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Book review: Rich Dad's Retire Young, Retire Rich

Rich Dad's Retire Young, Retire Rich Rich Dad's Retire Young, Retire Rich by Robert T. Kiyosaki


My rating: 3 of 5 stars
I thought Kiyosaki had some good ideas in Rich Dad Poor Dad, so when this book's title caught my eye, I thought it'd be worth a read. It definitely was! Kiyosaki admits that he's not the best writer, and I agree, but he has a compelling way of teaching important business and financial lessons through stories about his past.

He shamelessly plugs his books, board games, and website, but it works; he sells tons of them, and I put several more of his books on my to-read list.

The book's main point is that you can't get ahead by simply working harder or working more hours. You need to use various forms of leverage. As Kiyosaki puts it, "Leverage is the ability to do more and more with less and less." Keep adding leverage, he promises, and you'll earn more and more by doing less and less work.

I really liked Kiyosaki's explanation of income as earned, portfolio, or passive income, and how to use portfolio and passive income to minimize taxes and maximize what you keep.

Although Kiyosaki made his wealth mostly in real estate, his lessons apply to any area of business.

Notes
Money doesn't make you happy, but it buys you the time to do what you love and pay others do do what you hate.

Use debt (other people's money), not equity (your own money).
Invest for cash flow, not capital appreciation. Cash flow gives you money now, but capital appreciation may never occur.
The most important word in money is "cash flow". The second most important is "leverage".
Good debt puts money in your pocket every month. Bad debt takes money out of your pocket every month.
Buy assets, not liabilities.

Supplement old financial tools like mutual funds with faster, safer, more information-rich tools.
The rich use financial leverage, while the poor use physical leverage (hard work).

Forms of leverage
- debt
- other people's money
- other people's time
- health
- time - to find opportunities
- education
- relationships - business and personal. It's who you know, not what you know.
- tools
- spare time - do something worthwhile instead of meaningless leisure

3 kinds of education
1. academic
2. professional
3. financial
The poor stop at academic or professional. The rich move up to financial.

A winning strategy must include losing. If you expect to win 100% of the time, you'll never take the chances you need to succeed.
Think in terms of risk and reward, not right or wrong, risky or safe.
Instead of asking for more money for doing less work, do more for more people.

3 types of income
Earned (50% money)
- paycheck from job
- government takes 50%
- 401(k) fits here because withdrawals are taxed
Portfolio (20% money)
- paper assets (stocks, bonds, mutual funds)
- government takes 15-20% of capital gains
Passive (0% money)
- real estate, royalties, intellectual property
- tax-deferred
- government takes as little as 0% for tax-free munis, depreciation from property improvements, and deferred capital gains on real estate that are rolled into charitable remainder trusts

Business owners can buy many things with pre-tax dollars, but employees use after-tax dollars.
Employee order: earn, pay taxes, spend remainder
Business owner order: earn, spend, pay taxes on remainder

To get rich quickly, be open to new ideas, and "take on possibilities greater than your current abilities. Have a reality that can change, expand, and grow quickly."
Expand your context/reality/mind rather than increasing your content/information.
Your future is determined by what you do today, not tomorrow, regardless of your dreams.
"Stop doing today what you don't want to do in the future. Do today what you want for your tomorrows."

Use faster words
- cash flow from assets instead of a high-paying job
- make money instead of save money
- depreciation instead of appreciation (make money when you buy, not sell)
- invest in private companies instead of public companies
- go to seminars instead of school

The value of your labor increases incrementally. The value of assets increases exponentially.
Leverage the power of networks. Network with organizations rather than competing against them, especially those larger than you.

Leverage generosity
The Law of Reciprocity: give and you shall receive
serve more and more people
be generous with your money; give to charities

Everyone has financial problems, whether rich or poor. How you handle your problems determines if you'll become rich or poor.
Good expenses make you richer. "Your greatest expense in life is the money you do not make".

Don't park all your money in savings and mutual funds. Don't "buy, hold, and pray"; use the velocity of money to keep it moving and working for you. Create or acquire assets tax-efficiently.
Decrease the risk of investing in paper assets with stops, calls, puts, and shorts. You'll make money whether the market goes up, down, or sideways.
Don't keep all your money in paper assets. Even a diversified portfolio of paper assets isn't diversified enough.

Portfolio
paper assets
business(es)
real estate

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