the income column allows to you pay little to no tax.


The god news is risk can be virtually eliminated if you know the game. A true investor wants to recoup his money quickly.

Before 1974, the company guaranteed you a steady amount of money as long as you lived. But after ERISA, you only got back what you and the company contributed. And you often lived longer than your pension. Whatever you and your employer put into the plan s not guaranteed to exist when you pull it out. This is because 401k and superannuation are subject to market forces.

Today you can retire at 65 and run out of money at 75. Then what?


Investing without being investors

Too many people are dependent on the government to solve their individual problems. In 2020 there are 275 million Americans and 100 of them depend on government support. Promises won’t be kept.

Because of that, many people in the E and S quadrants try to become investors to some extent and we start hearing words like:

-        Diversification: this is a word from people who do not like risk. But successful and rich investors do not diversify. “Put all your eggs in one basket and watch this basket closely” said Warren Buffet. The true investor welcomes volatility.

-        Blue chip stocks: in their mind, it’s safer. But the stock market is not. These stocks will not protect your money in a free fall

-        Mutual funds: people who know little about investing feel better giving their money to a fund manager. But that doesn’t mean it is less risky.


Great economic upheavals coming

Because millions of people who are security-minded are coming on the investment market, great changes are coming.

We are at a moment of change. Some people will cling to ideas from the industrial age, while others will embrace the information age. Today we cannot put our future in the hands of the government anymore. It’s better to invest yourself. If you give your money to a mutual fund or an advisor, you might have to wait until you are 65 to find out if they did a good job.


Learn to manage risk

You will fall a few times but after a while it’s like riding a bike. It becomes second nature. Instead of avoiding risk, learn to manage it.

People who take risks change the world. The idea of “study hard and find a safe job” is an idea from the industrial age. Many still think that the I quadrant is not their responsibility.


3.     Why people choose security over freedom


Every time Poor Dad got a promotion or a pay raise, he would also go up a tax bracket. Because taxes wre too high, his accountant told him to buy a bigger house so that he could write off the interest payments. Then his debt increased. The richer he got, the more he had to work just to keep up with the bills. He always thought that the next promotion would solve the problem. The more insecure he felt, the more he sought security.


Your two biggest expenses

Millions of people fall in the same money trap: every time they make more money, they also increase their two biggest expenses: taxes and interest on debt. Plus, the government often offers you tax breaks to get you deeper into debt.


Going from job to job in search for freedom

Many people spend their life in search for freedom and wind up going from job to job instead. Every 5 years they find the perfect job, that they hate 4 years later. They spend their whole life in the E quadrant.


Doing your own thing

The S quadrant is the hardest and the riskiest out there. Failure rates are high and being successful can be worse than failing. You will work harder than if you were in any of the other quadrants and you will work harder for a long time. They do everything, from answering the phone, to hiring and firing employees, filling in when employees don’t show up, talking to the tax man, fighting off government inspectors and so on.

9 out of 10 businesses fail within 5 years. 99% of small businesses disappear within 10 years. It’s often because of burnout and lack of energy. Those who survive only work in their life, end up working long hours in their store and end up prisoners of their own business.

One year, Kiyosaki made 1 million in capital gains and was able to indefinitely defer paying those taxes. He sold three pieces of real estate and put them through a Section 1031 exchange under the US Internal Revenue Code. He never touched the money, he just reinvested it into a much larger property.


No matter how much you make, you will feel more safe and confident if you make your money from two quadrants. Bill Gates did S and B (self –employed and set up a business). Kiyosaki knows some people who work in 2 quadrants:

-        a firefighter who works for the city government and works as professional investor on his free time

-        a firefighter who buys houses, fixes them up and collects rent. He owns 45 houses that pay him 10K$ a month net after debt, taxes, maintenance, management and insurance.

-        One who spends his time analyzing companies and taking major long-term positions in stocks and options. His portfolio is now 3 million $. If he cashed it out and moved the money into an investment that earns 10% per year, he would have an income of 300,000$ per year for life.


Money alone does not bring security. It comes from being financially educated.


The pattern for financial freedom

The path Rich Dad recommended is business owner + investor. This is Bill Gates, Rupert Murdoch and Warren Buffett.

True investors make money also when the market crashes. They make their money because the non-investors are panicking and selling when they should be buying. You should not be afraid of the incoming economic changes, because change means wealth is being transferred.


Your boss cannot make you rich

Your boss’s goal is to sell the company or live off it. His job is not to make you rich but to give you a paycheck. When he sells it, if you have nothing more than the paycheck that he gave you, then you are no better off than on the first day of work.

The only difference between a rich person and a poor person is what they do in their spare time. When you work hard, work hard. But remember that what you with your paycheck and your spare time will determine your future. If you work hard on the left side (S and E), you will work forever. If you work hard on the right side (B and I), you have a chance of finding freedom.


Kiyosaki suggests doing B and I. Start the business, it will give you experience and excess cash so you can become an I.


4.     The three kinds of business systems

Your goal is to own a system and have people work that system for you

1.      Traditional C corporations: where you develop your own system

2.      Franchises: where you buy an existing system

3.      Network marketing: where you buy into and become part of an existing system


You may build 2 or 3 companies before you build one that lasts.

