1. ocrediCog
She Saot nws
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Save Yo
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ad's Tr e Crisis
uth Ab
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1 Go to school 2 Get a job 3 Work hard 4 Save Money
5 Livebelow your means 6 Your home is an asset 7 Get out of debt
8 Invest for the long term in a retirement plan filled with stocks,
bonds and mutual funds
TM
1
knowledge: the new money ™

2. Shooting the Sacred Cows of Money
Putting a bullet in the head of bad
financial advice
A Quick Note from Robert
Throughout history, cultures have tightly grasped their “sacred cows” (dearly held beliefs so commonly accepted, so
religiously observed, that to question them is sacrilege).
Our culture is no different. Our beliefs are no less sacred.
Especially when it comes to money.
A year or so ago, Kim and I did something we’d never done before. We assembled all the Rich Dad advisors in one
room to talk about the common myths our culture holds about money.
These myths include:
• Go to school
• Get a job
• Work hard
• Save money
• Your house is an asset
• Get out of debt
• Live below your means
• Invest for the long term in a well-diversified portfolio
The conversations were candid, funny, and dead-on. We filmed these conversations and placed them on a website,
www.shootingthesacredcows.com.
The goal was to create short, free, easy-to-watch, and easy-to-share videos to introduce those new to the
Rich Dad message and to help the Rich Dad community educate their family, friends, and co-workers about
Rich Dad principles.
Rich Dad’s vision has always been to provide comprehensive financial education with quality, free resources when
possible to as many people as we can. The mission of Sacred Cows is to take you from the established mindset about
money to the enlightened mindset, to put a bullet to the head of bad financial advice, and to help you take charge
of your financial future.
The videos are available for free online at www.shootingthesacredcows.com. But we thought it would be a great idea to
take the content from the videos and condense it all into a free eBook that is easy to share.
So, that’s what we’ve done.
2

3. The following eBook is an edited version of the video transcript. I hope you enjoy it. Please share it with your friends,
family, and co-workers—anyone you know who could benefit from the collective knowledge of the
Rich Dad team.
Comprehensive financial education is still the surest way to financial freedom, both personally and as a society.
Together we can make a difference.
Rich Dad Team
Robert T. Kiyosaki
Robert is the founder of The Rich Dad Company, a recognized brand worldwide and a global leader in financial
education, empowering people to escape the Rat Race and find financial freedom.
A successful entrepreneur and investor, Robert is the author of 19 books, including Rich Dad Poor Dad—the #1
personal finance book of all time. He’s regularly featured on shows such as Larry King Live, Oprah, and Your World with
Neil Cavuto.
Robert’s bestseller, Conspiracy of the Rich: The 8 New Rules of Money, pioneered online book publishing as a free online
interactive book with contributions from over a million readers in over 167 countries. Frequent updates appear on
www.conspiracyoftherich.com
3

4. His latest release, Unfair Advantage, addresses what schools will never teach you about money and incorporates both
audio and video into Rich Dad’s first enhanced eBook.
A true advocate of effective financial education, Robert isn’t afraid to challenge the status quo. He offers financial advice
that exposes the absurdity of conventional attitudes about money and debunks the so-called financial experts.
Kim Kiyosaki
As an internationally renowned speaker, author, entrepreneur, and real estate investor, Kim knows what it takes to
succeed and be a financially independent woman. She’s a sought-after speaker, television and radio talk-show guest, the
host of a PBS Rich Woman show, and a columnist for www.WomenEntrepreneur.com.
Through her international brand, Rich Woman, Kim draws on a lifetime of experience in business and investing
to be an advocate for women in the marketplace. A self-made millionaire, Kim is a happily married (but fiercely
independent) woman and often travels and speaks with her husband, Robert Kiyosaki. Her first book, Rich Woman,
was a Business Week bestseller and is one of the top 50 best-selling personal-finance books of all time.
Ken McElroy
Ken is a founding partner of MC Companies, a real estate investment company that specializes in management,
investment, development, and construction with a portfolio across the southwestern United States of over 10,000
apartment units valued in the hundreds of millions of dollars.
4

5. As a Rich Dad Advisor, Ken brings 20 years of real estate experience to the team and speaks to thousands of people
across the globe each year. He is the author of the Rich Dad Advisor books The ABCs of Real Estate Investing, The
Advanced Guide to Real Estate Investing, and The ABCs of Property Management. He is also a contributing author
to Robert’s The Real Book of Real Estate and the author of The Sleeping Giant: The Awakening of the Self-Employed
Entrepreneur. Find out more at www.KenMcElroy.com, www.mccompanies.com, and www.thesleepinggiant.com.
Andy Tanner
Andy is a renowned paper-assets expert and successful business owner and investor known for his ability to teach key
techniques for stock-options investing. In 2008, Andy was key in helping develop and launch Rich Dad’s Stock Success
System which teaches investors advanced technical trading techniques to profit from bull and bear markets. He serves
as a coach to Rich Dad’s Stock Success System trainers and as the Rich Dad Advisor for paper assets. He is currently
authoring an upcoming Rich Dad Advisor book on paper-asset investing.
Anita Rodriguez
Anita homeschooled her four children before becoming a teacher and counselor in the poorest high schools of Denver’s
inner city. Later, she was a high school administrator for Douglas County in Colorado, one of the wealthiest counties
in the nation. Having spent most of her life in education and seen first-hand the lack of sound financial education
in the U.S. school system, she joined The Rich Dad Company in 2006 as an Education Advisor. She brings her vast
experience to Rich Dad to help develop world-class financial-education curriculums that change lives.
5

6. Blair Singer
Blair is a top-rated and internationally known speaker and sales communications trainer. Since 1987 he’s worked with
tens of thousands of individuals and organizations such as IBM and JPMorgan to help them achieve extraordinary
levels of sales, performance, productivity, and cash flow.
As a speaker and Rich Dad Advisor, Blair has presented in over 20 countries across 5 continents on life-changing sales
success, and is the author of the Rich Dad Advisor books Sales Dogs and The ABCs of Building a Business Team that
Wins. Find out more at www.salesdogs.com and www.blairsinger.com.
Tom Wheelwright
Tom is the founder and principal for ProVision Wealth Strategies. For more than 25 years, Tom has devised innovative
tax, business, and wealth strategies for sophisticated investors and business owners. Tom is an international speaker and
an adjunct professor in the Masters of Tax program at Arizona State University. He serves as the Rich Dad Advisor for
Tax and Wealth Strategy and is the author of an upcoming Rich Dad Advisor book on building wealth through tax
strategies. Find out more at www.provisionwealth.com.
6

7. Garrett Sutton
Garret is a founder and partner with Sutton Law Center, P.C., a law firm with offices in Nevada, Wyoming, and
California. He has over 20 years experience assisting and advising entrepreneurs, families, and businesses in selecting the
appropriate corporate structures to limit their liability, protect their assets, and advance their personal financial goals.
As a Rich Dad Advisor, Garrett speaks frequently at Rich Dad events on the topic of corporate formation and
asset protection. He is the author of the Rich Dad Advisor books The ABCs of Writing Winning Business Plans,
The ABCs of Getting Out of Debt, Own Your Own Corporation, and How to Buy and Sell a Business. Find out more
at www.garrettsutton.com and www.sutlaw.com.
Mike Maloney
Mike is the owner and founder of www.goldsilver.com, an online precious-metals dealership that specializes in the
delivery of gold and silver and secured storage. Additionally, www.goldsilver.com provides research and commentary for
its clients, assisting them in their wealth-building endeavors.
Mike has spoken to audiences throughout the world on the benefits of precious-metals investing. A student
of economics, Mike is regarded as an expert on economic cycles and capitalizing on the opportunities they afford.
He is the author of the Rich Dad Advisor book, Guide to Investing in Gold and Silver. Find out more at
www.goldsilver.com.
7

