Rich Dad's
Retire Young, Retire Rich
by Robert T. Kiyosaki
Why David Met Goliath
David and Goliath was one of rich dad's favorite stories.
I suspect he may have seen himself as David, a man who started
with nothing, yet rose to compete against the giants of business.
Rich dad said, "David could beat Goliath because David
knew how to use the power of leverage. A young boy and a simple
slingshot were far more powerful than the feared giant, Goliath.
That is the power of leverage." My previous books were
on the power of cash flow. Rich dad said, "Cash flow
is the most important word in the world of money. The second
most important word is leverage." He also said, "Leverage
is the reason some people become rich and others do not become
rich." Rich dad went on to explain that leverage was
power and that power can work in your favor or against you.
Because leverage is power, some use it, some abuse it, and
others fear it. He said, "The reason less than 5 percent
of all Americans are rich is because only 5 percent know how
to use the power of leverage. Many who want to become rich,
fail to become rich because they abuse the power. And most
people do not become rich because they fear the power of leverage."
There Are Many Forms of Leverage
Leverage comes in many forms. One of the recognized forms
of leverage is the leverage of borrowing money. Today we are
aware of the severe problem of people abusing this powerful
form of leverage. Millions of people struggle financially
because the power of debt leverage is used against them. Because
of the consequences of the abuse of debt leverage, many people
now fear this form of leverage, saying, "Cut up your
credit cards, pay off your mortgage, and get out of debt."
My rich dad would chuckle and say, "Cutting up your credit
cards won't make you rich. Cutting up my credit cards only
makes me miserable." Nonetheless, rich dad agreed that
if you were abusive with the power of debt leverage, you definitely
should cut up your credit cards, pay off your mortgage, and
get out of debt. He said, "Giving a credit card to some
people is like giving a loaded gun to a drunk. Anyone who
is near the drunk is in danger, including the drunk."
Instead of teaching us to fear the power of debt leverage,
rich dad taught his son and me how to use the power of debt
leverage in our favor. That is why he often said, "There
is good debt and bad debt. Good debt makes you rich and bad
debt makes you poor." Most people are loaded down with
bad debt and many others live in fear of debt and are proud
to be debt free... even to the point of being free of any
good debt. In this book, you will find out how my wife, Kim,
and I retired young and retired rich because we were deeply
in debt, deeply in debt with good debt, debt that made us
rich and financially free. In other words, we used the power
of leverage, we did not abuse the power, nor do we live in
fear of its power. Instead we respect the power of leverage
and use it wisely and cautiously.
Can Everyone Be Rich?
During the hundreds of interviews I have given after the release
of the first Rich Dad book I am asked this question: "Do
you think everyone can be rich?"
I reply, "Yes. I believe everyone has the potential to
be rich."
At that point, I am often asked, "If everyone has the
potential to be rich, why do so few actually become rich?"
My usual reply is, "I don't have the time today to answer
that question." If they insist, I may say, "Many
of the answers are found in my first four books in the Rich
Dad series."
If the interviewer is persistent they may ask something like,
"When will you give us all the answers?"
I reply, "I don't know if anyone has all the answers."
Even though I do not have all the answers, I am very happy
to be finally bringing this book, book number five in the
Rich Dad series, to you. This book will definitely explain
why I believe all of us already have the power and the potential
to be very rich... and I do mean all of us, not just some
of us. It will also explain how my wife, Kim, and I could
retire young and retire rich, even though we started without
any money. And it will also explain why some people are rich
and why others are poor even though we all have the power
and the potential to be very rich and retire young. It's all
a matter of leverage.
The first four books in the Rich Dad series were primarily
about the power of cash flow. This book is about leverage.
Why one entire book? The reason is because leverage is a very
big word, encompassing and touching virtually everything in
our lives. This book will focus on three important forms of
leverage. They are:
SECTION I: THE LEVERAGE OF YOUR MIND
This is the most important section of the book. In this section,
you will find out why money does not make you rich. In this
section, you will find out that the most powerful form of
leverage in the world, your mind, has the power to make you
rich or make you poor. Just as someone can use, abuse, or
fear the power of debt leverage, the same is true when it
comes to your brain, a very powerful form of leverage.
Words Are Leverage
You will find out the power of words. Rich dad always said,
"Words are leverage. Words are powerful tools... tools
for the brain. But just as you can use debt to make you rich
or poor, words can be used to make you rich or poor. In this
section, you will find out about the power of words and how
rich people use rich words and poor people use poor words.
Rich dad often said, "Your brain can be your most powerful
asset or it can be your most powerful liability. If you use
the right words in your brain you will become very rich. If
you use the wrong words, your brain will make you poor."
In this section you will find out about rich words and poor
words... slow words and fast words. You will find out why
rich dad said, "It does not take money to make money."
He said, "Getting rich begins with your words and words
are free." In Rich Dad Poor Dad, you may have read that
rich dad forbade his son and me from saying, "I can't
afford it." Rich dad said, "The difference between
rich people and poor people is that poor people say 'I can't
afford it' more often than rich people. That is the primary
difference."