Franchises are for people who do not want to build or do not know how to build their own systems.

Often people get stuck being self-employed on their journey to the business quadrant. This is primarily because they do not develop a strong-enough system and end up becoming an integral part of the system. Successful business owners develop a system that will run without their involvement.


When things go wrong it’s that either the system of the people have a problem.

There are three ways you can make it to the business side quickly:

1.      Find a mentor

They are successful at doing what you want to do. Do not find an advisor, they have not done it themselves. Advisors are in the S quadrant. Don’t be a manager, be a leader. Leaders direct people who are smarter than them.

To learn about all the systems necessary in a big company, you will need to spend 10 to 15 years and learn all the different aspects of business. Even with a mentor, this is labor intensive. Creating your own system requires lots of trial and error, upfront legal costs and paperwork. All of this occurs at the same time you are trying to develop your people.


2.      Buy a franchise

You are buying a tried and proven operating system. This way you can focus on developing your own people. Buying the system removes one big variable when you are learning to be a business owner. Many banks will loan money for a franchise because they recognize the importance of systems and how starting with a good system lowers their risk.

Be careful, if you buy the system then you have to do it their way, not your way. It’s tough for self-employed mindsets.


Banks do not lend money to people without systems

Many people do not understand the difference between a product and a system. Just because you can sing does not mean you understand the systems of marketing, finance, accounting, sales, human resources and others.

A human body and an airplane are a system of systems. If only one subsystem fails, the whole thing crashes. It’s the same in business. All subsystems should be working.

If banks only lend to tried-and-true systems and the person who is going to run them, then you should do the same if you want to be a smart investor


3.      Get involved in network marketing

Also called multi-level marketing or direct distribution systems. You pay an entry fee of 200$, you can buy an existing system and immediately start building your business. Lots of paperwork, order processing, distribution, accounting and follow-up are automated and managed by the network marketing software systems. You can focus on the business

Some MLM just want you to sell the product to your friends and family, while others truly want to educate you and help you succeed.


To succeed, you must overcome what people think of you and learn to lead people. It’s the hardest thing in business to work with different kinds of people. The ability to get along with and inspire people is a priceless skill, a skill that can be learned.

It is better to endorse a franchise that want to develop you as a human being rather than turning you into a salesperson. The best organizations:

-        Are proven, with a successful track record, a distribution system and a compensation plan that have been successful for years.

-        Have a business opportunity you can succeed in, believe in, and share confidently with others

-        Have ongoing, long-term educational programs to develop you as a human being. Self-confidence is paramount.

-        Have a strong mentor program. You want to learn from leaders, not advisors. You want to learn from people who are already leaders and are on the right side

-        Have people you respect and enjoy being with


If the organization has the 5 criteria, then and only then look at the product. Too many people look at the product instead of the business system and the organization behind the product. Some say “the product sells itself”; this is indeed important if you are looking for be a self-employed salesperson. But if you are developing a long-term business, then the system, lifelong education and the people are more important.

With a good franchise, you get a good system and you focus on developing your people.


5.     The five levels of investors

Those who do not invest:

-        Work hard all their lives

-        Worry about money all their lives

-        Depend on others, family, company pension, the government

-        Have boundaries of their lives defined by money

-        Will not know what true freedom is


There are many ways to financial freedom: real estate, dividends, interest (via bonds), oil, books, royalties (via patents). Many people just give their money to brokers or financial planners who are also in the E or S quadrant. “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those taking the subway”, said Warren Buffett.


In Australia, 401k is called a superannuation plan. In Canada it’s RRSP. In all cases, it is the worst thing to invest in:

-        The 401k company makes money even if you lose money: they take 80% of the profit

-        You get taxed at 35% vs 15% for long-term capital gains

-        You must pay 10% to take your money out early

-        You have no insurance if the market crashes vs fire insurance when you invest in real estate

-        It’s for people who plan to be poor when they retire


Real investors do not park their money. They move it, acquire new assets and move on to acquire more assets. Only amateurs park their money.
401k are too expensive, too risky, too tax-inefficient and unfair to the investor. There are better ways to invest but you need financial education.


What is the best investment?

The average investor invests for capital gains and prays that the price of their stock or real estate will go up. But a good investment is when you have more cash flowing in than out. It’s not the asset that makes you rich or poor. Real estate is a good investment only if you are a good investor. Same for stocks.

“When people ask me ‘Is real estate a good investment’, I answer ‘I don’t know, are you a good investor?’” says Kiyosaki.


Most brokers and advisors are salespeople who get paid whether the investor makes or loses money.


The 5 different levels of investors

1.      Zero-financial level

They have nothing to invest. They have nothing, or spend as much as they earn. That’s 50% of the US population. Many people look rich but are poorer than most poor people. They end up in debt or homeless as soon as the market crashes.


2.      The savers-are-losers level

Since 1971 and Nixon, the US can print money at the speed of light. The money you save is counterfeit. Savers are the biggest losers. Since 1971, the US dollars has lost 95% of its value compared to gold. In 1971, gold was 35$ an ounce. Four years later it was 1,400$ an ounce. Now it is 1,700$ per ounce. The problem grows at the national debt escalates and the US continues to print more counterfeit money.


