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File:Robert Kiyosaki.png

Robert Toru Kiyosaki (ロバート・トール・キヨサキ, 清崎 徹, born April 8, 1947) is an investor, businessman, self-help author, and motivational speaker. The following are some of the things he teaches in his various publications and presentations.

(Related article: Robert Kiyosaki)


Disclaimer

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The advice and information presented here is meant to be a relatively summarized reiteration of what Robert Kiyosaki teaches. The validity and prudence of such information and advice is disputed; as “good advice” is a subjective judgment. Additional discussion on this controversy is provided in the main biographical article on Robert Kiyosaki, under the “Criticism and Controversy” section.


Robert Kiyosaki's Teachings

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“Financial Education”

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Educational methodologies

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In his words, "Education is more important today than ever before. But we need to teach people to think a little further than just looking for a secure job and expecting the company or the government to look after them once their working days are through. That is an 'Industrial Age' idea, and we aren't there anymore. The rules have changed." –Robert Kiyosaki 2000 Cashflow Quadrant

“The main reason people struggle financially is because they spent years in school but learned nothing about money. The result is people learn to work for money...but never learn how to have money work for them,” says Robert.[1]

Kiyosaki says that life skills are often best learned through experience and that there are important lessons not taught in school. He says that formal education is primarily for those seeking to be employees or self-employed individuals. And according to Kiyosaki, in order to obtain financial freedom, one must surely be either a business owner or an investor, generating passive income. In effect, Kiyosaki stresses what he calls "financial education" as a means to obtaining wealth. (Robert Kiyosaki 2000 Cashflow Quadrant)

Capital Gains vs. Cash Flow (Wealth through passive income)

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Robert Kiyosaki holds the position that one should seek investments based on how much earnings they can expect to receive in cash flow, rather than capital gains. (Kiyosaki, Cashflow 202 The E-Game)

According to Kiyosaki, “wealth” (as he views the term) is measured as the number of days the income from one’s assets will sustain them. He says that “financial independence” is achieved when one’s monthly income from assets exceeds their monthly expenses. This lesson is stressed repeatedly as one of Kiyosaki’s primary points when giving financial instruction. He states that the only way to achieve “true wealth” is through passive (or residual) income. (Robert Kiyosaki 2000 Cashflow Quadrant)

Conversely, Kiyosaki acknowledges that investing for the sake of capital gains may be appropriate, depending on one’s situation. For example (in Cashflow 202 The E-Game), he says, “There are times when I do invest for capital gains…a lot of times we get into the market buying small things that we’re going to flip for quick cash…but eventually you want to transfer it into cash flow. Because cash flow…is what really gives you the freedom. Many times this (Capital Gains) doesn’t give you freedom, it gives you worries…What I want is this (Cash Flow) in the long-term, over here.”

Assets vs. Liabilities (Spending habits)

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One of the major points Kiyosaki writes and talks about is to think of an asset as something that puts money in your pocket and a liability as something that takes money out of it. He says that in order to achieve wealth and be rich, one must buy assets and minimize liabilities. (Robert Kiyosaki 2000 Rich Dad, Poor Dad)

With this reasoning, whether a real estate property is an asset or a liability depends on whether rental income exceeds the costs of ownership (mortgage payments, taxes, maintenance, etc.). According to this, a home which you live in is considered a liability and is only an asset for the bank, since the mortgage payments take money from your pocket and puts it in the bank’s. Even after the mortgage is paid off, the home is still considered a liability because of expenses such as taxes and maintenance.

Much of his advice encourages people to minimize expenses/liabilities (as well as increase income/assets) and to not waste money on buying worthless items (which he calls “doodads”) that clearly do not earn anything and may have little or no market value. (Kiyosaki, Cashflow The E-Game)

Although the majority of his advice consists of what might be considered conservative spending (spending money almost entirely on investments, and very little on anything else), he says he “does not promote living frugally.” He advices one should feel free to spend their money on their dreams. However, this advice is in the context of promoting that one should accomplish these dreams only after a good amount of wealth has first been earned. During the expected years in which it should take to earn a large amount of wealth, Kiyosaki does advocate that one “live frugally”. (Kiyosaki, Cashflow The E-Game)

File:Cashflow Quadrant.jpg

The Cashflow Quadrant

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“The Cashflow Quadrant” is in the name of many of Robert Kiyosaki’s books or other merchandise. “The Cashflow Quadrant” is the name given (by him) to the system in which all the money in the world is earned. And “The Cashflow Quadrant” is what he calls a diagram (designed by Kiyosaki) depicting this system. (Robert Kiyosaki 2000 Cashflow Quadrant)

The diagram consists of four groupings, split with two lines (one vertical and one horizontal). In each of the four groups there is a letter representing a way in which an individual may earn income. The letters are as follows.