8. Kathy Heasley
Kathy is the founder and principal of Heasley & Partners, Inc., a branding and marketing firm, which pioneered and
champions Heart & Mind™ Branding. A successful author, entrepreneur, business coach, and public speaker, Kathy
serves as the Rich Dad Advisor for marketing and branding. She has over 20 years of experience helping to shape
brands like Cold Stone Creamery and Massage Envy and is an international speaker on branding, marketing, and
communications. Find out more at www.heasleyandpartners.com.
Trina White Maduro
Trina is a businesswoman, investor, and social entrepreneur. She grew up in the midst of violence, drugs, and gangs on
the south side of Chicago and was raised in a single-parent home with 14 other siblings and family members.
Trina excelled in sports and initially viewed professional basketball as her destiny and vehicle to success. She later chose
to pursue a career in social work and ministry through non-profit organizations and churches, which she’s done for the
last 21 years. Today, she is a social entrepreneur who understands how to use money to create opportunities and better
the lives of herself and those she serves.
8

9. Rodney Anderson
Rodney is the Executive Director and Senior Managing Partner for Rodney Anderson with Supreme Lending. He is
the leading home-loan specialist in Texas, and has arranged financing for over 20,000 families over the last 18 years. He
is the #1 producer of mortgage origination in the state of Texas and was named the #1 FHA/VA lender by Mortgage
Originator magazine. Rodney brings his 25 years of experience to the table as the Rich Dad Advisor on lending. Visit
www.RodneyAnderson.com for more information.
Marco Antonio Regil
Marco is a successful entertainment entrepreneur and investor. He’s Mexico’s number-one TV host and has devoted 25
years of his life to radio and television. He’s a spokesperson for such companies as McDonald’s, Pepsi, and Nestle and
for non-profit organizations like the American Red Cross and the Mexican Telethon. He’s helped raise more than $40
million every year for these charities.
9

10. Introduction:
Robert and Kim’s Story
In Shooting the Sacred Cows, Kim and I share our story about how we met, were dirt-poor, and built our wealth together
as a team. We also share why we felt compelled to start The Rich Dad Company and why we feel financial education is
so important.
Robert
Hello I’m Robert Kiyosaki, and I’m probably best-known for my book Rich Dad Poor Dad.
Kim
And I’m Kim Kiyosaki.
Robert
Kim and I met in Hawaii in 1984 when I was kind of between businesses.
Kim
I should say something. We met in 1984 and fell in love, and 1985 was probably the worst year of our lives.
We were broke and building a business, but we were homeless for a period of time, we struggled financially, and it was a
really tough time to go through.
Robert
So, in 1986 I asked Kim to marry me because I figured if she had put up with me with no money, she’d put up with me
any time. I asked her dad and his first question was...
Kim
My dad’s first question was, “Does he have a job?”
Robert
The answer was, of course, no! But anyway, by 1994 Kim and I were financially free, and we did it without a job,
without a retirement plan, and without government support.
Kim
Yes, and I think one of the most beautiful things about being financially free was that it was the first time we were able
to ask, “What do we want to do with the rest of our lives?” Because, up until that point, we were so busy working day
to day and paying the bills that we never had that luxury.
And that’s when we started The Rich Dad Company.
Robert
And in 1996, we created the CASHFLOW board game to give people the same financial education my rich dad
gave me.
10

11. Kim
Prior to meeting Robert, I had very-little-to-no financial education. And what Robert’s rich dad taught him and what
we learned on our journey to becoming financially free was not what we heard from financial advisers and planners. In
fact, it was almost the opposite.
We found that lots of people were asking us how we achieved financial freedom, so we created the CASHFLOW game
to teach people just what we did, which was quite the opposite of what many people are taught.
Robert
Today we’re in a financial crisis. Kim and I saw this crisis coming, and that was the reason back in 1996 that we created
The Rich Dad Company—to provide financial education so people can learn to take care of themselves.
I was always taught the importance of teaching people to fish instead of giving people fish. Unfortunately, what our
governments do today is give people fish rather than teach them to fish. And the more you give people fish, the more
poor people you create.
The Rich Dad Company was formed to teach people what my rich dad taught me, but more importantly, to teach
them how to fish.
Kim
Like Robert said, there’s a huge financial crisis going on right now. If something isn’t working for you financially today,
then maybe you need to look for new answers.
And we’re always looking for new answers. That’s what Shooting the Sacred Cows is about—getting financially educated,
taking charge of your life, and not depending on the government or other financial experts.
Robert
Our answer to the financial crisis is to get financially educated. Instead of starting out with learning how to fish,
financial education begins by shooting the sacred cows of money.
Money does not start in your hands. Money actually starts in your head.
People hold to sacred cows, age-old Industrial-Age beliefs, such as, “Go to school.” Everybody says, “Well, you have to
go to school.” Unfortunately, you don’t learn anything about money in school.
In Shooting the Sacred Cows of Money, we’re going to say some things that will challenge you. You might even say,
“That’s not fair!” Well, we’re not trying to be fair. There is no fairness when it comes to money. Either you’re a winner,
or you’re a loser.
We say hard things because they are the truth, but also because we care about your financial future. The lies of the
sacred cows of money actually hurt people. A sacred cow is something that everyone accepts as truth—and it’s taboo to
say anything bad about it or to the contrary. There are many sacred cows regarding money. They are serious, and they
hurt people.
11

12. Today’s world is different than it used to be. The way things always have been done financially isn’t working, and it’s
time that somebody stands up and shoots a few sacred cows so that people stop suffering.
A good analogy is the people who lived in New Orleans prior to Hurricane Katrina. They knew they lived below sea
level. They knew that it was only a matter of when, not if, a disaster like Katrina hit. Yet, they chose to ignore the
potential consequences. And they paid the price. Today, we’ve got a lot of financial storms. You need to be prepared.
We have a solution—a very strong solution. By shooting the sacred cows of money, we hope to wake you up to start
thinking differently. So, lock and load.
Time Out: The 5 Elements of Financial Education
You need to know the five elements of financial education.
Element number one is history. There are many interesting dates, but one important one is 1913 when the Federal
Reserve Bank was created. Also of importance, in 1913 the Internal Revenue Service (IRS) was created so that they
could tax us. They had to tax us if they were going to print money.
In 1971, President Richard Nixon took the U.S. off the gold standard. After 1971, money stopped being money. It
became a currency backed by debt. One of the reasons we’re in this massive financial crisis today is because, after 1971,
the Federal Reserve Bank could print as much money as it wanted.
In 1974, the rules of retirement changed with the Employee Retirement Income Security Act (ERISA), which paved
the way for the 401(k). And that’s why today so many people of my generation are afraid of running out of money
during retirement.
Element number two is taxes. As you know, taxes are not fair. There are many reasons why the rich pay much less in
taxes than people who work for the rich.
Element number three is financial vocabulary. In other words, understanding the language of money. For example,
what’s the difference between an asset and a liability, capital gains versus cash flow, or fundamentals versus technicals?
That’s all part of a financial vocabulary.
Number four is wealth protection. As we all know, people out there are trying to steal your money. But there are also
people whom you trust who are taking your money. Because of this, financial education is not only how much money
you make, but how much money you keep.
And element number five is that there are two sides to every coin. When you put your money in the bank,
the bank gives it to somebody else. When you put your money in your retirement plan, the bank gives it to
somebody else.
12