Bonds is another words for savings. There are: US treasury bonds, corporate bonds, municipal bonds and junk bonds.

For years, it was assumed that bonds were safe. During the subprime mortgage crisis of 2007, bankers repackaged subprime loans into bonds, magically got this subprime bond labeled as “prime” and sold them to institutions, banks, governments and individual investors. Interestingly, it was Moody’s, Warren Buffett’s firm, that blessed this subprime mortgages as AAA prime debt, the highest rating for bonds.

Today many countries like Ireland and Greece are unable to pay the interest on their bonds. Bonds are clearly very unsafe. And they could return less than inflation.

China could be the biggest loser of all.  They have 1 trillion in US bonds. Every time the US government prints money, its value decreases. The day China stops buying US government bonds, the world economy will stop and crash.

Many retirees are like China; they need steady income after retirement and they believed US bonds were safe. And they are realizing those who saved money in bonds are losers.

Municipal bonds are IOUs issues by cities, hospitals, schools and public institutions. They are tax-free income. But not risk-free. 3 trillion $ were invested in municipal bonds in the US. But two thirds of them are at risk now because these institutions are broke. Unless more money is pumped in, many hospitals, schools, cities and states are going to default and stop paying their bonds, like subprime homeowners stopped paying on their home mortgages.

The bond market is the biggest in the world, bigger than the stocks market or real estate market. This is because most people are savers. But that means most people are also losers, especially after 1971.

Remember professional investors do not park their money; they move it in an asset, get their money back without selling the asset and move their money to buy bigger assets.


3.      The I’m-too-busy level

They prefer remaining financially naïve. They hand their money to experts and pray he does a good job. In 2007 many people realized their expert was not an expert, and couldn’t be trusted at all.

The stock market is a Ponzi scheme; so is social security. It works as long as new money flows in.


4.      The I’m-a-professional level

He is in the S quadrant investing in the I quadrant. Many retirees do this. They invest in stocks themselves without a broker. They buy, fix and manage their own properties. They buy and store their own gold and silver.

When they take a course, it is often on a very narrow area, like stock trading or small real estate investing.

Rich Dad said this should be what you spend your life learning:  

With sound financial education, level-4 will move on to level-5.


5.      The Capitalist level

This is the richest people in the world. He is a business owner from the B quadrant investing in the I quadrant.

Differences with the level-4 investor:

-        The level-4 is in the S quadrant, whereas the level-5 is in the B quadrant

-        The S-quadrant uses his own money, the B-quadrant uses other people’s money to invest

-        The S-quadrant is a solo investor. The B-quadrant has a smart team.

-        The S-quadrant earns less and pays higher taxes

-        It’s harder for the S-quadrant to raise money

-        It is easier or the B-quadrant to raise money: it can sell shares on the stock market.

If Facebook had remained a small web-consulting firm, it would have been difficult to raise investor capital.

If McDonald’s had remained just a single hamburger store, an S-quadrant operation, nobody would have invested in it. Once McDonald’s started expanding in the B quadrant via a franchise system and was listed on the stock exchange, money poured in.

The reason a business sells shares is because the more they share, the more the entrepreneur becomes. An S-business is too small to share.

Kiyosaki: “In real estate, the same is true. When I was a small real estate investor investing in single-family homes, condos and small4-to-30 unit apartment buildings, it was difficult getting loans. The moment Kim and I began investing in apartment buildings with over 100 units, banks were more willing to lend us much more money. The reason? On 100-unit-plus properties priced in the millions, banks do not finance the investor. They finance the investment. In other words, on properties with over 100 units, banks look more closely at the investment than the investor. On top of that, banks would rather lend 10 million $ than 10 thousand $. Once bankers are satisfied with our ability to own and manage large apartment houses profitably, banks often line up to offer us money, even during a crisis.”


So where do lvel-5 investors get their money from? Answer: they get it from level-2 and level-3 investors who save their money in banks and pension plans.


Starting with nothing

A true capitalist never has money, he only uses other people’s money.

Kiyosaki started by buying a property using 100% debt. In 2007, when the stock market and real estate markets crashed, banks were more eager to lend him millions of dollars to buy and take over their investments gone bad. In 2010 alone, he acquired 87 million$ in real estate, using loans from the banks and pension funds. A true investor makes money no matter the market condition.


Where are you? Are you an investor level 1?

If you have nothing then yes. If you have bad debt, then get out of it. Kiyosaki wrote a book called How we got out of bad debt


If you are at investor level 2

Be careful if you are saving money in a bank or in a retirement plan. Generally, savers are losers. It’s a strategy for those who do not want to learn. Remember the US dollar lost 95% of its value since 1971.

You can even lose money saving gold if you buy it at the wrong price.

Take a few course on investing, either in stocks or real estate.

Remember that bonds is the biggest market in the world because people and businesses are savers, not investors.


If you are at level 3

Same as level 2, except that this level invests in riskier instruments such as stocks, bonds, mutual funds, insurance and exchange-traded funds.


