Remember These Truths About Wealth Every Day

Dear Reader, 

My rich dad began preparing me for the I quadrant, the investor quadrant of the CASHFLOW Quadrant when I was just nine. 

He used the game of Monopoly. 

“One of the great formulas for wealth is found in the game of Monopoly. Always remember the formula: four green houses, one red hotel,” he’d say. Over and over again.

The game of Monopoly is a game of cash flow. If you had one green house on a property you owned and you received $10, that was $10 a month in cash flow. Two houses, $20. Three houses, $30. And then the red hotel, $50. 

More green houses and more red hotels mean more cash flow, less work, less taxes, and more freedom.

A simple game — but an important lesson.

It applies to real life. You just have to know how to take action…

Rich dad played Monopoly in real life. He’d often take his son and me to visit his green houses — green houses that would one day become a big red hotel, right on Waikiki Beach.

As I grew up and watched my rich dad play the game of Monopoly in real life, I learned many valuable lessons about investing. 

It’s important to remind yourself of these lessons:

  • Investing is not risky.
  • Investing is fun.
  • Investing can make you very, very rich.
  • More importantly, investing can set you free — free from the struggle of earning a living and worrying about money.

In other words, if you were smart, you could build a pipeline of cash flow for life — a pipeline that would produce cash in good times and bad, in market booms and market crashes. Your cash flow would increase automatically with inflation and, at the same time, allow you to pay less in taxes.

I am not saying real estate is the only way to invest. I use the game of Monopoly simply as an example of how the rich get richer. 

Keep in mind that it’s not the asset class that makes a person rich  or poor. For example, when a person asks, “Is real estate is a good  investment?” I reply, “I don’t know. Are you a good investor?” Or if  they ask, “Are stocks a good investment?” again my answer is the same, “I don’t know. Are you a good investor?”

My point is that it is never the investment or asset class that is important. Success or failure, wealth or poverty, depends solely on how smart the investor is. A smart investor will make millions in the stock market. An amateur will lose millions.

Tragically, most people do not think learning to invest is important. This is why most people believe investing is risky and turn their money over to “experts,” most of whom are not really investors, but sales people who make money whether the investor makes money or loses money.

Below, I’ve listed five levels of investors. My poor dad was in the first two levels. He held traditional views about money and as a result, he ended up struggling financially. 

My rich dad had a rich mindset and thought about money very differently and as a result, ended up being one of the richest men in Hawaii. My rich dad was a level five investor.

Which Level Are You?

Level 1:  The Zero-Financial-Intelligence Level

Sadly, in America, once the richest country in the world, over 50 percent of the U.S. population is at the bottom level of the I quadrant. Simply said, they have nothing to invest.

There are many people who make a lot of money who fall into this category. They earn a lot — and spend more than they earn.

Level 2:  The Savers-Are-Losers Level

Many people believe it is smart to save money. The problem is that today, “money” is no longer money. 

Remember that savers, bondholders, and most people who save money in a retirement plan, are people who park their money, investing for the long term, while professional investors move their money.  Professional investors invest their money in an asset, get their money back without selling the asset, and move their money on to buy more assets. That is why savers who park their money are the biggest losers.

Level 3:  The I’m-Too-Busy Level

This is the investor that is too busy to learn about investing. Many investors at this level are highly educated people who are simply too busy with their careers, family, other interests, and vacations. Hence, they prefer to remain financially naïve and turn their money over to someone else to manage for them.

This is the level that most 401(k), IRA, and even very rich investors are at. They simply turn their money over to an “expert,” and then hope and pray their expert is really an expert.

Level 4:  The I’m-a-Professional Level 

This is the do-it-yourself investor in the S quadrant. Many retirees become Level-4 investors once their working days are over.

This investor may buy and sell a few stocks, often from a discount broker. After all, why should they pay a stockbroker’s higher commissions when they can do their own research and make their own decisions?

If they invest in real estate, the do-it-yourselfer will find, fix, and manage their own properties. And if the person is a gold bug, they will buy and store their own gold and silver. 

In most cases, the do-it-yourselfer has very little, if any, formal financial education. After all, if they can do it themselves, why should they learn anything?

Level 5: The Capitalist Level 

This is the richest-people-in-the-world level. The Level-5 investor, a capitalist, is a business owner from the B quadrant investing in the I quadrant.

The ease of raising capital is one of the biggest differences between being successful in the S quadrant versus being successful in the B quadrant. Once a person is successful in the B quadrant, life is easy.  The challenge is becoming successful.

The problem with success in the S quadrant is that raising capital is always difficult.

So the question is: Who do Level-5 investors get their money from? The answer is: They get their money from Level-2 and Level-3 investors who save their money in banks and pension plans.

It’s Your Choice

One great thing about freedom is the freedom to choose to live the life you want to live.

In 1973 at the age of 26, I knew I did not want to live my life the way my parents chose to live. I did not want to be living below my means, living paycheck to paycheck, trying to make ends meet. To me, this was not living. It may have been good for them, but I knew in my heart that it was not right for me.

I also knew that going back to school for advanced degrees was not for me. I knew school did not make people rich because I grew up in a family of advanced degrees. Most of my uncles and aunts had master’s degrees and a few had their doctorates.

I did not want to climb a corporate ladder in the E quadrant either, nor did I want to be a very special specialist in the S quadrant.

So I took the path less traveled and decided to become an entrepreneur and professional investor. I wanted the freedom to travel the world, do business, and invest.

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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