Mastering Financial Intelligence: Rich Dad's 5 step guide - Robert Kiyosaki

today I'm going to summarize another book from Robert Kiyosaki called increasing your financial IQ getting richer by getting smarter according to Kiyosaki there are five basic Financial IQs if you want to get rich and most importantly stay Rich then you have to have all five of them Financial IQ number one making more money if you have a toothache it means you have dental problems to solve the problem and stop the pain you visit a dentist in the same way if you are not earning enough money it means you have money problems if you start solving

the money problems the pain of not having enough money will go away just like your toothache for example let us say you want to improve your selling skills but you are very shy and hate rejection this is quite a serious problem that stops many people from becoming a salesperson if you take courses or read books and solve this problem you will become a better salesperson which means you will sell more and that means you will earn more the reason you started to earn more is because you solved a problem I think you would agree that

solving money problems helps you to earn more if that is the case then the more problems you solve the more you earn and the higher your financial IQ number one goes the path to making more money looks something like this picture first you start solving small problems these are usually the problems on a personal level such as lack of knowledge on certain topics or lack of self-confidence Etc then you move on to more complex ones it is like a game every time you solve a problem you move to another level where there is another problem

waiting for you to be solved the more money problems you solve the smarter you get and the more you earn it also works the opposite the more money problems you ignore the poorer you get you must solve your money problems as early as possible otherwise there will come a time that you will be forced to do things that you don't want to do and you will regret that you did not solve the problem when it was small once I heard an interesting story about the importance of solving problems early it is a story about a

farmer and a rooster one day a farmer comes to the rooster and says from now on you will stop crowing in the mornings if I ever hear you again crowing I will pull off all your feathers the rooster says nothing and stops crowing in the mornings as the farmer requested sometime passes and the farmer comes back again and says you know what from now on you will start walking like a hen otherwise I will pull off all your feathers again the rooster says nothing and starts walking and behaving like a hen he starts to hang

out with hens and even forgets that he is a rooster a few more months passed by and the farmer comes back again with another request and says you know what from now on you will start giving me eggs just like other hens otherwise I will pull off all your feathers and make a dinner out of you at this point the rooster realizes that he had to fight back he had to protest and solve the problem when the farmer made the first request now it is already late and he is forced to do something that is

impossible to you it may sound like a dumb story but every day many people are forced to do things that they are not proud of they work for people or companies that they hate but they do it anyway because they have to put food on the table and feed their families Kiyosaki says that many people want more money but they don't want to go through the process of solving problems for example to become a medical doctor there is a rigorous process of Education and Training many people dream of becoming a doctor but the process gets

in their way what many people do not realize is that it's the process that makes them rich not the money in order to grow wealthy you must come to terms with the fact that problems will never go away each time you find a solution to a problem a new one will pop up the key is to realize that the process of solving those problems makes you rich and once you start solving not only your own problems but others as well then the sky is the limit simply put there are trillions of ways to make more

money because there are trillions of if not infinite problems to solve when Kiyosaki was a young boy Rich Dad said money problems make you smarter if you solve them he also said if you solve your money problem your financial intelligence grows when your financial intelligence grows you become richer if you don't solve your money problems it will lead to a series of other problems and you will get poorer Rich Dad used the example of having a toothache to illustrate what he meant by a problem leading to other problems he said having a money problem is

like having a toothache if you do not handle the toothache the toothache makes you feel bad if you feel bad you may not do well at work because you are irritable not fixing the toothache can lead to further medical complications because it is easy for germs to breed and spread from your mouth one day you lose your job because you have been missing work due to your chronic illness without a job you cannot pay a rent if you fail to solve the problem of rent money you are on the street homeless in poor health eating

out of garbage cans and you still have the toothache it might be an extreme example but Kiyosaki says that this story stayed with him I realized at a young age the importance of solving problems and the domino effect caused from not solving a problem many people do not solve their financial problems when they are small and at the toothache stage Financial IQ number two protecting your money Financial IQ number one is measured by how much you make whereas Financial IQ number two is measured by how much you keep to yourself for example a person making

two hundred thousand dollars a year has a higher Financial IQ number one than the person who makes one hundred thousand dollars a year however if the first person loses 50 of his income to taxes but the second person loses only 15 percent then it means he has higher Financial IQ number two than the first person protecting your money from Financial Predators is important as most of us know the world is filled with people and organizations waiting for the opportunity to help themselves to your money many of these people and organizations are very smart and Powerful

