Robert Kiyosaki has an obvious message. America needs financial education. Right now our educational system is broken and nothing is being taught that prepares people for financial freedom. All of Robert’s books are good and teach the basics of financial literacy and the need for continuous learning. Rich Dad/Poor Dad is another famous book by this author. We’ll profile that book in a separate summary.

The Cash Flow Quadrant is a very important concept that people need to cement in their memory if they want to control financial freedom. The quadrant consists of the following:

1.) E – Means employee
2.) S – Brackets for small businesses or freelancers
3.) B – Represents large companies (500 employees or more)
4.) I – Inverter Supports

Traditional education prepares us for the E and S quadrant. The mantra has been to go to school and then college to hopefully land a good job and save in a 401K for retirement. As many of you know, this is not a good model today. On a side note, I was lucky enough to grow up with an excellent finance professor. My father taught the principles that Mr. Kiyosaki teaches in his books Rich Dad/Poor Dad, The Cash Flow Quadrant, and this book Unfair Advantage. I can also tell you that most people are not financially educated. Authors like Mr. Kiyosaki and Dave Ramsey are really needed and we are doing what should be taught in our school system nationally.

Why is this important to me?

This can be answered by asking a few more questions. Do you know the difference between good debt and bad debt? Can you define an asset and a liability in simple terms?

Do you know that there are three types of income taxes?

If any of these are unclear to you, then you need to read this book. In summary form, I will answer all these questions. Good debt is anything that spits out positive cash flow and increases in value. So, if you have debt on a rental home that produces positive monthly cash flow, then that’s good debt. If you have credit card debt that you don’t pay each month, then it’s bad debt. Simply put, good debt makes you money and bad debt costs you money.
Actives and pasives! Anything that generates positive cash flow is an asset, while anything that costs you money is a liability. Example: A business that generates monthly profit is an asset. Your home is a liability. I know many of you will disagree with this, but your house is costing you money every month. This is not a bad thing, but because you need a place to live, but it is a responsibility.

The three types of income include: Ordinary, Portfolio and Passive. We’ll go into more detail about how these play a role in your financial freedom later in this roundup. This book is important to you if you want to be financially free and escape the rat race of running out of money before the end of the month.

There are several examples and details described in Unfair Advantage, but for reasons of time we will cover each one in summary.

1. Knowledge: knowledge put into practice equals power. There are various ways to make money, whether it be in a business, real estate, stock market, content creation, licensing deals, internet marketing, or various other endeavors. The point here is that nothing happens without educating yourself. Warren Buffet, the second richest man in the world, is known for his constant reading and learning skills. The premise of Unfair Advantage is that with very high financial education, money comes in instead of going out. You can pay zero taxes and make millions with very low risk by using other people’s money in good or bad economies. This creates an extreme unfair advantage.

2.Taxes: Taxes are government incentives for people to do what they want them to do. Therefore, because companies create jobs and wealth, they have tax strategies as incentives to keep the economy going. There is a big premise that people need to understand. I will expose the difference. When you are an employee, you work, you pay your taxes and then you get your money to pay your expenses. When you’re a business, you work, pay all your expenses, and then pay taxes on what’s left. This is totally legal and can legally increase return rates. Remember one thing: tax evasion is prudent, while tax evasion means jail time.

3. Debt – Good debt creates real wealth by allowing you to use OPM (Other People’s Money). This is very powerful and requires discipline. This is an area where
I wish this book was discussed in more detail. Keep in mind that debt used wisely can create unlimited wealth and leverage. Too much misused debt can create financial ruin. Also, know that over 85% of the US population has too much bad debt. This is not what we are talking about. This too must be taken care of in order to truly achieve financial freedom. The use of debt is an advanced strategy and should be used wisely, which requires financial education.

4. Risk – The greatest risk in investing comes from financially uneducated people giving their money to financial planners and hoping things will work out. This by far has caused great losses for people. Inflation is rampant right now even though the government says it isn’t. This is a greater risk to savers than taxes. Saving money as an investment is a bad idea because, over time, the value decreases due to inflation. 401Ks and mutual funds along with diversification are presented as NOT risky. This is the furthest thing from the truth. 1. Mutual funds are subject to double taxation as well as fees that consume your earnings. Also, you are not in control of your money. Note: This does not mean that ALL backgrounds are bad. This is where financial education comes in. Many financial planners will tell their clients to diversify. According to Warren Buffet – “Diversification is a protection against ignorance”.

5. Compensation – The rich do not work for money. Think about hard work for a moment. If you work overtime, you are exchanging hours for dollars. The problem is that your marginal tax rate increases as you earn more ordinary income. Your overtime is taxed higher than you work more. I am not against hard work. Just be sure to combine it with SMART and RIGHT WORK as well. The rich work to buy assets that generate cash flow. Your goal should be for your money to work harder than you and for you to earn more money as quickly as possible.

What asset will pay your liability? This concept was first covered in Rich Dad/Poor Dad. This simple question changes the whole mood, and if people followed it, they would be much better off financially. This means that if you want a new ship, what asset will you pay for the ship? Once you understand this simple idea, your world will change.

I hope you found this short overview video helpful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. I highly recommend ingraining the knowledge of compounding in your head. Answer the following correctly and you will understand the power of compounding. Would you rather have $1,000,000 in cash today or a dime doubled daily for 31 days? You can email me at [email protected] with your response.