If you are at level 4

The key to success is lifelong learning, great teachers, great coaches, and like-minded friends.

These people take control of their lives, knowing mistakes are opportunities to learn and grow.


If you are at level 5

The world has no borders. It’s easier than ever to be a capitalist in a world of plenty. Keep learning and keep giving. Remember to be generous. You need to give more to receive more.


6.     You cannot see money with your eyes

Before buying a property, you need to see:

-        The financial agreement

-        The market

-        The management

-        The risk factor

-        The cash flow

-        The corporate structuring

-        The tax laws


Before making the deal, you need to ask yourself the following questions:

-        What do you figure your ROI to be?

-        How does this investment fit into your long-term financial strategy?

-        What vacancy factor are you using (for real estate)?

-        What is your cap rate?

-        Have you figured in management costs

-        What percentage rate if you use to compute repairs?

-        Did you know that the city just announced it will be tearing up the roads in that area and changing the traffic pattern, and a highway will run in front of your building?

-        If the market is going up, do you know why it is? Is it business economics or greed?

-        How long do you think the trend will continue?

-        What happens if the place doesn’t rent?

-        If it doesn’t, how long can you keep it afloat?


9 out of 10 investors buy because they hear a hot tip or make their decision based on what their eyes see. That’s why 9 out of 10 never make money, or just break even.

You need to make the difference between good advice and bad advice. Most of the bad advice is handed out at home; that’s why poor people remain poor.


Your advisors are only as smart as you

If you are financially naïve, they will only give you low-yield, low risk investments. They have to do it, by law. They do not want to take the time ot educate you and will diversify your portfolio instead of focusing it. You need to do your part of getting educated if you want your advisor to be smart.


Also, some bankers might lie, like by saying that your house is an asset. And they are not lying. Your mortgage is an asset… to them.

Even if you pay your mortgage, your house is still a liability if it doesn’t generate income through positive cash flow. The government still taxes you property taxes if you own it. If you stop paying them, the government charges interest that rates from 10 to 50%. Then if an investor pays these property taxes for you, you owe them the taxes plus interest. If you don’t pay them, they get to take your house for just the money they put up.

In most states, property taxes take priority in repayment, even before the bank’s mortgage.

This way, you can buy houses you paid the taxes on for just a few thousand dollars.


The definition of real estate

After the agrarian age, the industrial age made power not based on land anymore. Monarchs started taxing peasants on their land, and created taxes on land ownership and mortgages. Today, land is still called real estate because it never really belongs to you; it belongs to the royals.


Find out your real interest rate


You buy a 100K home: 20K down payment + 80K loan.

Rate: 8% on 30 years.

In 5 years, you pay 35K to the bank – 31K in interest and 4K only for debt reduction. At the end of the term, you actually paid 131K only in interest, which more than doubles the price of your home.

And that does not include property tax and insurance on the loan. It’s like 160% interest.


Industry average

In the banking industry, 7 years is the average as the life expectancy for the mortgage. That means banks expect the average person to buy a new house or refinance ever 7 years. That means they expect their 80K back in 7 years + interest.

The government gives you tax breaks on buying more expensive housing because it brings more property taxes for them.

Your house stays an asset for the government: it brings the government money every year.


What about savings?

Yes, they are assets. But your savings and checkbook balance are a liability for the bank, because it has to pay you for it. You do not get a tax break for saving money because they banks do not want you to save money. They do not really need your money because for every 1$ in their bank, they can lend 10$.

They like the fact that if you have an account with them, you are likely to borrow money from them though, and you will be paying 9% while they pay you 1% on your savings.


The more people you are indebted to, the poorer you are

The world takes from the poor, the weak and the financially uninformed. If you have too much debt, the world takes everything from you: your time, your work, your home, your life, your confidence, even your dignity if you let them.


Money is debt

The US dollar is an instrument of debt. Every dollar used to be backed by silver or gold, but it is now n IOU guaranteed to be paid by the taxpayers. It only works as long as the world has confidence in the American taxpayer to pay for this IOU called money.

Under the Weimar Republic, that confidence disappeared. As an old woman was pushing a wheelbarrow full of marks to buy a loaf of bread, someone stole the wheelbarrow and lef the pile of worthless money all over the street.

Today’s money is “fiat”; it cannot be converted in gold or silver. It only works as long as people have confidence in the government backing it.


If you take on debt and risk, then you should be paid

If you invest in property and lose money just because the salesman says it’s a good deal because the government will give you a tax break for losing money, then it’s bad. They are telling you to go into debt, take all the risks and pay for it. E and S people that’s a good idea, but B and I people don’t.


The game of money is the game of debt. Everyone wants you to get into debt

A banker will tell you to take on debt so the government can give you a tax break. Then a real estate agent will tell you to sign the papers even though you pay more than what the tenant is paying, so you are subsidizing their lease. You are losing twice. You must remember that money is made when you buy, not when you sell. A deal has to make economic sense in both good times and bad.

Just because you hope for the house price to go up does not mean it is a good investment.


If you take on debt personally, make sure it’s small. If it’s big, make sure someone else pays for it.

Gold is an asset only if you buy it for less than you sell it for.

