Robert Kiyosaki has an obvious message. America needs financial education. Right now our education system is broken and nothing is taught to prepare people for financial freedom. All of Robert’s books are good and teach the basics of financial literacy and the need for continuous learning. Rich Dad/Poor Dad is another famous book by this author. We’ll profile that book in a separate overview.

The Cash Flow Quadrant is a very important concept that people need to consolidate in their memory if they want to control financial freedom. The quadrant consists of the following:

1.) E – Stands for employee

2.) S – Supports for Small Businesses or Freelancers

3.) B – Represents large companies (500 employees or more)

4.) I – Supports for inverters

Traditional education prepares us for the E and S quadrant. The mantra has been to go to school and then college to hopefully get a good job and save in a 401K for retirement. As many of you know, this is not a good model at present. On a side note, I was lucky to grow up with an excellent finance professor. My father taught the principles that Mr. Kiyosaki teaches in his books Rich Dad/Poor Dad, The Cash Flow Quadrant, and this book Unfair Advantage. I can also tell you that most people are not financially educated. Authors like Mr. Kiyosaki and Dave Ramsey are really needed and we are doing what needs to be taught in our school system nationwide.

Why is this important to me?

This can be answered by asking a few more questions. Do you know the difference between good debt and bad debt? Can you define an asset and a liability in simple terms?

Did you know that there are three types of income taxes?

If you are not clear on any of these, then you need to read this book. In summary form, I will answer all these questions. Good debt is anything that spits out positive cash flow and increases in value. So if you have debt on a rental home that produces a positive monthly cash flow, then that’s good debt. If you have credit card debt that you don’t pay each month, then it’s bad debt. Simply put, good debt makes you money and bad debt costs you money.

Actives and pasives! Anything that generates a positive cash flow is an asset, while anything that costs you money is a liability. Example: A business that generates monthly profit is an asset. Your home is a liability. I know many of you will disagree with this, but your house costs you money every month. This is not a bad thing, but because you need a place to live, but it is a responsibility.

The three types of income include: Ordinary, Portfolio, and Passive. We’ll go into more detail about how these play a role in your financial freedom later in this roundup. This book is important for you if you want to be financially free and escape the rat race of running out of money before the end of the month.

There are several examples and details described in Unfair Advantage, but for time reasons we will cover each one in brief.

1.Knowledge: knowledge put into practice equals power. There are a number of ways to make money, whether it be in a business, real estate, stock market, content creation, licensing agreements, internet marketing, or various other endeavors. The point here is that nothing happens without educating yourself. Warren Buffett, the second rich man in the world, is known for his constant reading and learning skills. The premise of Unfair Advantage is that with a very high financial education, money goes in instead of out. You can pay zero taxes and earn millions with very little risk using other people’s money in good or bad economies. This creates an extreme unfair advantage.

2. Taxes: Taxes are government incentives for people to do what they want them to do. Therefore, because companies create jobs and wealth, they have tax strategies as incentives to keep the economy going. There is a great premise that people need to understand. I will expose the difference. When you are an employee, you work, you pay your taxes, and then you get your money to pay your expenses. When you’re a business, you work, pay all your expenses, and then pay taxes on what’s left. This is totally legal and can legally increase return rates. Remember one thing: tax evasion is prudent, while tax evasion means jail time.

3. Debt – Good debt creates true wealth by allowing you to use OPM (other people’s money). This is very powerful and requires discipline. This is an area where

I wish this book was discussed in more detail. Keep in mind that debt used wisely can create unlimited wealth and leverage. Too much misused debt can create financial ruin. Also, know that more than 85% of the US population has too much bad debt. This is not what we are talking about. This too must be taken care of to truly achieve financial freedom. The use of debt is an advanced strategy and must be used wisely, which requires financial education.

4. Risk: The biggest risk in investing comes from people with no financial education who give their money to financial planners and hope things work out. This has by far caused great losses for people. Inflation is rampant right now even though the government says it isn’t. This is a bigger risk for savers than taxes. Saving money as an investment is a bad idea because over time the value is reduced by inflation. 401Ks and mutual funds along with diversification are presented as NOT risky. This is the furthest thing from the truth. 1. Mutual funds are subject to double taxes, as well as fees that eat away at your earnings. Also, you are not in control of your money. Note: This does not mean that ALL funds are bad. This is where financial education comes in. Many financial planners will tell their clients to diversify. According to Warren Buffet – “Diversification is a protection against ignorance.”

5. Compensation – Rich people don’t work for money. Think about hard work for a moment. If you work overtime, you are trading hours for dollars. The problem is that your marginal tax rate increases as you earn more ordinary income. Your overtime is taxed higher than you work more. I am not against hard work. Just make sure you pair it with WORKING SMART and RIGHT as well. The rich work to buy assets that generate cash flow. Your goal should be to make your money work harder than you do and make more money as soon as possible.

What asset will pay for your liability? This concept was first covered in Rich Dad/Poor Dad. This simple question changes the whole mood and if people followed it, they would be much better off financially. This means that if you want a new boat, what asset will you pay for the boat? Once you understand this simple idea, your world will change.

I hope you found this short summary video useful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. I highly recommend ingraining the knowledge of capitalization in your head. Answer the following correctly and you will understand the power of compounding. Would you rather have $1,000,000 in cash today or one penny doubling daily for 31 days? You can email me at [email protected] with your answer.

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