  • E: Employee – Working for someone else
  • S: Self-employed or Small business owner – Where a person owns their own job and is their own boss.
  • B: Business owner – Where a person owns a “system” of making money, rather than a job to make them money.
  • I: Investor – Spending money in order to receive a larger payout in return.

For those who are on the left side of the divide (E and S), it is said by Kiyosaki that one may never obtain true wealth (See “Capital Gains vs. Cash Flow (Wealth through passive income)” section of this article).

For those who are on the right side of the divide (B and I), he states that this is the only road to true wealth (See “Capital Gains vs. Cash Flow (Wealth through passive income)” section of this article).

(additional note) Although the source of this information is simply word-of-mouth, it was said that 90% of the population is on the left side, leaving 10% on the right; and only 10% of the total money made is on the left side, leaving 90% of the money made by the people on the right (only 10% of the population). These numbers are meant to depict the United States.

Leverage

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“‘Cashflow’ is the most important word in the world of money.”, begins Kiyosaki. “The second most important word is ‘leverage’. Leverage is the reason some people become rich, and others do not. Because leverage is power, some use it, some abuse it, and others fear it. The reason less than 5% of all Americans are rich is because only 5% know how to use the power of leverage.” (Kiyosaki 2002 Retire Young, Retire Rich)

“True leverage is the ability to do more and more with less and less.”, says Robert. “Here’s a suggestion. Get a clean sheet of paper and begin to write your answers to this question. How can I do what I do for more people, with less work, and for a better price? Rich Dad called this ‘the million dollar question’.” –Robert Kiyosaki 2002 Retire Young, Retire Rich

His primary examples of using leverage are in utilizing “OPM” (Other People’s Money) and “OPT” (Other People’s Time); as seen in his book (2005) OPM:Other Peoples Money: How To Attract Other People's Money For Your Investments – The Ultimate Leverage.

Accounting skills (Financial statements)

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In the computer game Cashflow The E-Game, as well as the board game Cashflow 101, Robert Kiyosaki teaches accounting skills by showing his students how to “be financially literate” and read/write a financial statement. This is a large part of the game, as with each transaction the player is required to cross off old items, add new ones, and calculate the totals. These financial statements consist of income, expenses, assets, and liabilities.

Debt

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“There is good debt and bad debt. Good debt makes you rich, and bad debt makes you poor.” –Robert Kiyosaki, Cashflow The E-Game

Kiyosaki agrees with most, in that he dislikes consumer debt. However he says that a “sophisticated investor” knows that debt is not always a bad thing to have. In other words, when debt produces profitable assets, it may be a good debt to have. Meaning, debt taking money out of your pocket is justified if it enables you to put a greater amount of money into your pocket. For example, if you take out a mortgage loan on a house, you are in debt to the bank; but this debt is justified by your ability to own the property and produce income from it, so long as that income exceeds your expenses. (Kiyosaki 2002 Retire Young, Retire Rich) (Kiyosaki Cashflow The E-Game)

“One of the most recognized forms of leverage is borrowing money. Today, we are aware of the severe problem of people abusing this powerful form of leverage. Many people now fear this form of leverage, saying ‘cut up your credit cards, pay off your mortgage, and get out of debt’. My rich dad would chuckle and say ‘Cutting up my credit cards won’t make me rich. Cutting up my credit cards only makes me miserable.’” –Robert Kiyosaki 2002 Retire Young, Retire Rich