Why Investing Is Not Risky
In this book, you will find out why people who say "Investing
is risky" are some of the biggest losers in the investment
markets. Again it goes back to words. You will find out that
what you think is real becomes your reality. You will find
out why people who think investing is risky invest in the
riskiest of all investments. It's caused by their reality.
In this book, you will find out why investing does not have
to be risky. In order to find safer, higher yielding investments,
people must first begin by changing their words.
As stated earlier, the power of leverage can be used, abused,
or feared. In this section, you will find out how to use the
leverage of your brain in your financial favor, rather than
use it against you. Rich dad said, "Most people take
the most powerful leverage in the world, their brain, and
use that power to make them poor. That is not the use of that
power. It's abuse. Every time you say, 'I can't afford it'
or 'I can't do that' or 'Investing is risky' or 'I'll never
be rich,' you are using the most powerful form of leverage
you have... using it to abuse yourself."
If you want to retire young and retire rich, you will need
to use your brain in your favor, not against you. If you cannot
do that, the two other sections of this book will not be possible
for you, even though they are easy to do. If you can gain
control over your most powerful form of leverage, the next
two sections will be easy because they are easy.
SECTION II: THE LEVERAGE OF YOUR PLAN
In book number three, Rich Dad's Guide to Investing, I wrote
that "investing was a plan." In order for Kim and
me to retire young, we had to have a plan... a plan that started
with nothing, because we had nothing. The plan had an end
or an exit and it also had a time limit. Our time limit was
ten years or less. It took us nine years, retiring in 1994.
I was forty-seven and Kim was thirty-seven. Although we started
with nothing we exited with approximately $85,000 to $120,000
a year in income, depending upon the market, without working.
Our income was now coming solely from our investments. Even
though it may not have been a lot of money, we were financially
free because our expenses were less than $50,000 a year.
We Retired Young in Order to Get Rich
One of the advantages of retiring young is that we now had
the free time to get rich. By the way, Forbes magazine defines
rich as $1 million or more a year in income. In other words,
according to Forbes, we were not yet rich when we retired.
Knowing that, one of the reasons for retiring young was so
that we would have the time to get rich. After retiring, our
plan was to spend time investing and building businesses.
Today, not only do we have substantial real estate holdings,
we have built a publishing company, a mining company, a technology
company, and an oil company, as well as investments in the
stock market. As rich dad often said, "The problem with
having a job is that it gets in the way of getting rich."
In other words, we retired young so that we would have the
time to become rich. Today, our income per year from our investments
and businesses is in the millions and is climbing steadily,
even after the stock market crashed.
Everything is going according to plan.
In book number three, Rich Dad's Guide to Investing, I wrote
that most people have a plan to be poor. That is why so many
people say, "When I retire, my income will go down."
In other words, they are saying, "I plan on working hard
all my life and then I will become poorer after I retire."
That may have been an okay plan in the Industrial Age, but
that is a very poor plan in the Information Age.
Millions of workers are now counting on their retirement plans,
plans such as a 401k, IRA, Superannuation plans of Australia,
RRSP plans of Canada, and other plans to be there when they
retire. These plans are what I call Information Age retirement
plans. I call them that because in the Information Age, employees
are now responsible for their retirement. In the Industrial
Age, it was the company or the government that would take
care of your financial needs once your working days were over.
There is one tragic flaw in these Information Age retirement
plans. The flaw is that most of these plans are indexed to
the stock market, and as you may have noticed, stock markets
go up and stock markets go down. It shocks me to realize that
millions and millions of hardworking people are now betting
their financial future and their financial security on a stock
market. What will happen to these workers if, for example,
they are eighty-five years old and their retirement plan is
wiped out, either by depletion, theft, or market crash? Are
you going to say to them, "Get a job and begin saving
for retirement?" That is why I am concerned and why I
write and why I teach. I believe we need to better educate
and better prepare people for the Information Age, the age
where we all need to know a lot more about money. The age
where we all need to be more financially responsible and depend
less on a company or government to take care of us when our
working days are over.
Just look at the numbers. By the year 2010 the first of 75
million baby boomers will begin to retire. Over the years,
let's say that each of these 75 million begins to collect
just $1,000 per month from the promised government retirement
plan that they have contributed to, and another $1,000 per
month from the financial markets. If my math is correct, 75
million × $1,000 comes to $75 billion per month from
the government program and another $75 billion from the financial
markets. Seventy-five billion dollars per month coming out
of the government and from the financial markets will have
a dramatic impact on both institutions. What will the government
do? Increase taxes? What will the financial markets do when
$75 billion comes out of the market instead of going in? Advise
you to "Buy and hold, invest for the long term, and de-worsify
your portfolio?" Will the financial advisors continue
to say, "The stock market on average has always gone
up?" I don't have a crystal ball and I do not pretend
to predict the future. But I can say this much. A combined
$150 billion coming out of these two large institutions instead
of going in will cause a few ripples in the economy.
The old plans from the old economy will cause millions of
people financial hardship once their working days are over.
Millions in America do not have a company retirement plan
or personal retirement plan. What will they do? Look for a
job? Work all their lives? Move in with their kids or grandkids?