Every time you hear “don’t worry , the government will give you a tax break” or “easy monthly payments”, then you know someone is luring you into the game. Don’t fall for it.

Part 2: Bringing out the best in you

7.     Becoming who you are

“When a person feels the need for money,” rich dad explained, “an E will automatically look for a job, an S often will do something alone, a B will create or buy a system that produces money, and an I will look for an opportunity to invest in an asset that produces more money.

If you can’t read numbers, then you must take someone else’s opinion,” said rich dad. “In the case of buying a house, your dad just blindly accepts your banker’s opinion that his house is an asset.”

Once you better understand the right side, you’ll begin to see the differences more clearly. Most people don’t even know there is a difference. They just assume that everything is risky, and they pay for it. But as the years go on and you become more comfortable with your experience and education on the right side, your vision will improve and you will begin to see what people on the left side cannot see. And you will understand why seeking security to avoid risk is the riskiest thing you can do. You’ll develop your own financial vision and not have to accept other people’s opinions. You’ll be able to see for yourself and know the difference between financial facts and financial opinions.”



8.     How do I get rich?

Four green houses, one red hotel

When the real estate market was really bad, we bought as many small houses as we could with the limited money we had. When the market improved, we traded in the four green houses and bought a large red hotel.

Or if you don’t like real estate, all you have to do is make hamburgers, build a business around that hamburger, and franchise it. Within a few years, the increasing cash flow will provide you with more money than you can spend.

it makes no sense to me to give people a tax break to lose money and spend their lives in debt. Or to call your home an asset when it really is a liability that drains cash from you every day. Or to have a national government that spends more money than it collects in taxes. Or to send a child to school to study so they can get a good job, but not to teach that child anything about money.

Do you want to be the kind of person who thinks buying four green houses and turning them in for one red hotel is easy? Or do you want to be the kind of person who thinks buying four green houses and turning them in for one red hotel is hard?

Then she discussed investments: “Many people think that buying stocks or mutual funds will make them rich. But simply buying stocks, mutual funds, real estate, and bonds won’t make you rich. Just doing what professional investors do does not guarantee financial success. A person who has a loser mentality will always lose no matter what stock, bond, real estate, or mutual fund they buy.” A common goal people have is to find the perfect romantic partner, but according to the instructor, most people go about it all wrong. “So many people look everywhere for the perfect person, the person of their dreams. They look for the right person instead of working to become the right person.

Perfectionism is the issue for people in the S-quadrant

They want to do things perfectly, that is why they remain in the S quadrant. The real issue is that they need to be in control. This is the kind of people you should hire, like a dentist, because you want them to be perfectionist, like your attorney of your brain surgeon.


The fear of losing money

If fear keeps you prisoner in one of the financial quadrants, I recommend reading Emotional Intelligence by Daniel Goleman. In his book, Goleman explains the age-old puzzle of why people who do well in school do not always do well in the real world. His answer is that your emotional IQ is more powerful than your academic IQ

After reading Goleman’s book, I came to realize that financial IQ is 90 percent emotional IQ and only 10 percent technical information about finance or money.

The rational brain vs the emotional brain

The problem with emotional thoughts is that they sound rational. If you use the word “feel” then it’s an emotional decision, like “I don’t feel like exercising today” or “the investment feels bad”

Differences between B and I

There is also constant tension between business owners and the investors in that business, often called the shareholders. One wants more capital, and the other wants greater dividends. A conversation at a shareholders meeting may sound like this: Company managers: “We need a private jet so our executives can get to their meetings faster.” Investors: “We need fewer executives. Then we won’t need a private jet.”

Differences between S and B In business transactions, I often see a bright S, such as an attorney, put a multimillion-dollar deal together for a B, a business owner. When the transaction is completed, the attorney becomes silently angry because the B makes millions and the S earns an hourly wage. Their words may sound like this: The attorney, the S, might say: “We did all the work, and he made all the money.” The business owner, the B, might say: “How many hours did those guys bill us for? We could have bought the whole law firm for what they charged.” Differences between E and I Another example is a bank manager who gives an investor a loan to buy some real estate. The investor makes hundreds of thousands of tax-free dollars, and the banker gets a paycheck that is taxed heavily. The bank manager, the E, might say: “I give that guy a loan, and he doesn’t even say thank you. I don’t think he knows how hard we worked for him.” The investor, the I, might say: “Boy, those guys are picky. Look at all this useless paperwork we have to do just to get a lousy loan.”

If You Are Married or in a Primary Relationship If you are married or in a primary relationship, circle the quadrant you generate the majority of your income from. Then circle the quadrant your spouse or partner generates income from. The reason I ask you to do this is that the discussion between partners is often difficult if one partner doesn’t understand where the other is coming from.

Internal journey

The process is much like learning to ride a bicycle. At first you fall down a lot. Often times it is frustrating and embarrassing, especially if your friends are watching. But after a while, the falling stops and riding becomes automatic. If you fall down again, it’s not that big of a deal because you now know that you can get up and ride again. The process is the same when going from an emotional mindset of job security to the emotional mindset of financial freedom. Once Kim and I made the crossing, we were less afraid of failing because we were confident in our ability to stand back up again

The main reason so many people struggle financially isn’t because they lack a good education or are not hardworking. It is because they are afraid of losing. If the fear of losing stops them, they’ve already lost.

