Master the Six Basic Rules of Investing – Robert Kiyosaki

I always borrow to invest. One of my favorite books that just came out was called Fake. Fake money, fake teachers, fake assets. I use debt to invest. But to be able to do that, to go to here, to get rich, to do that, you've really got to have a lot of financial education. I don't recommend it, but it's the best way to get rich. President Trump, you know, my friend, we wrote two books together. I know some of you guys hate him. A lot of people hate the guy, but he's very smart. He's a capitalist. Obama, socialist, communist. Hillary, crook. So anyway, be very careful right now because I use debt. Trump uses debt. The more debt we use, the less tax we pay. That is why I love real estate. I can use debt, pay no taxes, make a lot of money. So that's really what I teach. I don't recommend it, but for those of you who understand what's called an infinite return, it's the best way to get rich. But you have to have a lot of financial education. So the reason the rich don't pay taxes is because there's three types of income. They'll never teach you this in school. The fake teachers will never. Number one type of, there's three types of income. Number one type of income is earned income. That's earned income. It's when you work for money, it's earned. So that earned income shows up here. So these are the guys that pay tax. And when all the guys are screaming tax the rich, well, you can't tax them because they don't have jobs. It's kind of funny, isn't it? You're going to tax the rich. Oh yeah. Good luck. And then the second type of income is portfolio income. And portfolio income is from flipping houses or you buy a stock for like $10, you sell it for $20. That's portfolio income. I don't do that. Trump doesn't do that. So most guys who are flipping houses and all that, buying stocks and flipping them, you're getting this type of income. So this income is about 20% today. Some of that here. But the income that the rich work for is called passive income. Passive income is also known as cash flow. That's the name of our game, cash flow. And that income is income that's flowing from here to here. It bypasses taxes. So I know it doesn't sound fair and it isn't fair. I don't disagree with you. But what's not fair is our schools, which are part of the problem. We'll never explain that. Our school system is so fake. It's more fake than those fake plastic plants. And these teachers, bless their heart, they don't know any of this. And I really want to talk to you about the most important subject for all of us today, rich, young, poor, old. It's called financial education. And as you know, our school systems teach us nothing about money. Nothing. It's pathetic. They have financial literacy courses today. Well, that's not financial education. It's really pathetic. And what's happening for most people today is they follow that age-old mantra, go to school, what do you learn about money in school? Nothing. Get a job. Well, jobs are disappearing. Not only that, is that with artificial intelligence and G5 coming, more jobs are going to get wiped out, plus with driverless cars, more jobs are getting wiped out. So why would you go to school to get a job and then work hard for money and pay taxes? Taxes are going to keep going up, sports fans. They have to. Somebody's going to pay off this massive mountain of debt stacking up all over the world. And the only way they pay off debt is via taxes. And then they tell you to get out of debt. Debt is money. Please understand me. In 1971, when Nixon took the dollar off the gold standard, money became debt. So the rich know how to use debt to get rich. And that's what I do. My friend Donald Trump, I know some of you hate the guy, more power to you, you know, but we use debt as money. And other guys will tell you, get out of debt. Well, you choose. The rich use debt to get rich and the poor middle class get wiped out because they're in debt. That's because of the lack of financial education. And then tell you to invest for the long term on a well-diversified portfolio of stocks, bonds, mutual funds, and ETFs. The key word in there is invest for the long term. Why would you invest for the long term when they're printing trillions of dollars and zero interest rate policy? They're paying you nothing for your money. And you're going to hold for the long term? And you got HFT, high frequency trading? You know, they can trade a thousand pieces of stock in a second and you don't have a prayer. You're trading against a machine, a robot. So all this financial advice people are giving out there is a recipe for disaster. Again, this is my message to anybody, including millennials, is where is your head? And I know most millennials, they want the high paying job. They want to be able to pay the rent, eat, and all this stuff. And then you dream of the big house, a nice car, and all that. But that's why 99% of Americans are broke because their heads are on the wrong spot. So when I asked Kim if she would take an accounting course, it was just two days, you know, I wanted to see if her head could get into the asset column. That was the difference, wasn't it? Yeah. Actually, it didn't happen right at that moment. You fell in love with me? Of course I did. Of course I did. But this started the journey on investing. This started the journey on assets. But I do remember the moment down the road where, just like everybody else, I was focused on the income column, get a job, get the pay raises. If you're an hourly wage, work more hours or raise your hourly wage. So I was always focused here. And then finally, after we'd actually bought some investment properties, the light finally went on. And I'm like, instead of focusing on acquiring income, what if we focus on just acquiring assets that the assets go into the income column? So that was a huge shift in my mindset. And once that shift happened for me, I don't think about the income column anymore. I just think about the asset