13. Sacred Cow #1: Go to School
An important part of financial education is having a financial statement, which includes an income statement and
a balance sheet. When you go to your banker, your banker always asks for your financial statement, not your report
card, because your financial statement is your report card once you leave school. Your financial statement will tell you
whether or not you’re smart with money. The financial statement is the report card of your financial intelligence.
One of the biggest sacred cows of all is go to school. Many people think I’m anti-school. That is not true. I’m anti-
ignorance. So, I’m very pro-education. I’m just not pro of being stupid about money.
Anita
Education is more important now than it’s ever been.
Robert
That’s right.
Anita
So the problem is that the schools focus just on two kinds of education. There’s the academic, which is really
important…Reading, writing, arithmetic. You need to have it, that’s basic.
The second type of education they give is the professional kind of education. If you want to be a lawyer or an
accountant or a teacher, then you need to go to school and get those certifications. But the one kind of education that’s
lacking severely in the school system is financial education.
Rodney
I put on my Facebook one day that we need to teach our children financial education, and I received a comment back
from a teacher that said, “Who’s going to pay for it?” We’re all going to pay for it if we don’t start educating our children
about finances in school.
Robert
This is a very hot subject. Our schools are training people to be employees, to work for the rich. The second thing I
don’t like about school is how they label a kid as smart or stupid at an early age. The reason I’m sensitive about that is
because I was labeled stupid right from the start!
And it wasn’t that I was stupid. I was bored and not interested, and we studied subjects I wasn’t interested in. Nobody
could tell me how I was going use calculus.
Were they training me to be an employee or street smart? My poor dad was school smart. My rich dad was street smart.
I’d rather be street smart today.
Tom
Well, there’s a total lack of practical education. That’s really what you’re talking about, and I found that to be true. I’m
an accountant. I have a master’s degree.
13

14. Robert
And you’re an “A” student, right?
Tom
Yes, I’m an “A” student.
Robert:
We’ll forgive you.
Tom
Thank you. But when I went to school, the only financial education I got was specific to my profession. There was no
general financial education. I could have gotten a master’s degree and a PhD in my field without any specific financial
education at all about how to handle myself once I got out of school.
Robert
Right. And people say to me, “Well, I learned economics in school. Economics is financial education, right?” Not really.
It’s not about investing. It’s not about the law. It’s not about taxes, not about history.
Garrett
Robert, as a lawyer, I see all sorts of people walk through the door. Some are highly educated, and some have no
education at all, but like you said, they’re street smart. And the first time I saw this type of client, I thought, “Wow! He’s
doing pretty well. He didn’t go to college, but he’s got all this real estate.” And then there’s a pattern that develops where
you see a lot of people who never went to college but are street smart and have done very well.
Kim
I was talking to a woman the other day. She’s a highly successful medical doctor. She’s very smart in many ways, but
when we were talking, she finally looked at me and said, “Oh my gosh. I have not a clue about my money.”
She’s 45 years old, and she has not a clue. Many times you think that, because people are successful, they know
something about money. But they really don’t because they never had the education.
Andy
School creates a culture of dependence. We depend on three things. We depend on a corporation to take care of us.
We depend on government to take care of us. And, the scary one I think is, we depend on institutions—you know, the
people who run our 401(k)s— to take care of us.
We rob ourselves of the independence to think freely as entrepreneurs or investors, and we become dependent on those
three entities. It’s brutal.
Robert
Mr. Maloney, you never finished school, did you?
Mike
No, no. I failed school, but more than that, school failed me. I was dyslexic.
14

15. They didn’t know what dyslexia was back then, but basically I was just like you, Robert. I was bored stiff. I got put in
all the remedial classes. Basically, I was in with the dumb kids. They weren’t teaching me anything I wanted to learn or
anything that I would ever use in my lifetime.
Robert
And the reason I’m bringing up Michael is that most people will agree he’s probably the smartest guy on this team. And
the problem for Michael was that there are three kinds of education. There’s academic: reading, writing and arithmetic.
There’s professional: become a doctor or a lawyer or, in my case, a pilot. And there’s financial. But Michael was put back
because of academics, because you can’t read, right?
Mike
Right.
Robert
So, how did you learn to read?
Mike
Apple came out with OSX at the beginning of the last decade, and you can just select text, hit a button, and the
computer reads to you.
Most people don’t know it’s built into the operating system. I developed a passion for global finance and economics and
monetary history especially. And passion drives you.
Robert
Now we can’t shut him up, and I’m going to blame Apple for that one!
Andy
School is so low gain. I didn’t do well in school. I did very well in sports, and in sports you learn to compete. You learn
to deal with pressure. Goals in school are individually focused. You’re competing against everybody, and teamwork is
called cheating in school. Some of us cheated better than others.
Robert:
And I’ll just say the last thing about school that really upsets me. In America, schools are based on real estate tax. In
other words, if you come from a rich neighborhood, the real estate tax pays for better schools. If you are from a poor
neighborhood, you get less money. So, any time somebody tells me schooling is about being fair, when I look at the
number side of it, it isn’t. If you’re poor, you’re getting the worst possible education. To me, that is cruelty.
So how does a person learn about money? How does a person increase their financial intelligence? A diagram called the
Cone of Learning provides some interesting clues.
15

16. Cone of Learning
After 2 weeks we Nature of Involvement
tend to remember
Doing the Real Thing
90% of what we say Simulating the
and do Real Experience
Doing a Active
Dramatic Presentation
Giving a Talk
70% of what we say
Participating in a Discussion
Seeing it Done on Location
Watching a Demonstration
50% of what we hear
and see
Looking at an Exhibit
Watching a Demonstration
Passive
Watching a Movie
30% of what we see Looking at Pictures
20% of what we hear Hearing Words
10% of what we read Reading
Source: Cone of Learning adapted from Dale, (1969)
The Cone of Learning was created by an educational researcher named Edgar Dale in 1969. What he found is that the
worst way to learn is by reading or listening to a lecture. And the best way to learn is at the top of the cone, which is
simulations through games, and then doing the real thing.
The interesting thing is that my poor dad who was good at school thought that reading and lecture were the best way to
learn. My rich dad taught me to be a rich man by using methods at the top of the cone. He taught me using the game
of Monopoly™—you know, four green houses, one red hotel, four green houses, one red hotel—and then we went out
and did the real thing.
So, one of the ways, if you want to learn without much risk, is by simulations, playing games. The reason my wife and I
created the CASHFLOW game was so that you could play and make a lot of mistakes with play money.
How many people in this room have made financial mistakes?
16

