Join The Richest Game In The World

Dear reader, 

When I was younger, my rich dad said to me, “The rich get richer partly because they invest differently than others. They invest in investments that are not offered to the poor and the middle class. Most importantly, however, they have a different educational background. If you have a financial education, you will always have plenty of money.”

To be a rich investor, you must have a plan, be focused, and play to win. An average investor does not have a plan, invests in hot tips, and chases the hot investment products of the day, flitting from technology stocks to commodities to real estate to starting his or her own business. It’s okay to invest on a hot tip now and then, but please do not delude yourself that one hot tip will make you rich forever.

I’ve shared how I retired early by increasing my debt rather than trying to get out of debt, which is what most people try to do. The logic behind that thinking is that there is good debt and bad debt, and most people are loaded down with bad debt. 

The same is true with income. Most people are not aware that there is good income and bad income, and most people do not become rich because they work hard for bad income. When you ask for a raise, you ask for an increase in bad income. If you want to invest like the rich, you need to work hard for the right kind of income.

The three types of income are:

  1. Ordinary Income: The income you earn by working for a paycheck.  
  2. Portfolio Income: This income is generally from paper assets such as stocks, bonds, and mutual funds.
  3. Passive Income: The income you earn from an asset like real estate. It’s the income you work the least for, often taxed less, and it consistently earns the highest returns over a long period of time.  

Start by Building a Business

Rich dad said, “I am going to teach you the fundamentals of building a successful business,” rich dad continued. “If you can learn to build a successful B-quadrant business, your business will generate excess cash. Then you can use the skills you learned becoming a successful B to analyze investments as an I.”

The richest self-made people in the world are entrepreneurs from the B quadrant. They are far richer than movie stars, sports stars, and highly paid professionals. When I made my decision to not follow in my poor dad’s footsteps after returning from Vietnam, it was my rich dad who suggested I start by learning to build businesses. He said, “The reason the richest people in the world are from the B quadrant is that it is the hardest quadrant to be successful in. But if you are successful, the floodgates of abundance open up and wealth showers down upon you. If you can build a B-quadrant business, you are playing in the richest game in the world.”

One of the primary reasons rich dad started so many businesses was that he had excess cash flow from his other businesses. He also had the time because his businesses required minimal effort on his part. This allowed him free time and extra money to keep investing in more and more assets tax-free. 

That is why he became rich so quickly.

Start with Real Estate

As with any investment, I am often asked, “How do I find a good real estate investment?” My answer is, “You must train your brain to see what others cannot see.”

The next question is, “How do I do that?”

The answer is, “The same way any shopper finds a good deal.”

A great strategy for shopping for a property is the 100:10:3:1 method. That means you should analyze 100 properties, make offers on ten of them, have three sellers say yes, and then buy one. In other words, you must look at over 100 properties to buy one property.

By investing the time to analyze thousands of investments, my vision slowly improved. Each time I made an offer to buy a property,  I learned something, even if the offers were laughed at or flatly rejected. Each time I arranged the financing with a banker, I learned something. Each time I bought a property, I learned something new and valuable, even if I lost money on the property. Today, the accumulation of all those lessons, good and bad, is the education and experience that make me rich and allow my wife and me to make more and more money in real estate.

Great investments are seen in your mind’s eye, and nowhere else. 

In the real world, there aren’t “For Sale” signs that say, “Here is a great deal.” All the signs say is, “For Sale.” 

It is your job to train your brain to see a great deal and to also negotiate a great deal. That takes dedication and practice.

By investing the time to analyze thousands of investments, my vision slowly improved. Each time I made an offer to buy a property,  I learned something, even if the offers were laughed at or flatly rejected. Each time I arranged the financing with a banker, I learned something. Each time I bought a property, I learned something new and valuable, even if I lost money on the property. Today, the accumulation of all those lessons, good and bad, is the education and experience that make me rich and allow my wife and me to make more and more money in real estate.

Leverage with Paper Assets

Would you drive a car without insurance?” rich dad asked me. “No,” I replied. “That would be foolish. Why do you ask me this question?”

Rich dad smiled and asked, “Would you invest without insurance?”

“No,” I replied. “But I’m investing in real estate. I always insure my property from losses. In fact, the bank requires I carry insurance on all property I own.” “Good answer,” rich dad replied.

“Why are you asking me these questions about insurance?” I asked again. 

“Because it’s time for you to learn how to invest in paper assets, such as stocks, bonds, and mutual funds,” rich dad replied. “You can invest with insurance in paper assets?” I asked.  

“You mean you can insure against loss, or minimize your losses?” Rich dad nodded. “So investing in paper assets doesn’t have to be risky?” I asked. “No, it doesn’t,” said rich dad. “Investing doesn’t have to be risky at all if you know what you’re doing.”

“But isn’t investing risky for the average paper-asset investor?”  I asked. “Isn’t the average investor investing without insurance?” Rich dad again nodded, looking me in the eye, and said, “That’s why I’m teaching you this. I don’t want you to be an average investor.

To me, buying options to protect your assets makes sense. Selling options for cash flow is fun. One of the reasons I do not worry about money is simply because I know I can go to the market and make more money in minutes than most people make in months, and pay less in taxes.

Can everyone do what I do? Absolutely, but only if they are willing to invest some time in expanding their context and increasing their financial context.

Caution: Not Every Investment is a Winner

One last point. 

Investing in real estate, or any investment product for that matter requires more than buying one thing and expecting that one product to make you rich. In real estate, if Kim and I have a plan to buy ten properties, that means we need to look at 1,000 properties. Of those ten properties, we expect two to be great investments and two to be dogs, investments that we could lose money on. These are generally sold immediately. That leaves six investments that we either have to improve or sell. Regardless if it is real estate, stocks, mutual funds, or building businesses, the ratios tend to remain the same. 

Regards,

Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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