Risk-taking

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Kiyosaki advocates risk-taking and often stresses the importance that one "have guts" to take risk. He says risk is necessary to yielding high gains on investments. Some argue that it is a result of this thinking that he has in the past gone bankrupt, losing millions of dollars. Kiyosaki comments on his prior bankruptcy by saying “it was worth it.” (See the “Dealing with failure” section of this article)

On the other hand, Kiyosaki points out that risk may be calculated, so as to minimize the danger of failure. Much of his advice is reflective of this statement. For example, his frequent advice on investing in assets which produce cash flow, rather than investing for capital gains, is given in part for the sake of protecting oneself from unforeseen failure. That is to say that if one were to invest for capital gains, while disregarding cash flow, they may end up losing money when unforeseen complications causes the value of their investment to drop. (See the “Capital Gains vs. Cash Flow (Wealth through passive income)” section of this article)

General advice

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Dealing with failure

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Kiyosaki says mistakes and failure are to be expected, and then learned from. “Failing is part of winning,” he says. “Expecting to win 100% of the time and never failing is a loser’s reality.” (Kiyosaki It’s Easy To Be Rich)

“…the worst thing that happened at school was that they taught me not to make a mistake.”, says Robert. He continues, “Now if you don’t make a mistake, that means you’re always afraid of trying something new. And the way a human being is designed to learn is by making mistakes.” (Kiyosaki It’s Easy To Be Rich)

“I felt terrible the first time I failed (went bankrupt). I felt even worse the second time.”, begins Robert. “But yes, to me, it was worth it. If I had not failed twice, I would not have retired eighteen years early, nor would I be financially free today.” (Kiyosaki It’s Easy To Be Rich)

“…having a winning strategy sometimes meant losing. …Financially intelligent people think in terms of risk and reward. In other words, financially intelligent people weigh the risks and they weigh the rewards. If the rewards are great enough, they will come up with a strategy or a plan that will increase their chances of success, regardless of how many times they lose before they will win.” –Robert Kiyosaki 2002 Retire Young, Retire Rich

After the above mentioned passage from “Retire Young, Retire Rich”, Robert then proceeds to cite an example of a stock broker he says he knew who’s “winning strategy took in the probability of losing 19 out of 20 times…Each time he wins, he immediately goes back to the same odds –which are one out of twenty.” In this example, the potential losses of the amount of money invested during those 19 times could be outweighed by the one success.

Repetition

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Kiyosaki makes constant use of repetition. He says he feels that in order for an important idea to sink in, one should normally have to consider it again and again. This style is apparent throughout his publicized material. It is a style which is opposed by some of his critics. (See “Criticism and Controversy” section of the main article on Robert Kiyosaki)

Association

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“Birds of a feather flock together” is a small lesson of Kiyosaki’s. This opinion of his was mentioned in the audio companion to his board game “Cashflow 101”. It is an old saying that in this context is meant to imply that if you want to be and think a certain way (i.e. financially educated and wealthy), you should associate with others who either are this way or also intend to be. For instance, spending time with business owners or investors might give you support to be one yourself. He suggests that those who are merely employees or self employed individuals may hinder your progress by offering discouragement and bad advice.

Consultation

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Kiyosaki says that “free advice is often the worst advice”. Meaning many people will offer you advice, but only a few will offer good advice. And although he recognizes that good advice may sometimes come freely, he suggests that paying an experienced, competent professional to share their opinions and advice with you is often a smart thing to do. For instance, consulting a CPA or attorney. (Robert Kiyosaki 2002 Retire Young, Retire Rich)

Greed and Generosity

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In Kiyosaki’s book “Retire Young, Retire Rich”, he gives a short lesson on generosity and the perception of greed. “Doing more and more with less and less is one form of being generous. In fact the easiest way to become rich is by being generous…to become rich by serving more people.”