17. Kathy
Yes, the only thing we were ever taught in school was maybe how to balance a checkbook, how to have a savings
account, those basics.
Robert
Financial education is like learning another language.
Marco
I say this all the time in Mexico. If you learn English, you can do business with the whole world.
Robert
When you learn to speak the language of money, it opens up a whole new world. And unfortunately in our
school systems, we don’t teach the language of money. We teach people the language of becoming a doctor, lawyer,
or an employee.
Sacred Cow #2: Get a Job
The next sacred cow is get a job. Now the problem with getting a job is: Who do you think pays the most taxes—the owner
of the business or the worker? For that, I’ll turn to my accountant here, Tom.
Tom
Well, it’s clearly the employee who’s paying the most taxes. I started as an employee right out of school, and I was
paying high taxes. Even though my job is to reduce taxes, I was paying high taxes. And then about 15 years ago, I
started my own business—my own CPA firm—and I was now self-employed and paying more taxes. So, it wasn’t
until I started acting like a bigger business, and was really a significant-sized business, that I started paying less in taxes.
It’s because the business owners, the entrepreneurs, and the investors—the active investors—really pay the least amount
of taxes.
Time Out: The CASHFLOW Quadrant
In this eBook, you’ll hear a lot about E, S, B & I, also known as the CASHFLOW Quadrant. E stands for employee;
employees have a job. S stands for self-employed, small business, or specialist like a doctor or a lawyer. These people
own a job. B stands for big business, 500 employees or more, and these people have other people working for them.
And I stands for investor, and investors have their money work for them.
Now my poor dad always said to me, “Go to school and get a job.” He wanted me to become an employee or a
specialist like a doctor or a lawyer. My rich dad said, “If you want to be rich, you have to be a business owner on the
B-I side.” And that’s the difference between my rich dad and my poor dad.
Robert
If you look at the CASHFLOW Quadrant, you have the E, S, B, & I quadrants. The people who go to school are on
the E and S side. The S stands for specialist like a doctor or a lawyer, and the E’s are employees. But doctors and lawyers
pay the highest taxes, right?
17

18. Tom
Oh, by far. It’s the self-employed people because, not only are they paying the highest income taxes, they also get the
privilege of paying Social Security taxes and Medicare taxes on everything they earn. So, they’re paying extra taxes just
to be in that S quadrant.
Robert
Right. My mother wanted me to be a doctor. If I had followed that advice, I’d be paying the highest tax possible. They
make a lot of money, but they pay the highest percentage in taxes. So that’s why this relates back to “go to school.”
Tom
That’s right. And they actually have the fewest options to reduce their taxes. But the tax laws are really geared towards
those people who are creating jobs, the entrepreneurs—those who are creating housing, real estate investors—because
the government understands that’s what we need. They want the private sector to do that, and so they reward them for
doing so. And that’s really all the tax law is. It’s a system of rewards for people doing what the government wants you
to do.
Blair
The other part of it is this whole idea of getting a job. There’s some kind of a myth out there that goes with “get the
job, get a safe, secure job.” And so that by getting a job somehow you’re going to be taken care of for the rest of your
life. All you have to do is pick up any paper to see how many tens of thousands of people are losing their jobs. There
are no safe, secure jobs, and now we’re competing with India and Asia for jobs that were sacred to America at one point
in time. So, this whole idea of having a job and being secure is just not true. It’s probably the most insecure thing you
could be doing right now.
Robert
The idea of a secure job is an Industrial-Age idea.
Blair
Exactly.
Kim
The only option put into your head is to go get a job, and I wasn’t around…
Robert
That’s brainwashing.
Kim
Yes. I didn’t grow up around entrepreneurs. I wasn’t around business owners. I was around employees.
Kathy
When I first started my company 15 years ago, I went back to my class reunion, which is always an interesting thing
to do, and I remember saying to them, “Yeah, you know, I started a company about five years ago.” They looked at
me like, “You’re so brave.” And I’m thinking, “I’ve had this company for five years now. That’s the longest I have ever
worked anywhere.”
18

19. Robert
See, without financial education you have to get a job. What’s tragic today with so many people losing their jobs is that
they’re going back to school to get another job, but they’re now competing with their kids. That’s insanity. So, we’re not
saying jobs are bad. We’re just saying as entrepreneurs that our job is to create jobs. The government doesn’t really create
jobs. They need more entrepreneurs.
Kim
I didn’t even know there was another option growing up. I thought all you could do was get a job. So again, it’s not
right or wrong to be an employee, but I’d like to know what my options are.
Anita
When you were in school, did they say, “Go to school, get your diploma, and become an entrepreneur?” No. I mean
you’ll never hear that in the school system.
Kim
No, they said, “Work your way up the ladder, get the bigger paycheck, get a better job, and higher pay.”
Anita
But you’re right. Get a job is the only option that you’ll hear in school as a rule.
Robert
And job stands for Just Over Broke, you know.
Tom
To me, the real issue with a job is that it’s the highest-risk profession you can have because you only have one client.
When I started my business 15 years ago, it was after being fired from a job. What I recognized was that I had no
control over my life because I had one client, my employer, whereas now I have thousands of clients. Now, if one client
fires me, it’s not the end of the world. Now my risk has gone down considerably, almost to nothing. When you have a
job, it’s just a high-risk play.
Ken
Well, the other thing is, you’re in complete control. That’s the piece that I like.
Robert
You’re an entrepreneur because nobody would hire you! (Group laughter.)
Ken
But it’s nice. If you’re going to lose some business, or you do lose some business, you can go out and do something. You
can go out, generate business, and fill that gap.
Robert
Financial security is more important than job security. E’s and S’s get punished for making mistakes, or they lose their
job. B’s and I’s get richer from their mistakes because they learn from their mistakes.
19

20. Sacred Cow #3: Work Hard
The next sacred cow is work hard.
My poor dad, a schoolteacher, a great guy with his PhD, always said, “I’m a good, hardworking man.”
My rich dad had a different point of view. He had me read this book by Mark Twain. It was a story of how Tom Sawyer got
the other kids to paint the fence for him. My rich dad said, “That’s working hard. You want other people to work hard for you,
and you want your money to work hard for you.” That was his lesson.
Robert
A lot of people can’t wait until Friday because they hate their work so much. And they dread Sunday because they have
to go back to work the next day.
With us, I would say most of us are working 24/7, but we’re working differently. I love my work. It’s challenging,
with problems and all that stuff, but I love it. So, we work hard, but we don’t work hard in the normal sense of
working hard. The problem with working hard for money, because the rich don’t work for money, is that you pay
more in what, Tom?
Tom
Taxes.
Robert
Taxes. The harder you work for money, the more you will pay in taxes, right?
Tom
Right. Instead of working hard for money, the rich work for assets and pay a lot less in taxes. The tax law is geared
towards building assets because, when we build assets, we build the economy.
Robert
The big difference between E’s and S’s, and B’s and I’s, is that E’s and S’s focus on the income statement, and B’s and I’s
focus on the asset column.
Tom
As we build assets, the economy grows. Employees benefit also because now we have more jobs for more employees.
Robert
But on Michael’s side, people are working so hard because the Feds are also working hard printing money, right?
Mike
I’ve got friends who just say, “I need to get more hours,” or “I need to get a second job,” or something like that. They’re
working harder to make a few more dollars, but they don’t realize that over this entire past decade, the average income
after inflation has fallen. So the harder people work, the less they’re making because the government and the Federal
Reserve, the banking system, they’re basically stealing it from them.
Robert
Can we bring in the bags of coins right now? Thank you.
20