Winners Cut Their Losers and Ride Their Winners

Winners do not clingn to stock that is falling because they do not want to admit defeat. They do not sell as soon as the price goes up by fear of seeing it drop.

Often, the moment they know they took a losing position, i.e., their stock price starts to go down instead of up, they will sell and take their losses. Most are not ashamed to say they took a loss, because a winner knows that losing is part of the process of winning. When they find a winner, they will ride it up as far as it can go. The moment they know the free ride is over and the price has peaked, they cut and sell. The key to being a great investor is to be neutral to winning and losing. Then you don’t have emotionally driven thoughts, such as fear and greed, doing your thinking for you

Losers Do the Same Things in Life

People who are afraid of losing do the same things in real life. We all know of:

• People who stay in marriages where there is no longer any love

• People who stay at dead-end jobs

• People who hang on to old clothes and things they never use

• People who stay in towns where they have no future

• People who stay friends with people who hold them back

The wisdom of risk

There is a science to taking risks, especially financial risks. One of the best books I have read on the subject of money and risk management is Trading for a Living by Dr. Alexander Elder. Although it was written for people who professionally trade stocks and options, the wisdom of risk and risk management applies to all areas of money, money management, personal psychology, and investing.

People on the left side think “play it safe” is a logical thought. It isn’t. And it’s the emotional thoughts that keep people stuck in one quadrant or the other. What people DO on the right side of the equation isn’t that hard. I’m sincere when I say that it’s as easy as buying four green houses for low prices, waiting until the market improves, selling them, and then buying a big red hotel.


9.     Be the bank, not the banker

The rich create money

In times of panic and recession, opportunities are everywhere. People who panic do not seem them


people in the B and I quadrants must also possess highly specialized technical skills. These include financial literacy, how to restructure debt, how to structure an offering, how to raise capital, understanding your market, and other learnable skills. When the RTC said, “We have a banker’s box for sale, and in it is property that used to be worth $20 million, but you can have it today for $4 million,” most E’s and S’s didn’t have a clue about how to raise the $4 million to buy the gift from financial heaven or know how to recognize the good deals from the bad.


The period from 1986 to 1996 was, for some people, the worst time of their lives. For others, it was the best of times. When I received that phone call from my rich dad in 1986, I recognized the fantastic opportunity that this economic change presented me. Even though I did not have a lot of extra cash at the time, I was able to create assets by utilizing my skills as a B and an I.


And money continues to flow from the left side to the right side of the CASHFLOW Quadrant, just as it always has. Many people are deeply in debt, yet they pour money into the stock market, often through their retirement plans. The B’s and I’s on the right side will sell at the top of the market, just when the last cautious people on the left side overcome their fear and enter the market. Something newsworthy will happen, the market will crash, and when the dust settles, the investors will move back in. They will buy back what they just sold. Again, we will have another great transfer of wealth from the left side to the right side of the CASHFLOW Quadrant


Be the bank, not the banker

In my opinion, people simply fail to realize that they are in this large global game, a virtual casino in the sky, but no one ever told them that they are important players in the game. The game is called “Who Is Indebted to Whom?”


When I was in my mid-twenties, it dawned on me that the name of the game was to be the bank, but that didn’t mean to get a job as a banker. My advanced education was about to begin. It was during this period that my rich dad had me look up words like “mortgage,” “real estate,” and “finance.” I was beginning to train my mind to see what my eyes could not. He encouraged me to understand the game and, when I learned the game, I could do what I wanted with what I found. I decided to share my knowledge with anyone who was interested. He also had me read books on the great leaders of capitalism— people such as John D. Rockefeller, J. P. Morgan, and Henry Ford. One of the most important books I read was The Worldly Philosophers by Robert Heilbroner. For people who want to operate on the B and I side, his book is a must-read


After The Worldly Philosophers, I recommend reading The Creature from Jekyll Island by G. Edward Griffin, Paul Zane Pilzer’s Unlimited Wealth, James Dale Davidson’s The Sovereign Individual, Robert Preacher’s The Crest of the Wave, and Harry Dent’s The Great Depression Ahead


How to play the bank

After the 1986 Tax Reform Act became law, there were opportunities everywhere. Real estate, stocks, and businesses were available for low prices. While it was devastating for many people on the left side, it was wonderful for me because I could utilize my skills as a B and I to take advantage of the opportunities around me. Instead of being greedy and chasing everything that looked like a good deal, I decided to focus on real estate. Why real estate? For these five simple reasons:


1. Pricing

Mortgage payments were super cheap


2. Financing

The banks wouldn’t give loans on stocks but on real estate they would accept. With 10K in real estate and a 90% loan, you could buy a 100K property. If stocks went 10%, you would just gain 1K, but with real estate you would gain 10K.


3 ;. If you made 1M in stocks, you would have to pay 30%. But with real estate, you could defer payment until the next purchase of property. Taxes could be rolled tax free until the next transaction. On top of that, you could depreciate the property for even bigger tax advantages.


