![]() (Shortform note: Rich Dad, Poor Dad contains lots of (possibly embellished) examples of super-profitable real estate deals. Anything that has value, produces income, appreciates, and has a ready market.Royalties from intellectual property such as music, scripts, patents.When selling a property, trade it for a larger one to avoid immediate taxes on the gain.This will let you broaden the opportunities you find. Consider buying property that’s larger than what you need.Using steady cash flow from rental income to make riskier bets, like in the stock market.Kiyosaki notes that today foreclosures are competitive and he’s looking elsewhere. ![]() Buying under-market properties, like from foreclosures, and reselling them quickly.(Shortform caveat: note that with more leverage, if the houses lose value, you also magnify your losses, as in the 2008 recession.].Or, you could pay $100k down payments for 5 houses and get rental income from 5 houses. In other words, with $500k, you could buy one $500k house and use it to make income. Using debt to lever up on more houses.Kiyosaki once liked tax liens, which he claims returned 16%, but says since then more attention has made this less profitable.Stock, bonds, funds, and other securities.The odds are against you and the stress is high. Only start a business if you have a desire for it.If you have to work there for it to generate money, it becomes your job. You own them, but they’re managed by other people. Businesses that don’t require your presence.If you are going to use the Rich Dad, Poor Dad cash flow chart, you will need assets. The cash flow chart seems simple, but there are some things you need to keep in mind if you’re going to utilize it. The profession is selling hamburger franchises, but the business is accumulating income-producing real estate. McDonald’s isn’t a hamburger business – it’s in the real estate business. Rich Dad, Poor Dad uses McDonald’s as a surprising example.Your business is how, independent of you, your money makes more money. Your profession is how you draw a salary. People who don’t become rich either spend all their income on expenses, or buy liabilities that increase their expenses but don’t add income.Ĭonsider that “money earning money” is your business. Rich Dad, Poor Dad‘s cash flow chart looks like this: Meanwhile, they minimize their spending on Expenses and buying Liabilities, to have more money to buy more Assets. We’ll get more into distinguishing assets vs liabilities in the next section, but the main point here is that wealthy people use their Income to buy Assets that return more Income. (Shortform note: these are Robert Kiyosaki’s terms and don’t follow typical GAAP accounting.) Liabilities are something that spend money over time. Assets are things that make money over time. It shows how much in assets and liabilities you have. The top box is an income statement, measuring how much income you get in a period, and how much expenses you pay out. The Rich Dad, Poor Dad Cash Flow Chart and Balance SheetĬonsider how the cash flow chart and balance sheet relate to each other. You can see this philosophy clearly outlined in the Rich Dad, Poor Dad cash flow chart below. You want your money to make enough money that you don’t have to work anymore. The key to financial independence is having money that makes more money. Even further, if your work isn’t just a pure service but also builds value in the company – say in R&D or product improvement – the value may be many multiples of your salary.Your work may allow your employer to earn $100k in sales that year, yielding a clean profit after deducting your salary. When you work for an employer, you get paid only a fraction of the value that you generate for the employer (otherwise, if the business would go bankrupt). Rich Dad, Poor Dad‘s cash flow chart offers a unique idea. How Can The Rich Dad, Poor Dad Cash Flow Chart Help You? You can look to the Rich Dad, Poor Dad cash flow chart to understand how money generates money. The Rich Dad, Poor Dad, cash flow chart addresses an important basic principle of finance: having consistent cash flow helps make you rich. What Rich Dad, Poor Dad‘s cash flow chart, and what can it teach you about managing and making money? Like this article? Sign up for a free trial here. Shortform has the world's best summaries of books you should be reading. This article is an excerpt from the Shortform summary of "Rich Dad Poor Dad" by Robert T.
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