Articles

Rich Dad, Poor Dad

an article by Murray Becotte, an investment adviser with BMO Nesbitt Burns

Rich Dad Poor Dad is full of lessons.

Two roads diverged in the woods, and I took the one less traveled by. And that has made all the difference.
Robert Frost

Get the book Rich Dad, Poor Dad by Robert Kiyosaki and compel your kids to read it.

This book provides an excellent course in financial literacy. Being financially literate means taking a different perspective than your typical axiom of "go to school, get good grades and look for a safe, secure job. "In fact Kiyosaki defines this as a prescription for becoming part of the rat race. The rat race is where you work for the owners of your company, for the government by paying taxes, and for the bank by paying off a mortgage and credit cards. Most people work for everyone except themselves. Most families work from January to mid-May for the government just to cover their taxes.

He compares us to donkeys chasing carrots on a stick. If the donkey could see the whole picture of chasing the carrot it might rethink its choice to chase it.

Two dads educated Kiyosaki. One dad has a PhD and the other never finished eighth grade. And yes, the eighth grade dropout is the rich dad. Kiyosaki contends that schools do not teach what the rich know. The world has changed, but education has not changed with it.

Our children will spend years in school studying antiquated subjects they will never use. Money is not taught in schools. This is why smart bankers, doctors, and accountants who earned excellent grades may still struggle financially all their lives. Our huge national debt is the result of highly educated government officials making poor financial decisions!

If you want to learn to work for money, school is the place. The rich don't work for money; money works for them. Rich people acquire assets; poor and middle class folks acquire liabilities that they think are assets. Assets put money into your pockets and liabilities take money out. Liabilities are things like mortgages and credit card debt. Assets are businesses that do not required your presence, stocks, bonds, mutual funds, income producing real estate, are all examples.

Is a home an asset or a liability? People work all their lives paying off their homes. In Canada the interest is not tax deductible nor are all the other related expenses. People with large houses often have to work harder and miss opportunities because their cash is flowing out the expense column.

Our expenses always seem to keep up with our income, never allowing us to invest in assets. For rich people the assets are much larger than the liabilities. And this is why the rich keep getting richer and the gap between rich and poor keeps growing.

One definition of wealth is to have income from your assets to cover your expenses. At this point you are no longer dependent on wages. The rich focus on their assets; everyone else focuses on their income or bank statements. Once your monthly cash flow from your asset column exceeds your monthly expenses, you have left the rat race and are on the fast track. Rich people buy luxuries last. They wait until the income from the asset column can buy the luxuries.

The poor and the middle class buy luxuries with their own sweat, blood and children's inheritance. Once a dollar goes into the asset column, never let it out. Savings are used to create more money, not to pay bills.

Kiyosaki is constantly shocked by how little talented people earn. In the real world, it's not the smart that get ahead, but the bold.

Most people are not rich because they are terrified of losing. He says he has never met a rich person who has never lost money, but has met a lot of poor people who have never lost a dime.

Too many people are focused too much on money and not on their greatest wealth, their education [not formal education!].

We live in rapidly changing times, but if people keep open minded and keep learning about new developments, they will grow richer and richer through the changes.

Money doesn't solve problems. Intelligence solves problems and produces money.

Reprints

You are welcome to reprint these articles as long as the following quotation is printed at the conclusion of each reprinted article. Hyperlinks as below must be included in the quotation.

Barb McEwen is a Master Executive Coach and Organizational Strategist who works with corporations and individuals worldwide. As founder of 20/20 Executive Coaching and 20/20 Executive Women she has spent the past twelve years working with high potential individuals to help them hone their leadership and management skills. Contact Barb at barb.mcewen@2020executivecoaching.com.