21. Kim
I’m not going to hold that!
Robert
I’ll give you an example. In the year 2000, one gold coin cost $300. This huge bag I’m holding is $300 in
U.S. quarters.
Today, in 2010, that same gold coin costs thousands of dollars to buy. So the reason people have to work so hard to
keep up is because the value of our dollars is going down. The insanity of getting another job, paying more taxes, and
working harder when... How many dollars did the Fed print in 2009?
Mike
From August of 2008 through 2009, they created about 1.5 times more paper dollars than they printed in the previous
200 years.
Robert
So, that’s why people are working harder, because their money is worth less.
Mike
And it isn’t the coin that changed. People don’t understand that it isn’t the price going up. It’s the value of the dollar
falling. It’s the currency that’s changing. The can of Campbell’s soup in the grocery store is the same can with the same
contents from back in 1950 when it cost 15 cents. Today it’s $1.95 or whatever it is. What’s changed is the dollar’s
value, not the can of soup.
Robert
So that’s why the rules have changed. In 1971 the U.S. dollar stopped being money and it...
Mike
It became a currency. It became debt.
Robert
It became an IOU from the federal government. And the thing is, they can print as much as they like. The more they
print, the harder you have to work.
It all takes place in your head.
Take this glass here. In this case, the glass here is “context.” It holds the “content,” in this case, the water. E’s and S’s
have a different context than B’s and I’s. Having a different context, E’s and S’s attract the sacred cows like “go to
school,” “work hard,” and “live below your means.” B’s and I’s, having a different context entirely, attract a different type
of content, a different type of information, and a different type of education.
Money is created out of your head. If you’re a true B and I, you’re not concerned. It’s because, just like the Fed, we can
print our own money.
21

22. Sacred Cow #4: Live Below Your Means
Our next sacred cow is one of our favorite ones—live below your means. Do you like living below your means? It’s no
fun. It kills people’s spirits. Why would you want to live below your means? But many people have to live below their means,
unfortunately, because the Fed is printing so much money that taxes and inflation go up, which means people are forced to
live below their means. Let’s talk about what keeps people living below their means and how you can rise above yours.
Anita
Well, if you’re on a paycheck, you have that one income coming in, and if you’re just one person, you’ve only got
24 hours in a day to work. So, there is a limit to how much you can work to get those paychecks coming in. This
forces many to live below their means.
Tom
The key here is to raise your means. That’s the idea here. It’s not that we want to have terrible credit-card debt or
something like that. Instead, let’s raise our means so that we can live the way we want to live instead of living at
this poverty level.
Kim
So why is it that whenever some adviser looks at your finances that the first thing he looks at is how you can
cut expenses?
Tom
Well, what does a financial planner tell you? The first thing that they ask you is, “What do you need to live on
when you retire?” They never ask, “What do you want?”
Kim
Robert and I definitely do not believe in living below our means.
Robert
When we met in 1984, we had nothing, but every year we would get together at New Year’s and we would set our
goals for health and assets. So, that’s why it took us only about 10 years from 1984 to 1994 to become financially free,
because we kept adding assets every year. And we continue to do the same thing today because it’s fun and exciting.
That’s one of the best-kept secrets—getting rich is fun!
Kim
It is fun! It’s a lot of fun. If Robert and I want to buy a luxury like a new car, we first acquire an asset. So we acquire the
asset and the cash flow from the asset pays for the car payment.
So it’s never living below your means. It’s expanding your means through acquiring assets that give you cash flow that
gives us all those good things in life.
22

23. Robert
The point here is this: There are assets and liabilities. The way you increase your means is to acquire more assets—not
houses or cars—but assets. The reason so many people struggle financially is that they have no financial education. They
may be a good doctor or lawyer or accountant or rock star, but if they don’t know the difference between assets and
liabilities and they keep buying liabilities instead of assets, they have to keep living below their means.
If you’re single or not, if you’re on a fixed income, if you’re an E and an S, your income is limited. There are four major
expenses that keep E’s and S’s poor.
Number one is tax, and taxes are going to go up because the Fed is printing so much money all over the world.
Two is debt. People leave college with tons of debt, use credit-card debt to make ends meet, and then use debt to buy
their house because they think it’s an asset.
Three is inflation. Inflation goes up because, as taxes go up and prices go up, then inflation goes up.
And fourth is retirement. You must put something away for the day when you stop working.
Those are the four main reasons E’s and S’s, as a general rule, have to live below their means. But if you have financial
education and live on the B-I side, you can increase your means by increasing cash-flowing assets.
Andy
I think a lot of people accept mediocrity, and in order to be able to grow in business, in order to make more money,
you have to step out of that comfort zone and stop being mediocre.
Robert
Or hoping the government is going to save you. I think living below your means is one of the greatest spirit-killers there
is. There’s a lot of people who like being poor. I’m not making it right or wrong, but that’s definitely not what I like to
do. Kim and I definitely don’t live below our means.
Kim
No, I definitely do not like living below my means. I did it when I was in college, and that was exciting times and all,
but I get inspired when I get put in a position where I need to create something new. I want to be bigger than I am,
not less than I am, and I think people are being taught to contract and be less than they are instead of being inspired to
expand and be more than they are.
Tom
That’s the issue with the idea of a budget, right? A budget is all about cutting. It’s all about slicing. It’s all about being
less than you are. Instead, you should make a strategy and look at projections into the future. Ask “What can I do?” as
opposed to “What can’t I do?” That’s the big distinction.
Kathy
A lot of it comes from fear, too. You know, I think people are afraid of their futures. They’re not sure where the future
is going to lead them, and they think, “I’ll live below my means. I’ll save. I won’t allow myself to have this small luxury,
that small luxury.” They of course fall off the wagon, and then they feel bad about it, and it creates guilt.
23

24. Robert
The worst thing is that they cut back on their expenses and they save money. Right, Mike? That’s the worst thing they
could do.
Mike
Right. They’re saving depreciating money.
Anita
It all goes back to the questions you ask. When you say, “I can’t afford it. I don’t have the money for that,” you put
yourself in a box. A better question would be, “How could I afford that? How can I get the money for that?” That type
of question expands your mind.
Trina
You know, in my community where I grew up, living below your means was pretty much a step up. I’m just being
honest. We didn’t have any means, and we didn’t live and didn’t know how to live. It was basically survival. And some of
the ways we created those means were, of course by legal definition, illegal. That was the way we survived, and that was
the way we got by. Living below your means is completely opposite to abundant living, which is what I believe in my
faith, abundant living. The opposite of that, to me, is not the way that God intended for us to live.
Robert
That’s why I think it’s absolutely criminal that our school system does not teach us much about money. And what
they do teach us is to put your money in the bank which means you lose more money, and then talk to a financial
planner who’ll put you into mutual funds. That is not financial education. That is educating people to give more
money to the rich.
Kim
That will also cause you to have to live below your means. That’s what they’re training you to do. Create a budget.
Mike
And while you’re at it, you’re going to pay more and more in taxes because you get no tax benefit for living below
your means.
Robert
And that’s a problem. You say to a child, “Go to school and get a job. Become a doctor or a lawyer.” That child will pay
more than his or her fair share of taxes and then will have to live below his or her means.
Marco
If you’re playing defense instead of offense, you’re just hiding and trying to play it safe, saving money, and you never
manifest. You cannot be who you’re supposed to be.
Kim
I say it’s time to get financially educated and take care of yourself.
24