Planning to work hard all your life is a poor plan. In spite
of this plan being a poor plan, millions of people have this
plan, even some people who are making a lot of money today.
They are working hard today but have nothing set aside for
tomorrow. For many baby boomers, time, our most important
asset, is running out.
Then I hear people say, "I won't need much money after
I retire. My house will be debt free and my living expenses
will go down." While it is true that your living expenses
may go down, what goes up are your medical expenses. Already
medicine, health, and dental care are too expensive for many
working people. What will happen when the medical industry
is faced with millions of retirees who need health care to
live, but have no money to pay? And if you believe in Medicare
saving you, then you probably believe in the Easter Bunny
also.
Maybe this is why Alan Greenspan, chairman of the Federal
Reserve Board, recently said on television, "We need
to start teaching financial literacy in our schools."
We need to start teaching our kids to take care of themselves
financially, rather than teaching them to expect the government
or the company they work for to take care of them after they
retire.
If you want to retire young and retire rich, you will need
a better plan than most people have. Section 2 is about the
very important leverage of having a plan on how to retire
young and retire rich.
SECTION III: THE LEVERAGE OF YOUR ACTIONS
There is an overused story about three birds sitting on a
fence. The question is, "If two birds decide to fly away,
how many birds are left?" The answer is, "Three
birds are left." The lesson is, just because you decide
to do something does not mean you will do what you decide
to do. In the real world less than 5 percent of the U.S. population
is rich because 95 percent of the population may want to be
rich but only 5 percent takes any action.
In book number four, Rich Kid Smart Kid, I write about how
our school system punishes kids for making mistakes. Yet,
if you look at how we learn, we learn from our mistakes. Most
of us learn to ride a bicycle only by falling off a few times.
We learn to walk by falling a few times. Then we get to school
and we are taught not to fall. We are taught that people who
fall are stupid people. We are taught that smart people are
people who sit like the three birds on the fence and memorize
the right answers. It's a small wonder why only 5 percent
of America's people become rich. If you look at some of the
richest people in the world, people such as Bill Gates, founder
of Microsoft, Michael Dell, founder of Dell Computer Corporation,
Ted Turner, founder of CNN, Henry Ford, founder of Ford Motor
Company, and Thomas Edison, founder of General Electric, they
all did not finish school.
I am not saying that school is bad. In the Information Age,
school and education are more important than ever before.
I am saying that sometimes to be successful we need to learn
to not do what we have been taught to do. If you want to be
more successful, simply watch how kids learn and copy them.
One of the things I had to learn was how to overcome the fear
of making mistakes, the fear of failing, and the fear of being
embarrassed. Most young kids know how to do that naturally,
but then we teach them not to do it in school. If I had not
been able to learn how to make mistakes, learn how to fail,
learn how to overcome my embarrassment, I would not have been
able to retire young and retire rich.
Three Easy Things Everyone Can Do to Become Rich
I have always said that what you have to do to become rich
is simple and easy. Almost everyone can do it. I am happy
to share this book because Sections 1 and 2 prepare you to
do the simple things you need to do, if you want to retire
young and retire rich. In Section 3, I will go into simple
and easy things most of us can do to become rich. I will go
into the three main assets that make people rich and allow
them to retire young. The three assets are:
1. Real estate
2. Paper assets
3. Businesses
In Section 3, you will find out what you can do to begin acquiring
these three vitally important assets. The reason Kim and I
could retire young and retire rich is because we spent our
time acquiring assets rather than working for money.
If you can read this book, you can do the simple action steps
to begin acquiring these three important assets, the assets
that the rich 5 percent of the population acquires. I promise
you that you can do the action steps, but you will need to
read the first two sections of this book. If you do not read
the first two sections, you may not be able to do the action
steps, even if they are easy to do. As rich dad said to me
years ago, "Getting rich begins with the right mind-set,
the right words, the right plan. After you have that, the
action steps are easy."
So why did David meet Goliath? Rich dad's answer to this was,
"David met Goliath so he could meet the giant inside
of himself." He also said, "Inside each of us is
a David and a Goliath. Many people are unsuccessful in life
because they run when they meet Goliath. Without Goliath,
David would never have become a giant of a man." Rich
dad used this story to inspire his son and me to become financial
giants. In other words, instead of killing the giant, rich
dad inspired us to become giants.
This book is about becoming financially free. Kim and I achieved
that freedom by acquiring or building assets... assets that
worked hard so we did not have to work. Once we were free,
we simply continued to build our portfolio of the three asset
classes, which are businesses, paper assets, and real estate,
into giant portfolios. We retired young and became richer
and richer by using all the leverage we could to build these
assets. Today those assets produce more and more income while
we work less and less. If you would like to do the same, this
book is for you. This book is written to assist you in finding
your own financial freedom... freedom from the drudgery of
earning a living. In closing, David became a giant by using
all the leverage he could. You can do the same. This book
is about bringing out the giant in you.
Authors Details:
Robert T.Kiyosaki - From The Book 'Rich Dad's Retire Young,
Retire Rich' |
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