if they are smarter than you or have more power than you they will get your money this is why Financial IQ number two is so important Kiyosaki says when I was just a kid my rich dad taught me the importance of protecting your money with a simple example he said a farmer needs to protect his crops from bunnies birds and bugs bunnies birds and bugs are thieves to a farmer using the idea that bunnies were thieves served as a powerful lesson bunnies were cute and cuddly they were harmless the same was true of birds the

reason he used cute creatures such as bunnies and birds was to make the point that some of the biggest thieves of our personal wealth are not just Bandits criminals or Outlaws he used bunnies and Birds because he wanted us to remember that some of the greatest Financial predators are people and organizations that we love trust or respect these are the people or organizations we think are on our side and are standing behind us Rich Dad said the reason so many people stand behind us is because it is easier to get into our pockets from that

position one of the reasons so many people have financial problems is because they have too many hands in their pockets Rich dads list of financial predators are following number one bureaucrats as we all know taxes are our single largest expense the job of the tax department is to get your money and turn it over to a government bureaucrat who spends it the problem with most bureaucrats is that they are very good at spending money they do not know how to make money which may be why they choose to become bureaucrats if they could make money

they would probably be business people instead of bureaucrats since they do not know how to make money but love to spend it bureaucrats spend a lot of time figuring out more and creative ways to take our money via taxes as you know we already pay taxes on our income Investments homes cars gasoline travel clothing meals alcohol cigarettes businesses education Etc we pay taxes upon taxes we pay taxes on things we don't even know about these taxes are sold to us as being good for society and some are society's problems however only get bigger because bureaucrats

do not know how to solve problems they know how to throw money at the problems before you get angry at what I just said about taxes let me tell you that Kiyosaki is not against the government or paying taxes as the rich dad said taxes are an expense for living in a civilized society taxes pay for schools and teachers fire and police protection court systems the military roads airports food safety Etc Rich dad's frustration with taxes was that bureaucrats very rarely solved the problems they faced which meant taxes had to keep going up since taxes

keep going up rich dad's philosophy was a bureaucrat's job is to get their hands deeper in your pockets legally and your job is to have them take as little as possible legally unfortunately it is often the people who earn the least who pay the highest percentage in taxes at one Event Warren Buffett had this to say about taxes the 400 of us sitting here in this room pay a lower part of our income and taxes than our receptionists or cleaning ladies do if you're in the luckiest one percent of humanity you owe it to the

rest of humanity to think about the other 99 the author says if you want to protect your money from taxes then you need to understand how different types of incomes are taxed there are three different types of income earned portfolio and passive in case you don't know earned income is the income you get for working for a company or for someone nine to five portfolio income is the income you get from owning stocks and bonds finally passive income is an income you get from owning assets that bring you money constantly without working an example of

this can be real estate working for earned income does not allow for much protection from taxes on the other hand portfolio income and passive income provide higher protection that is one of the many reasons why Kiyosaki is against earned income Predator number two partners it's insane to think that life is about living happily ever after happily ever after is true only in fairy tales things change that is why exit strategies are important for anything of worth I know it may be uncomfortable to ask for a prenuptial agreement before you marry the man or woman of

your dreams but it's the financially intelligent thing to do especially in this time when the divorce rate is 50 percent when forming a new business with a new business partner I know it may be difficult to think about a buy sell agreement or business disillusion agreement when you're just starting out but it is financially intelligent to think of your exit before you enter into the agreement you never know what can happen in the future death is the final exit it's another time when Predators appear or should I say vultures if you are rich not having

a financial IQ can be expensive for your loved ones family friends and the government show up for your funeral if you are rich your brother-in-law's children's grandchildren children you've never met suddenly become family and come to cry at your funeral if you have a high Financial IQ the percentage of your money these grieving relatives received will be controlled by you even after you have moved on Predator number three lawyers you may remember the person who sued McDonald's claiming the coffee was too hot that is an example of a financial Predator using the court system to

get your money millions of people are waiting for any excuse to use a lawsuit to get rich there are lawyers whose sole purpose in life is to take you to court and take your money knowing these predators are always on attack there are three things that financially intelligent person must do number one keep nothing of value in your name it was the Poor Dad who proudly said my house is in my name financially smart people would not have their houses in their names 2. buy personal liability insurance immediately remember you cannot buy insurance when you