He then points out how many employees expect to receive pay raises for doing more or less the same job; simply on the basis of loyalty or longevity (an employee’s continued work). Many of these people then think that the rich (their bosses) are greedy if they do not pay for loyalty/longevity. “Can you see how wanting more money for doing the same amount of work can be greedy?”, he points out. “Or wanting to be paid overtime. Or wanting to be paid extra if the job the person does is outside his job description.” That is to say, these people want “something for nothing”. (Robert Kiyosaki 2002 Retire Young, Retire Rich)

“In my world, to ask for more money to do the same job is greedy.”, he says, defending his perspective. “In my world, if I want more money, I first need to do more and more, for less and less money, (and) for more and more people. Then, I become rich.” –Robert Kiyosaki 2002 Retire Young, Retire Rich

He also says that those on the “left side” of “The Cashflow Quadrant”, who oppose his perspective on greed, would tend to work hard to buy themselves things like a big house to live in; whereas those on the “right side” of “The Cashflow Quadrant” tend to provide other people with things, such as a house to live in. (Robert Kiyosaki 2002 Retire Young, Retire Rich)

(See the “Leverage” section of this article) (See also “The Cashflow Quadrant” section of this article)

Market strategies

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Options

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“I absolutely love options. So many people think you have to invest for the long term –buy, hold, and diversify– and save money. That’s a very expensive way to do business. The more sophisticated you become (and) the more knowledgeable you become, the more you’ll want to use options,” says Kiyosaki, beginning his lecture on using options (in a video lesson as part of his Cashflow 202 computer game).

When investing in the stock market, Kiyosaki recommends the use of “puts” and “calls” (stock options). Kiyosaki says, “Most people buy options, but the real pros sell options to people who want to buy them.” He equates the practice to a form of cash flow; particularly when dealing with a what he calls a “channel market” (where stock prices are not likely to go significantly up or down) and one sells an option, but does not end up actually selling the stock. “This is highly speculative, highly risky, (and) you should know what you’re doing. But this is the way...the ‘real’ professional investors in options make their money. They don’t buy options; they sell options. Because most options expire without ever being exercised.” –Robert Kiyosaki Cashflow 202 The E-Game

Likewise, when investing in real estate, Kiyosaki suggests the use of options. In this context, purchasing an “option” means one is paying a relatively small amount of money for the option to buy the property at a later point in time. This means that person may or may not choose to go through with the transaction and purchase the property, usually based on later factors such as a rise in property value or newly obtained financing. Kiyosaki suggests buying an option, so that you may purchase the property for a given price, in hopes that the property value will later rise and you will be able to purchase the property for a price below its value. Unlike some of his other teachings, in this case Kiyosaki is advocating “speculation” and taking action based on the goals of obtaining capital gains, rather than cash flow. (See the “Capital Gains vs. Cash Flow (Wealth through passive income)” section of this article)

Shorts

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“It takes a long time for the bull to come up the market, but the bear goes out the window,” says Robert (in a video lesson as part of his Cashflow 202 computer game). This is in reference to what is called a “bull market” (rising) and a “bear market” (falling), in regards to the stock market.

When speaking about the stock market, Kiyosaki has said that a “professional investor” knows to have multiple investment strategies. He then explains how if one expects a stock to fall in price that he/she could go into what is called a “short position” and make a “naked short sale”. This means that this person will sell a certain amount of stocks at the current market value, only they do not actually own the stocks yet and will have to purchase and provide them later on. Regardless of ownership, the seller in this “short position” is paid in full for selling the stocks; i.e. 100 stocks @ $10 per share = $1,000 paid to the person in short position. This person is hoping to have the price of the stocks fall, where the money from selling at the higher price can then be used to pay for the stocks at the lower price; i.e. 100 stocks @ $7 per share = $700 spent to pay for the stocks. This would leave the difference between the two transactions as profit; i.e. $300. (Robert Kiyosaki Cashflow 202 The E-Game)

Robert points out, however, that this can be a rather risky investment strategy, as it is based on speculation. If the market value were to rise after one makes a “naked short sale”, the person could then be in debt for a significant amount of money. (Robert Kiyosaki Cashflow 202 The E-Game)

Tax deferring strategies

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1031 Exchange

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Kiyosaki explains that when a property is sold and capital gains (profit) is earned, a certain amount of that money (he says 15% - 35%) is supposed to be paid in taxes to the government. He then teaches that using what is called a “1031 Exchange” one can defer (meaning postpone) paying for the taxes on this amount of money (from the capital gains). This is done by giving the capital gains money to a Qualified Intermediary to hold the funds until they are reinvested (within 45 days) into a new property. (Robert Kiyosaki Cashflow 202 The E-Game)

See Also

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