Important note: An investment must make economic sense outside of the tax benefit for me to invest in it. Any tax benefit only makes the investment more attractive


4.      Cash flow

Rents stayed high despite the turndown.


5.      An opportunity to become a bank

Real estate allowed me to become a bank, something I had wanted to do wince 1974.


The rich create money

Let’s say I find a house worth 100K and get a great deal and only pay 80K for it. I pay 10K down and a 70K mortgage. Next, I post an ad “House for sale. Owner desperate. No bank qualifying. Low down payment. Easy monthly payments.”

The phone rings like crazy.

The house is sold on what is called a “wrap” or a lease-purchase contract. In simple terms, I sell the house for a $100,000 IOU. This is what the transaction looks like:


This transaction is then registered with a title and escrow office, which often handles the payments. If the person defaults on the $100,000, I simply foreclose and sell the property to the next person who wants a “low down payment, easy monthly payment” home to live in. People line up for the opportunity to buy a home on these terms. The net effect is that I have created $30,000 in my asset column for which I am paid interest, just like a bank gets paid interest for the loans it makes. I was beginning to be a bank, and I loved it. Remember that rich dad said, “Be careful when you take on debt. If you take on debt personally, make sure it’s small. If you take on large debt, make sure someone else is paying for it.”


In the language of the B and I side, I “laid off” my risk, or “hedged” my risk to another buyer. That is the game in the world of finance. This type of transaction is done all over the world. Yet wherever I go, people come up to me and say those magic words: “You can’t do that here.” What most small investors fail to realize is that many large commercial buildings are bought and sold exactly in the manner described above. Sometimes they go through a bank, but many times they do not.



Part 3: How to become a successful B and I

A journey of a thousand miles begins with a baby step. Don’t suddenly decide to lose 20 pounds. You don’t need big steps but many, many steps. You eat an elephant one bite at a time.

E and S’s have difficulty moving to the B and I side because they are afraid of making mistakes. They often say “I need more information” or “Can you recommend another book?”. Their self-doubt is keeping them trapped in their quadrant. You learn to ride a bicycle only by falling.

People who become wealthy, regardless of where they live have 3 qualities:

1.      They maintain a long-term vision and plan

2.      They believe in delayed gratification

3.      They use the power of compounding in their favor


People who write their goals are more likely to achieve them. Instead of trying to be an overachiever, be an underachiever. Be content with small steps, because each of them moves you closer to your goals and dreams.

You need to develop your financial and emotional intelligence.


10. Take baby steps

The Seven Steps to finding your financial fast track

11. Step 1: it’s time to mind your own business

We are programmed to mind everyone else’s business and ignore our own

Most of us work hard to make someone else rich.

Employees make bosses rich. Debtors make banks rich. Taxpayers make the government rich.


Take action

1.      Fill out your personal financial statement

2.      Set financial goals – 5 years, and 1 year

a.      5 years: I want a pass income of  ___ and the following assets (real estate, stocks, businesses, commodities): ____

b.      1 year: I want to decrease my debt by ____ and increase my cash flow from my assets to ___ per month




12. Step 2: take control of your cash flow

People who cannot control their cash flow work for those who can.


More money will not solve your problems. Cash-flow management is the problem.

Good debt is debt that someone else pays for you.

For every liability, there is an asset. Your loan from the bank is a liability but an asset to the bank.


Take action

1.      Determine which quadrant you receive your income today

2.      Determine which one you want to receive the bulk of your income from in 5 years

3.      Begin your cash flow management plan:

a.      Pay yourself first

Set aside a percentage of each payment you get and deposit it on an investment savings account. Never take it out until you are ready to invest it.

b.      Reduce your personal consumer debt


13. Step 3: know the difference between risk and risky

Business and investing re not risky; being undereducated is.

Financial literacy means training your mind to tell you which way the cash is flowing. Buying liabilities you have been told are assets if risky. Paying other people first is risky.


Take action

1.      Define risk in your own words

a.      Is relying on a paycheck risky to you?

b.      Is having debt to pay each month risky to you?

c.      Is owning an asset that generates cash flow each month risky to you?

d.      Is spending time to obtain financial education risky to you?

e.      Is spending time learning about different types of investment risky to you?

2.      Commit ( hours of your time each week to one or more of the following:

a.      Read the business section of your newspaper and the Wall Street Journal

b.      Listen to the financial news on television or radio

c.      Read financial websites, magazines and newsletters

d.      Play the Cashflow game and join a Cashflow Club near you

e.      Attend education seminars on investing and financial education

f.       Consider hiring a coach to help you work through the process of becoming financially free


14. Step 4: decide what kind of investor you want to be

Start small and learn to solve problems

If you want to acquire great wealth quickly, take on great financial problems. There are three types of investors: some seek problems, some seek answers, some seek an expert to tell them what to do.

You should interview several tax advisors, attorneys, stock brokers and real estate agents. Find advisors who practice what they preach and run away from those getting rich on commissions and fees alone.

Start small and learn to solve problems. You will gain immense wealth as you become better and better at solving problems.

If you want to acquire assets faster, you first need to learn the skills of the B and I quadrants. The best way is to build a business; it provides vital education, improves personal skills, provides cash flow and provides free time.