25. Sacred Cow #5: Save Money
The fifth sacred cow is save money. In 1971 President Nixon took the dollar off the gold standard, essentially taking the world
off the gold standard, and money was no longer money. So people are no longer saving money. They’re saving debt.
Robert
As I’ve said in my books for years, the big reason that savers are losers is very simply because in 1971 the dollar stopped
being money and became debt. Right, Mike?
Mike
Yes, the rules all changed in 1971. Before then, when someone became working age, they could expect to put away 10
percent a year, and by the time they got into their 60s, they could retire on their savings account and expect to live off
that interest. In 1971, everything changed and they started creating currency on a massive scale.
Robert
Worldwide.
Mike
Worldwide. And that is what causes inflation and the loss of purchasing power. Back in the 1950s, if you had $100,000
in the bank, you could retire on that.
Robert
So for folks like my mom and dad, the World-War-II generation, the industrialized generation, it was very smart to
save money. For our generation, the baby-boom generation, saving money could be the stupidest thing you can do
because the system is stealing your wealth through the very thing you work for—money itself, which isn’t really money
anymore.
Mike
Right. Real money is actually gold and silver. Money has to maintain its value over long periods of time. Currency
doesn’t have to. For 5,000 years, gold has been the predominant currency. It became money when somebody minted
it into coins in Lydia in about 680 BC, and each unit had the same buying power as the next one. They became
interchangeable.
Robert
Let me ask you this. This printing of money out of just paper, this has been tried before, hasn’t it?
Mike
Many, many, many times, and there’s always one result. When they start creating a whole lot of currency, you get far
higher prices for everything, but especially real money. Eventually gold and silver lie in wait. When the public senses the
inflation of retail prices that is caused by the inflation of the amount of currency in circulation, they rush back toward
gold and silver. They have for 5,000 years.
Robert
Name some governments that have attempted to print money.
25

26. Mike
The Weimar Republic.
Kim
What about Zimbabwe?
Mike
Zimbabwe, yes. They are the most recent, having printed a $100 trillion note. This is the largest note ever printed.
Robert
And this was printed in 2000?
Mike
Yes. But when Zimbabwe was created as a country, when it went from Rhodesia to Zimbabwe, the Zimbabwean dollar
was on parity with the U.S. dollar. One U.S. dollar was the same as the Zimbabwe dollar. But it doesn’t buy anything
today. It doesn’t buy a cup of coffee.
Robert
Right. See, the Greeks did the same thing when they started clipping coins. The Romans tried it, the English tried it,
the Germans tried it, the Chinese tried it, and now the U.S. is trying it.
Mike
Yep.
Robert
And so that’s why saving money is probably the biggest mistake you could make right now because today money is no
longer money. It’s now debt. All currencies throughout the world are in trouble, the same way the Zimbabwe dollar is
in trouble. That’s the problem with saving money. After 1971, it was no longer money.
Mike
And more than 70 percent of all the currency on the planet is U.S. dollars.
Robert
If the U.S. dollar goes, the world goes with it.
Mike
I’m preparing by getting fully diversified. I buy both gold and silver!
26

27. Sacred Cow #6: Your Home Is an Asset
The next big sacred cow is your home is an asset. In 1997, I wrote in Rich Dad Poor Dad that your house is not an asset.
At that point, every realtor stopped sending me Christmas cards. Your home is not your asset. It’s actually your bank’s asset if
you read a financial statement.
Robert
Kenny, you own lots of real estate.
Ken
Yes.
Robert
Is your home an asset?
Ken
No, not my personal residence.
Robert
A lot of people are in trouble today with their house.
Ken
Yes, because it doesn’t produce any revenue. I pay the bank every month. It’s the bank’s asset.
Robert
Everybody used to tell me my house had appreciated in value. Again, that’s capital gains versus cash flow. And what
people are finding out now that the real estate market has crashed and the value of homes has been sucked out… now
people are upside down on their home, and they’re finding out it’s a liability because they still have to pay the bank on
that mortgage.
Rodney
And I’ll tell you, I’m the largest originator of FHA and VA loans in the entire country. I rent. What does that tell you?
Robert
Well, as an accountant, is a house an asset?
Tom
Well, no. The bank will say it’s an asset, and the financial planners will say it’s an asset, but the reality is that it’s not an
asset for you unless it’s putting money in your pocket.
A house just drains money from your pocket. One of my little pet peeves is that people say, “Well, if you own a house,
though, you get a deduction for the interest.” Yes, but it’s money out of your pocket and the best you can get is 40 cents
on the dollar, okay? So you’re giving a dollar and you get 40 cents back. You’re still out 60 cents. It’s not difficult math.
27

28. Rodney
Your home is shelter. It’s a place to raise a family, but it’s not an asset that you’re going to make money on. It’s not a
financial asset.
Robert
Now, you might make money in an up-trending market, but today the market’s trending down. That’s why in 1997,
what I said in Rich Dad Poor Dad, that your house is not an asset, was heresy because the market was up-trending.
Now people are saying, “Oh my God, I should’ve listened to him.” I’m not saying don’t buy a house. I’m saying just
don’t be financially ignorant and call your house an asset if it’s taking money out of your pocket. Kim and I own two
houses, one in Arizona and one beautiful beach house in Hawaii, and they’re our biggest liabilities.
Kim
People did think, especially in the high times when the markets were high, that their house was an asset. Even if they
had their mortgage paid off, people were borrowing against their house and putting it into the stock market or wherever
they were putting it. So, not only were they getting crazy mortgages, but they were also taking money out against their
house in second and third mortgages.
Tom
And they were doing it for things like vacations, boats, cars, and other things. And the reality is that the reason they
were doing that is because they got to deduct the interest off their taxes and so they thought, “Well, this is okay because
I get a deduction.” Just because you get a deduction doesn’t make it a good thing to do.
Rodney
One of the big mistakes people make is over-improving their house. They put in a $50,000 swimming pool, and it
brings them $20,000 worth of value. The way I look at it is that you just bought a $30,000 babysitter.
Garrett
Fifty percent of the mortgages in Reno are under water, meaning that the mortgage is greater than the value of the
property. And this affects the whole community because people aren’t able to sell their homes and move to a place
where they can get a better job. The neighbors aren’t going to sell their houses because values are so far down, and so
this has affected entire communities. We’ve heard people say that your home is an asset. Well, we’re talking here about
financial education, and this is one of the biggest financial lessons that our country has had to learn in a very hard way.
Your home is not an asset.
Ken
This has happened before and what will happen is new laws will come in, new credit will be loosened again years from
now, prices will come up again, and people will do it again.
Robert
It’s about a 20-year cycle, as in anything. The point here is that this is the best time to buy real estate. If you are a
first-time home-buyer, this is your best time. Just don’t call it an asset. This is the best time to get back in the market,
and that’s why it takes financial education. The reason I’m in real estate is for one reason—debt—because one of the
easiest assets to get debt on is real estate. But if you’re going to use debt, you’ve got to be highly financially intelligent.
Otherwise, if you’re not intelligent, just keep calling your house an asset.
28

29. Time Out: The Four Asset Classes
We’re talking a lot about assets, and there are four primary asset classes.
One is business. As an entrepreneur you own a business.
Number two is real estate, and we love rental properties that cash flow, real estate that puts money in our pocket every
single month.
Number three is paper assets: stocks, bonds, mutual funds, and savings. Most E’s and S’s are in paper assets today.
And number four is commodities: gold, silver, other precious metals, oil, and gas.
We’re in business, we’re in real estate, and we own hundreds of properties in real estate. We have paper assets, and we
have commodities. So for us, when we talk about diversification, we’re in all four asset classes.
Sacred Cow #7: Get Out of Debt
Time to shoot one of the more evil of all the sacred cows, evil for most people—get out of debt. A lot of people are saying to cut
up your credit cards. I think that’s really ridiculous because a credit card is not the problem. In fact, I love my credit cards. I
don’t know how anybody could get along today without a credit card. The problem is a lack of financial education.
Mike
The entire currency supply, all of the dollars in existence, requires debt. You can’t have a dollar without debt. A dollar is
just an IOU. It’s borrowed into existence either by the government creating a bond that promises to pay interest or by
future taxes. Currency is also created by people taking out a loan at the bank through fractional-reserve lending. Every
month there’s a payment due on those dollars that you created.
Robert
Right. And a credit card is a fast way of creating money because there’s really no money in the card. So let’s say I go to
the store, and I charge $100. Like magic, $100 is created and it flows into the economy. That’s why debt is good. But
when you abuse this, that’s when we get in trouble. Rodney, you see the horror stories of bad debt, don’t you?
Rodney
Yes. I see people walk into my office who make $150,000 a year, but they have $250,000 in credit-card debt. Let’s face
it, we live in a credit society, and you do have to have credit. We have to learn how to survive and thrive in this credit
economy. But people are walking into my office, and they have this bad debt. They’re asking, “What do we do with it?”
Well, number one, you try to pay off the bad debt so that you can invest in good debt, which would be real estate.
Robert
And we love debt, don’t we?
29