need it no one sells insurance for a house that is on fire three hold assets of value in good legal entities such as an LLC limited liability company there are also bad legal entities these are Sole proprietorships and general Partnerships ironically most small business owners are in bad entities Predator number four brokers broker is another word for sales person in the world of money there are Brokers for stocks bonds real estate mortgages businesses Etc one of the problems today is that most people are getting their financial advice from sales people not rich people if you

meet a rich broker you need to ask if the broker got rich from his or her sales ability or financial ability Warren Buffett once said Wall Street is the only place people drive to in their Rolls-Royce to take advice from people who ride the subway here are a few tips for choosing a better broker number one in whatever area you are investing or doing business you need to educate yourself first having more knowledge will allow you to differentiate the educated broker from a salesperson number two see if the broker is interested in building relationships or

he she is only interested in making a sale for example once I started to work with the real estate broker and he seemed like a person who was interested in building relationships I was starting to think about doing another project with him however as soon as I signed the purchase contract he stopped taking my calls and transferred me to his assistant this is an example of a bad broker who is just interested in making transactions and moving on to another client I also have an amazing broker whom I use to buy gold and silver whenever

this broker is visiting the town he wants to meet for lunch we discuss a lot of things and he is always trying to help in any way possible also whenever I want I can just pick up the phone and call him number three find out if they invest in what they sell after all why should you invest in what they're selling if the broker doesn't have the confidence to invest in the same thing fifth Financial predators are businesses all businesses have something to sell if they do not sell they are out of business I often

ask is this business's product or service making me richer or poorer in many cases the product or service does not make you richer it only makes the business richer Financial IQ number three budgeting your money a budget is a plan for the coordination of resources when it comes to budgeting there are two important terms to remember budget deficit and budget surplus a budget deficit is in excess of spending over income and a budget surplus is an excess of income overspending everyone wants to have a budget surplus but in reality the majority have a budget deficit

even most governments around the world operate with a deficit there are two ways to have a budget surplus first by cutting expenses second by increasing income the majority of people and companies choose the first option cutting expenses but Kiyosaki thinks you should focus on increasing income rather than cutting expenses and to increase income you should increase spending not reduce it I know what you are thinking right now you are thinking how is increasing expenses going to help me create a budget surplus when I'm already in a deficit well when Kiyosaki talks about increasing expenses he

talks about two types of expenses specifically the first type of expense is the one that can help you to generate extra income for example if you have a store and are not selling enough products then you should spend more on promotion and marketing rather than cutting out marketing expenses the second type of expense you should increase is the one you pay yourself you probably know about the concept called pay yourself first so I'm not going to talk much we'll put a link to that video on the screen the basic idea is that every time you

earn money you should pay yourself first before you pay anyone else the author says that the money you pay yourself should be seen as an expense and prioritized over other expenses even if you operate on a deficit you should pay yourself first because it is the expense that is going to be used to create Assets in the asset column the asset column is your column and you should always take care of it I know most of you can agree with the logic of what I am saying but it is easier said than done so let

me tell you how the author and his wife Kim handled it Kiyosaki says soon after we were married we had the same financial problems many newlyweds have we had more expenses and income to solve this problem we hired Betty the bookkeeper Betty was instructed to take 30 percent of all income off the top as an expense and put that money in the asset column using simple numbers as an example if we had one thousand dollars in income and one thousand five hundred dollars in expenses Betty was to take 30 percent of the one thousand dollars

and put that money in the asset column with the remaining seven hundred dollars she was to pay the one thousand five hundred dollars in expenses Betty nearly died she thought we were nuts she said you can't do that you have bills to pay she almost quit you see Betty was a great bookkeeper but she budgeted like a poor person she paid everyone else first and herself last since there was rarely anything left over she paid herself nothing her creditors the government and bankers were all more important than Betty Betty argued and fought all of her

training told her to pay everyone else first the thought of not paying her bills or taxes made her weak in the knees I finally got her to understand she was doing us a favor she was helping us out I explained to her that she was helping us solve a very big problem the problem of not having enough money and as you know solving problems makes us smarter when she understood she was actually creating income through expense she was willing to go along with our plan to create a budget surplus for every dollar of income Betty

would take 30 cents and put it in savings and investing she knew that saving and investing were a necessary expense to create a surplus our first and most important expense with the 70 cents from every dollar left she was to pay taxes liabilities such as our mortgage and car payments and then our bills such as electricity water food clothing Etc needless to say for a long time we came up short every month although we had paid ourselves first we did not have enough money to pay others there were some months Kim and I came up