You should get started quickly.

In America and the world, there are two sets of rules: one for the rich and one for everyone else. The large tax breaks, incentives and payments go to the rich; and the middle class pays for them. For example, insufficient low-income housing is a political hot potato. To help solve it, cities, states and the federal government offers tax credits, tax breaks and subsidized rents to people who finance and build low-income housing. So, taxpayers subsidize rich people’s investments in housing.


Find your fast track.

To get on the financial fast track, become an expert at solving a certain type of problem. Do not diversify. Become an expert and people will come to you with their money.

Bill Gates is an expert at solving software-marketing problems, Donald Trump is an expert at solving problems in real estate, and Warren Buffett is an expert at solving problems in business and the stock market, which in turn allows him to buy valuable stocks and manage a successful portfolio. George Soros is an expert at solving problems resulting from market volatility, which makes him an excellent hedge-fund manager. Rupert Murdock is an expert at solving the business problems of global television networks.


Kiyosaki is an expert in solving apartment-related problems. If he wants to invest in other areas, he gives his money to people who have excellent track record in their field and who practice what they preach.


Seek to solve bigger problems, because inside big problems lie huge financial opportunities. That is why Kiyosaki recommends building a business before investing.


Take action

1.      Get educated in investing

Each week, do two of the following:

A.     Attend seminars and classes

B.     Look for For-Sale signs in your area. Call 3 or 4 per week. Ask the following questions:

·        Is it an investment property?

·        Is ti rented?

·        What is the current rent?

·        What is the vacancy rent?

·        What are the average rents in that area?

·        What are the maintenance costs?

·        Is there deferred maintenance?

·        Will the owner finance?

·        What types of financing terms are available?

C.      Meet with stockbrokers and listen to the companies they recommend for stock buys. Research these companies and consider opening a trading account and making some investments.

D.     Subscribe to investment newsletters and study them

E.      Read, attend seminars, watch financial TV programs and play Cashflow

2.      Ged educated in business

a.      Meet with brokers to see which businesses are for sale in your area. It will teach you terminology

b.      Attend a network-marketing seminar to learn about its business system

c.      Attend business-opportunity conventions or trade expos in your area to see what franchises or business systems are available



15. Step 5: seek mentors

A mentor is someone who tells you what is important and what isn’t.


Professionals have coaches. Amateurs don’t.

Take action

1.      Seek mentors

a.      Seek out role models and reverse role models (who lost everything)

2.      Who you spend your time with is your future. Write down the six people you spend the most time with

a.      Denis - S, I

b.      Martine – S, E

c.      Raphaelle - E

d.      Thibaut - S

e.      Irina - E

f.       Yueming - E

3.      Write their quadrant after their name

4.      Write their level as an investor

a.      Denis – Level 4

b.      Martine – Level 1

c.      Raphaelle – Level 2

d.      Thibaut – Level 1

e.      Irina – Level 1

f.       Yueming – Level 1


16. Step 6: Make disappointment your strength

Inside every disappointment lies a priceless gem of wisdom


Prepare yourself to be disappointed. The reason there are few self-made rich people is because few people can tolerate disappointment. Instead of learning to face it, they spend their lives avoiding it.


Expect to be disappointed. Only a fool expects everything to go the way they want.

Have a mentor standing by. They are great for financial emergencies. Most people will not head down the street until all lights are green. That is why they don’t go anywhere.


Be kind to yourself. Don’t beat yourself up when you make a mistake. That makes you too cautious when it comes to taking risks and adopting new ideas.


Tell the truth. The size of your success is measure by the strength of your desire, the size of your dream and how you handle disappointment along the way.


Take actions

1.      Make mistakes. Losing is part of winning. E and S’s think losing is not acceptable. B and I know that this is how they learn

2.      Start small. If you find an investment you want to invest it, put a little money down. You will learn way more this way. Don’t bet a lot, just a little money, pay attention and learn.

3.      The key is to TAKE ACTION. You must start doing.

a.      Make offers on small real estate deals

b.      Join a network-marketing company

c.      Invest in stock after researching the company

d.      Seek advice from your mentor, financial or tax advisor


17. Step 7: The power of faith

Trust that you have everything right now that you need to be successful financially. All it takes to bring out your natural gifts is your desire, determination and a deep faith that you have a genius and a gift that is unique.


Take action. Believe in yourself and start today!


18. In summary

Begin building pipelines of cash flow to support you and your family

If you are not a long-term investor yet, map out a plan to get control of your spending habits. Have a long-term plan to put away a small amount of money regularly. Get ready to stop hauling water buckets and begin building pipelines of cash flow.

Edited by French Ben
  • Thanks 1
Link to comment
Share on other sites

  • 2 weeks later...

Yes, all 3 of them are not very specific and repeat each other a LOT. 80% of the text in each of these books could have been cut or summarized.

Don't expect to get any specific advice though. Kiyosaki shows you a mindset more than a how-to recipe.

I have also uploaded notes for Rich Dad Poor Dad btw. And I write my notes in such a way that you do not need to read the book.

Edited by French Ben
  • Like 1
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Create New...