30. Ken
Yes, we have a lot of debt.
Robert
Our real estate that we own is all basically financed with our tenants, so that’s what I consider to be good debt. So when
we get real estate, we get proper leverage, and it’s paid by all the residents who live in all of our projects.
Tom
And it’s not just real estate. Business is the same way, and we even have good debt in business as well. That’s how we
grow. And it’s the cash flow from the business that’s able to pay the debt, and the debt creates more cash flow.
Robert
Many people are worried today or think investing is risky because they invest for capital gains. They’re hoping the stock
price goes back up. They’re hoping their home value goes back up. A smart investor doesn’t really care. A smart investor
wants both capital gains and cash flow.
People say that I like real estate. But I don’t really like real estate. I just love debt because it’s so easy to get a loan on real
estate, right?
Ken
I like the analogy that you use sometimes. You say that if you put $1 million of cash into a mutual fund, you
get whatever you get paid. But if you put $1 million as a down payment on real estate, you actually buy a
$5 million project.
Robert
Right.
Ken
So you’re actually getting a $5 million asset with $1 million, versus $1 million of mutual funds with $1 million.
And by using the bank’s leverage, the value you’re creating on that real estate is on the $5 million, not the $1 million.
Tom
And the tax benefits that you get on the real estate isn’t on the $1 million either. It’s on the $5 million. So you not only
increase leverage on your cash flow and on growth in your asset, but you also increase leverage on your taxes.
Ken
Here’s what we’re doing. We get these loans, and the tenants are paying them off. That’s the point.
Robert
And they’re paying it off with after-tax dollars.
Ken
They’re moving into our places, paying rent, and we’re taking that rent and paying our mortgages down to zero.
30

31. Kim
Wait a minute! Ken is talking about these million-dollar deals. Let me tell you how I started.
I’m somebody that knew absolutely nothing about money or financing or investing, and I began investing with a little
two-bedroom, one-bath house, and this was back in 1989. The house cost me $45,000. I had to put down $5,000,
which I didn’t have, and I had a mortgage—or good debt—of $40,000. The reason it was good debt is because every
month I would collect the rent and pay the expenses, including my mortgage payment. At the end of the month I had
a positive cash flow of $25. Now it wasn’t a lot, but it was a start, and from there I learned. I did my next investment
and my next investment. So it was good debt because that debt put money in my pocket every single month.
If only people understood that there is such a thing as good debt. I don’t know how many people I talk to who think
“debt” is the dirtiest word in the world. That’s the four-letter word.
Robert
Because they’re not educated. That’s why.
Kim
No. And people are raised, and I was raised, to get out of debt.
Robert
Go to a bank and the banker will sell you mutual funds. But ask them if they will loan you money to buy those mutual
funds, and the answer is no. But if we go in and say we want to buy real estate, they’ll ask us how much we want.
Ken
That’s because there’s collateral.
Robert
Yes!
Ken
They actually have something physical. That’s it.
Robert
They’ll sell you mutual funds, but they won’t lend you money on mutual funds. That should tell you something. And
the other part about it is, that borrowed money for real estate—is that after-tax, pre-tax, or no tax?
Tom
It’s no tax. Anytime you’re borrowing money, there’s no tax on that money. You can use that cash tax-free.
Robert
So if somebody wants to save a million dollars versus borrow a million dollars, it’ll probably take them $2 million to
save the million because taxes will take 50 percent of it.
Tom
Right.
31

32. Robert
But I just go straight into a bank, and I can borrow a million dollars tax-free. It’s great money. I love my banker. I’m not
saying bankers are bad. They’re fabulous because they give us the money. All they want is their interest. We keep all the
appreciation, depreciation, and amortization. We keep all of it. They’re the best partners of all. So I’m not anti-bank,
and I’m not anti-debt. I’m anti-lack of financial education because there’s good debt, and there’s bad debt.
Kim
Your rich dad was a tough mentor. But you know, I think some of the greatest mentors are tough because a really
great mentor will push you to go beyond where you think you can go. Some of my best mentors, that’s what they’ve
done for me.
Robert
Yes. And I didn’t always listen to my rich dad. I still remember when I did a real estate course, and I went running out
and found this condo for $64,000 that didn’t cash flow. I went to see my rich dad, and I said, “But it’s going to go up
in value,” in other words, capital gains. He said, “Never buy anything that goes up. It must cash flow.” And I said,
“No, no, no. It’s going to go up.” And we argued and argued and argued. He finally said to me, “If you start investing
for capital gains, someday you will lose big time.”
So I let that condo go, and I didn’t pay $64,000. Today it’s probably worth $300,000, but I learned a lesson from my
coach, my rich dad. If I had gotten into the habit of buying for capital gains due to the price of stocks going up or
real estate going up, I might have been wiped out in this crisis. So that’s why a coach and a mentor keep you onto
your plan.
Kim
And help you create and develop very good financial habits.
Robert
Right.
Kim
Because if you have poor financial habits in your personal life, you’re going to take those into your investment life.
One of the most important things a coach will do is help you develop great financial habits.
Robert
Because when markets go up, greed sets in. And greed makes people stupid.
32