column. And that's our game called cash flow. The first way you understand risk is you look in the mirror. It's who's looking back at you. You're the risk, not the investment. For example, I invest in a lot of real estate and say, oh, real estate is so risky. I think I'll buy ETFs. So you play it safe, but you'll learn more by investing in real estate, right? Because you'll make more mistakes. So that's the difference there. So it's not real estate that's risky, it's your risk. And sometimes it's ironic because I think about it like so blindly turning your money away to someone you barely know isn't risky. Or let's say, I don't know, maybe just depending on this job where your employer can fire you any day isn't risky either. You know, it makes you think a little, what truly is risky for you? How do you define it? And you look at all the pensions of the school teachers, firefighters, and all the guys with 401ks, they're all bankrupt because Wall Street stole their money from them, you know? And the Federal Reserve Bank, they're run by PhDs, like my poor dad. And PhD stands for poor, helpless, and desperate. The Fed has not been right in years, thereby worships the Federal Reserve Bank. The other day, somebody says, what do you think about artificial intelligence? I said, oh, are you talking about the Federal Reserve Bank? You know, they're a criminal operation. They're the guys stealing from our pension systems. It's horrible what's going on because we have all these PhDs, poor, helpless, and desperate people who are risk averse. Money, isn't it? It's really funny. But let me tell you what risk is. So when you go to your banker, your banker does not ask you for your report card. So here is the cash flow game, and this is called a financial statement. What makes the cash flow game different from monopoly, which is how my rich dad taught me via monopoly, is my rich dad also taught me about financial statements. So cash flow is the only game with a financial statement. So really simply, when you look at a financial statement, there's income, expense, assets, liabilities. There's one more thing in the cash flow game on the financial statement you'll see. It's the most important statement of all. It's called the statement of cash flow. It's off to the side here. So if you're going to be an entrepreneur or a capitalist, you have to have one of these. Going to be rich, you have to have one of these. But 99% of all high school students leaving school and college have no idea what this is. You have FICO scores, but you don't know what this is. So when a banker asks you for your financial statement, they want to see how smart you are here. So let me tell you why school makes students poor. So really simply, it's this. Let's say I have a master's in arts, a master of arts degree, right? Yeah. Or a bachelor of arts degree. Yeah. Do I learn anything about income? No. What about Greek mythology? Oh, there you go. That's very important. I learn nothing about income. And we wonder why kids are leaving school or a young generation looking for that high-paying job. But let me ask you this. If you have a degree in technology, do you learn anything about assets? Never. So you could be a techie and you know nothing about this. You could be a techie and know nothing about this. You see, when a banker looks at your financial statement, they're looking at the mirror of you. This is a reflection of you. And if you got Jack here and Jack here, then you're not that smart financially. So the reason the cashflow game is such an important game, it teaches you what is important to your banker or for a capitalist or for an entrepreneur. An entrepreneur has got to know how to increase their income. And an entrepreneur has got to know how to create assets. If you don't know those two things, you should not be an entrepreneur. You should be an employee. Which is why so many young people coming out of school have massive student loan debt over here, right? But they don't know anything about this and about this here. That's risky. And we always have to find outside resources to like find this information, learn this information, you know, taking courses here at Rich Dad, learning through your seminars. And so it's really astonishing how something that's supposed to prepare you for the future leaves you with just the most important documents that we're told that we need to have our resume and your report cards, your transcripts. But in reality, you're going to be an employee. Exactly. But for entrepreneurship, which is what a lot of people come to us for, this is where you can learn it here, because in the school system, you won't. You see, if you're going to increase your income right over here, you need a real teacher. If you're going to acquire assets, you need real teachers. What is high risk is asking people who are fake teachers, like my calculus teacher and my accounting, I mean, you love accounting teachers, don't you? I hate them. Did your accounting teacher know anything about this? No, nothing. Did your accounting teacher know anything about this? No. That's risky. So that's why I wrote the book Fake, Fake Money, Fake Teachers, Fake Assets. And what Wall Street is telling you to do is just give your money to them. That's risky. So the reason I say only lazy people use their own money is because it takes much more intelligence to raise capital. And so I've never been able, ever since my rich dad was a little boy, my rich dad forbade me from ever saying, I can't afford it. He says, figure out how you can afford it. How can you do something? Figure out how you can do something. So over my lifetime, most of the projects I've started, I've never had any money. I like not having money because it forces me to think. I get creative. I have to educate myself. I have to talk to rich guys. How'd you do this? How'd you do that? How'd you do that? And what has happened to me, and I just turned 72, I've never needed money. Because if I need money, I figure out how to raise it.