as much as four thousand dollars short we could have paid the four thousand dollars from our assets but that was our money the asset column belonged to us instead of panic Betty was instructed to sit down with us and let us know how short we were each month after taking a deep breath Kim and I would then say time to get back to financial IQ number one making more money with that Kim and I would hustle around doing whatever we could to make more money Kim with her marketing background often called businesses and offered to

consult with them on their marketing plans she also took modeling jobs and sold a line of clothes I offered to teach investment or sales and marketing classes for a few months I trained sales teams at a local real estate company I even made money by helping a family move and by clearing some land for another family in other words we swallowed our pride and did whatever it took to make the extra money somehow we always made it and somehow Betty stuck with us and assisted us with our problem solution and process even though she worried

more about us than we did unfortunately Betty could help us but was unwilling to help herself last we heard she retired and moved in with her single daughter they share expenses and do not have a budget surplus Financial IQ number four leveraging your money in very simple terms the definition of Leverage is doing more with less a person who puts money in the bank into a savings account has no leverage it's the person's money compare this with buying a property if banks require you to put down 20 for the purchase of a property it means

for every dollar you put in the bank puts in four dollars leverage helps you to earn higher returns many financial advisors will tell you that Leverage is risky Kiyosaki thinks that is absolutely false Leverage is risky only when people invest in assets that they have no control over the key word here is control if a person has control leverage can be applied with very little risk the reason most financial advisors say that higher returns mean higher risk is simply because they sell only Investments that allow very little control since most financial planners put people into

Investments where they have no control they should not use Leverage using leverage to invest in something you do not control would be like buying a car without a steering wheel and then stomping on the gas pedal the major flaw in paper assets such as savings stocks bonds mutual funds and index funds is the lack of control and because you have no control it is difficult and risky to apply Leverage Banks know this well and that is why it is very difficult to get a bank to lend you money to invest in the stock market at

this point you're probably wondering what kind of control Kiyosaki is talking about well he mainly talks about control over four areas income expense asset and liability for example if you have some type of business you probably have control over all four of them by doing more promotion and better marketing you can sell more and increase your income by using systems and automation you can decrease labor expenses by negotiating lower interest rates or by consolidating your loans you can decrease the interest rate on your loans Etc Leverage is not just about money there are other types

of leverages as well product can be used as Leverage for example if you are a doctor it is hard for you to leverage your value if patients come only to see you but if you invent a new cure or kind of medicine then your medical intelligence can be leveraged via a product other people's knowledge is another example of Leverage for example if you are bad at editing videos you can hire someone who can complete the work in one hour instead of you spending 20 hours another example for leverage is using other people's time if you

run a business there are probably a lot of tasks that are not that important but still need to be done by Outsourcing such tasks to others you are using time as Leverage successful people use this a lot to grow their business without other people's time it would be almost impossible to achieve big success imagine Jeff Bezos always kept cooking his meal cleaning his room washing his dishes and driving his car if he did that Amazon would not exist today or it would still be selling books as a small online store a final example to leverage

can be your network knowing the right people or having access to the right people can be the essential factor in succeeding in something for example let's say you want to create a YouTube channel but you have no idea how to create a successful YouTube channel you talk about it to a friend and he tells you that he personally knows a very successful YouTuber and can arrange a meeting with him so that you can ask your questions this is the simplest form of using your network as Leverage Financial IQ number five improving your financial information if

you are in a war information can mean life or death and if you are in business information can mean being rich or poor with just a few dollars some information and The Leverage of Technology young kids have become billionaires the founders who created Facebook Instagram and YouTube have proved that having access to information can be a huge asset likewise poor or mistaken information can be a huge liability poor information creates poor people many people who are struggling are doing so because they are using industrial or agrarian age information in the information age examples of Industrial

Age information are ideas such as I need a good education to get a high paying job today the good news is that information is abundant and free the bad news is that information is abundant and free the amount of information doubles every 18 months what you learned today might be obsolete in 18 months that is why you constantly need to educate yourself and update what you already know using obsolete information is like consuming expired food many of us double check the expiration date on the yogurt we buy but we rarely check our brains to see

if the knowledge has expired or not Kiyosaki thinks this is one of the main reasons many people are financially sick today the author does not provide any practical tips on how to improve IQ number five to me this chapter seemed like it was just random stories put together to create a chapter overall I found the book quite useful but as usual the author repeats some information over and over which can be quite annoying that is why I tried to provide new information that is not repeated in his other books if you would like to see

more check out the video you see on the screen thanks for watching