33. Sacred Cow #8: Invest for the Long
Term in a Well-Diversified Portfolio
Our last sacred cow is invest for the long term in a well-diversified portfolio of stock, bonds, and mutual funds. After
1974, the rules of retirement changed and suddenly forced E’s and S’s into the I quadrant with no financial education as they
had to put their money into these retirement plans. A whole new industry was born called financial planners. Today it takes 30
days to become a financial planner. It still takes a year and a half to become a massage therapist.
Robert
Andy, what do you think of mutual funds?
Andy
I think they’re a great way to make money... if you sell them to other people. Honestly, I think they’re one of the worst
places a person can put money. They make other people rich with hidden fees and expense ratios. And you talk about
the law of compound interest. Well, there’s the law of compound expenses too.
Robert
Okay, so let me ask you this: If I say to invest for the long term, like 30 or 40 years, what do you think about that and
paper assets?
Andy
You’ve lost control that quick. Liquidity is what paper assets are about—your ability to sell and buy without negotiation
problems. Think of all the companies people have held for the long term: Enron, Worldcom, General Motors, United
Airlines... you can just go on and on. But the moment you decide to hold stocks, what control do you have?
Robert
None.
Andy
In real estate, you can force the appreciation—paint it, carpet, etc. You can’t do that with paper assets. Your only control
is to sell. If you hold it forever, you’re rolling the dice and saying, “I hope it works out.”
Robert
Right. There are a lot of people, like financial advisers, who say that stocks are the best way to go and not to get into
real estate. Stocks are good for people who are not business people. You see, as entrepreneurs and real estate people,
we’re personally responsible for income, expenses, assets, and liabilities. But as a stock investor, even in Microsoft,
I have no control over income, expense, assets, and liabilities.
Andy
All you can do is sell or hedge. That’s all you can do.
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34. Tom
That’s right. And what makes it worse is that you take those paper assets that you don’t have control over because you
invest long-term and then put them into a 401(k). Then you have even less control because, once they’re in that 401(k),
you can’t take them out.
Robert
You’re penalized for early withdrawal.
Tom
You’re penalized for pulling them out. And then on top of that, you don’t even get the one tax benefit you get with
paper assets—capital gains. By putting them into a 401(k), you’ve lost that benefit.
Robert
On top of that, when you pull them out, there are three types of taxes: ordinary earned income, portfolio income, and
capital gains or passive income. And savings and mutual funds, what are they taxed at?
Tom
When you pull out earnings, when it’s coming through savings or a 401(k), they’re all taxed at the highest ordinary
earned income rate.
Robert
It’s the worst thing you could possibly do if you plan on being rich. But if you plan to be poor, it’s a pretty good plan.
Andy
Robert, I’ve seen you take heat in the press when you say they’re risky. I’ll tell you where I think the risk is. When you
sit down and they say, “We’re going to diversify you so that, if one company goes down, you’ve got all these other
companies to buoy you up.” That’s fine for non-systemic-type things, but not a system-wide problem. It does not
protect us if the system breaks down. And I think it’s…
Robert
That’s not diversification.
Andy
Right. It’s more fragile now than I think it ever has been before. And these people saying, “I’m well diversified,” they’re
not well diversified. Robert, you’re diversified across asset classes, not just bunches of stocks.
Robert
So the problem with diversification in just one asset class like paper assets is that it doesn’t protect you from a crash.
Andy
Right.
Robert
Warren Buffet, the world’s greatest investor, reportedly says that diversification is protection from ignorance.
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35. Andy
Right.
Robert
But it’s ignorance from both the person selling you the plan as well as you who invest in the plan. But here is the biggest
thing that really bugs me. When Kenny and I buy real estate, we always buy insurance, don’t we?
Ken
Yes.
Robert
And then when we drive a car, we have insurance, right?
Ken
Right.
Robert
Is there insurance for mutual funds?
Andy
Well, not for the average person.
Robert
Is there insurance on your 401(k) that what you put in will be there when you retire?
Andy
And which is more likely to burn down in the next five years, your home or your 401(k)?
Robert
And I’ll say it again. We all drive cars with insurance, hopefully. We all have houses with insurance. When we buy
real estate, we have insurance. Our companies have insurance. But the 401(k), all these retirement plans, there’s no
insurance on them. So if it crashes, you lose everything and the mutual fund companies walk away with the money.
Andy
And that’s a hard level of education because most people don’t know how to hedge that.
Robert
Nope.
Andy
They don’t know how. I mean it’s possible, but if you’re the average person, you don’t know.
Robert
That’s what we teach in our advanced courses.
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36. Andy
If you poll the average person and ask the difference—this is a very basic question—between a defined-benefit pension
plan and a defined-contribution plan, most people do not know that difference. That is not a minor thing. That is a
major deal.
Time Out: Defined-Benefit Plans vs. Defined-Contribution Plans
This is a very important point. In 1974, the rules of retirement changed. Prior to 1974, most people like my parents
had a defined-benefit pension plan. What that meant was that they received a paycheck for life from their company
after they retired. After 1974, the entire world started shifting onto defined-contribution pension plans. What you put
in is all you get back. Many people are terrified of running out of money in retirement simply because, with a defined-
contribution plan, you can lose everything in a market crash or you can run out of money before you die.
Ken
The cool part about this whole discussion is that those people putting their money in the plans and mutual funds, that’s
the money I get to buy my real estate.
Robert
That’s right.
Ken
That’s the truth.
Robert
So the money flows from the E’s and S’s…
Ken
And then I make money on their money.
Robert
Kim and I just bought this huge property, five golf courses and a major resort, and most of the money came from
retirement plans. So keep putting that money in that 401(k), you guys, because it has to go somewhere. Cash always
flows, and it flows from the E’s and S’s to the B’s and I’s. And that’s why financial education is so crucial.
Any time you have no control over your money, or the return of your money, you’re gambling.
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37. Final Thoughts
Robert
In closing, I’d like to thank you for reading and paying attention to this.
I’d also like to thank my friends who helped impart their wisdom because, as you’ve heard so many times, one of your
greatest assets—or liabilities—is the people you hang around with. But there’s one more thing about friends. I just want
to thank you guys for being givers.
Tom
What I would leave you with is to take control of your life. It’s not too late. And in fact, if you’re in a difficult situation,
now’s a better time than ever to make a change. And you can make that change. We’ve all made this change. Every one
of us has been there. We’ve all been in the dumps, and we’ve all hit at the top. We know that we can do it, and we know
that you can do it. So take control.
Kathy
You can’t wait until you have 100 percent confidence because you’ll never have 100 percent confidence. Take the leap.
Kim
It’s not until you hit a point where things become so uncomfortable or so painful that you are willing to accept that
things aren’t working right, the way that you think they’re supposed to work. And so for many people, when they get
into a financial crisis, that’s their wake-up call, and that’s where the change starts.
Robert
Help your children today. Take control of their financial education because they may not receive it in school, but there
are experts out there.
Kim
And I want to say specifically to the women, this is your time. Be strong. Get that financial education. As we said,
knowledge is the new money, and for women I think this is really an opportunity for you to grow and get stronger.
Take that next step.
Ken
And the objective is, like Robert says, to turn your mind into an asset instead of a liability. It takes more than one
book. It takes more than watching one video. It’s a whole process. I mean there’s no professional, there’s no athlete,
no expert in any area that has become a professional at something in one week or with one book or with one DVD
or one workshop.
Kim
To further your financial education, The Rich Dad Company has advanced educational and mentorship programs
**LINK** These programs are in the business entrepreneurial sector of real estate and paper assets. We also have Rich
Dad coaching programs **LINK** in business, real estate, and paper. These programs are developed to get you from
where you are today, to where you want to be.
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38. It is imperative that you get role models in the form of coaches and trainers every step of the way. They will keep you
on track. You’ve got to go through a minefield of failures to get over onto the side of success where you want to be.
Robert
Education’s a process. For example, I entered Navy Flight School in Pensacola, Florida. Two years later, I popped out as
a Marine helicopter-gunship pilot on my way to Vietnam.
That educational process transitioned me from a guy who couldn’t fly, to somebody who became one of the best pilots
in the world. The same thing happens with education. When you go to school, the question is, “What do you come out
as?” When you go through the process of education, do you come out an employee? Do you come out as a person who
needs a paycheck? Do you come out as a person always looking for a job? A person working hard and paying excessive
taxes? Most people go to school and they pop out as E’s and S’s. To come out as a B and I, you need financial education
because financial education is also a process.
Finally, one of the ways we learn best is by repetition.
For example, I didn’t learn to fly by flying once. I kept flying and flying and got better and better. One of the reasons
we created this eBook is so you can read it again and again.
Wait a week, read it again, and you’ll absorb more and see new things. Wait another week, read it again, and more and
more will make sense. That’s a great way to use this eBook, and that’s why I’m glad and I thank all of my friends for
coming together to share their knowledge. As you can see, financial intelligence isn’t from one source. It’s from multiple
sources, and that’s why friends are so important.
I’ll end with some great words about quitting from a great man, one of the greatest leaders of all—Winston Churchill.
In the darkest hour of England, he said, “Never, never, never, never give up.”
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