How To Get Rich Quick

Rich dad would regularly review the various levels of investors with me. He wanted me to understand the various ways investors made their fortunes. My rich dad had become wealthy by first investing as an inside investor . He had started small and learned the tax advantages available to him. He quickly gained confidence and became a truly sophisticated investor at an early age. He had built an incredible financial empire. My real dad, on the other hand, had worked hard all his life as a government employee and had little to show for it.

As I got older, the gap between my rich dad and my poor dad was increasingly evident. I finally asked my rich dad why he was becoming wealthier while my real dad was working harder and harder.

In the introduction this book I related the story of walking along the beach with my rich dad looking at the large piece of ocean front property he had just purchased. During that walk on the beach, I realized that my rich dad had just purchased an investment that only a rich person could acquire. The problem was my rich dad was not really a rich man, yet. That is why I asked him how he could afford such an expensive investment when I knew my real dad, a man who made more money than my rich dad, could not.

It was during this walk on the beach that my rich dad shared the basis of his investment plan. He said, “I can't afford this land either , but my business can.” As I stated in the introduction, this was when my curiosity about the power of investing began and when I became a student of the profession. During that walk on the beach, at the age of 12, I was beginning to learn the secrets of how many of the very richest people in the world invest and why they are the 10% that control 90% of money.

Again, I refer to Ray Kroc, founder of McDonald's, saying virtually the same thing to my friend's MBA class. Ray Kroc said to the class, “My business is not hamburgers. My business is real estate. ” That is why McDonald's owns the most valuable real estate in the world. Ray Kroc and rich dad understood that the purpose of a business was to buy assets.

When I was a young boy still in elementary school, rich dad was already placing ideas in my head about the differences between being rich, poor, and middle class. During one of our Saturday lessons, he said, “If you want job security, follow your dad's advice. If you want to be rich, you need to follow my advice. The chances of your dad having both job security and becoming rich are slim. The laws are not written in his favor. ”

One of rich dad's six lessons as described in Rich Dad Poor Dad was a lesson about the power of corporations. In CASHFLOW Quadrant, I wrote about how the different quadrants were governed by different tax laws. Rich dad used these lessons to show me the difference between his investment plan and my real dad's investment plan. These differences greatly affected my life's path after my formal education was complete and my military duty was over.

“My business buys assets with pre-tax dollars, ” said rich dad as he drew the following diagram:

“Your dad tries to buy assets with after-tax dollars. His financial statement looks like this,” said rich dad:

As a young boy, I really did not fully comprehend what rich dad was trying to teach me, yet I recognized the difference. Because I was confused, I spent much time quizzing him on what it meant. To help me understand a little better , he drew the following diagram

“Why?” I asked rich dad. “Why do you pay your taxes last and why does my dad pays his taxes first?”

“Because your dad is an employee and I am a business owner, ” said rich dad. “Always remember that we may live in a free country, but everybody does not live by the same laws. If you want to be rich, or get rich quickly, you had best follow the same laws the rich use.”

“Well, your dad is a highly paid government employee, so I estimate that he pays at least 50% to 60% of his total income in taxes in one form or another,” said rich dad.

“Well, that is not really the correct question,” said rich dad. “The real question is: ‘How much is my taxable income?'”

“Well,” said rich dad. “I pay taxes on net income, and your dad's taxes are withheld from his total income. That is one of the biggest differences between your dad and me. I get ahead faster because I get to buy my assets with gross income and pay taxes on net income. Your dad pays taxes on gross income and then tries to buy assets with his net income. That is why it is very, very hard for him to achieve any kind of wealth. He gives a lot of his money to the government first, money that he could be using to buy assets. I pay my taxes on the net, or what is left over, after I buy my assets. I buy assets first and pay taxes last. Your dad pays taxes first and has very little money left over to buy assets with.”

At the age of 10 or 11, I really did not understand exactly what rich dad was saying. I just knew it did not sound fair and I said so. “That is not fair,” I protested.

“I agree,” said rich dad, nodding. “It isn't fair, but that is the law .”

When discussing this issue in my seminars, I often hear, “That may be a law in the United States but that is not the law in my country.”

Since I teach in many English-speaking countries, I often reply with “How do you know? What makes you think the laws are different?” The fact is, most people do not know which laws are similar and which laws are different, so I offer a short lesson in economic history and laws.

I point out to my classes that most English-speaking countries' laws are based upon English common law, the law spread throughout the world by the British East India Company. I also point out to them the exact date the rich began to make the rules , “In 1215, the Magna Carta, the most famous document of British constitutional history, was signed. By signing the Magna Carta, King John yielded part of his power to the rich barons of England. It is now generally recognized that the Magna Carta showed the viability of opposition to the excessive use of royal power.”

I then explain the importance of the Magna Carta just how my rich dad had explained it to me. “Ever since the signing of the Magna Carta, the rich have been making the rules.” He also said, “The spiritual golden rule is: ‘Do unto others as you would have them do unto you.' Other people say that the financial golden rule is: ‘He who has the gold makes the rules. ' However , I think the real financial golden rule is: ‘He who makes the rules gets the gold. '”

introduction article seems to back up rich dad's view of the real financial golden rule. The article said, “For all the talk of mutual funds for the masses, of barbers and shoeshine boys giving investment tips, the stock market has remained the privilege of a relatively elite group.

“Only 43.3% of all households owned any stock at all in 1997, the most recent year for which data is available, according to New York University economist, Edward Wolff . Of those, many portfolios were relatively small. Nearly 90% of all shares were held by the wealthiest 10% of households. The bottom line: That top 10% held 73% of the country's net worth in 1997, up from 68% in 1983. ”

When I was 25 and almost out of the Marine Corps, rich dad reminded me of the difference in two life paths.

“Always remember that the rules are different for the different quadrants. Therefore, make your next career decision carefully. While that job with the airlines might be fun in the short term, in the long run, you might not get to be as rich as you want to be. ”

Although rich dad did not finish school, he was an avid student of economics, world history, and laws. When I was attending the U.S. Merchant Marine Academy, at Kings Point, New York (1965 to 1969), studying world trade, rich dad was very excited that my studies included admiralty law , business law, economics, and corporate law . Because I had studied these subjects, it was much easier for me to decide to not take a job as an airline pilot.

One of the differences between America and the rest of the world colonized by the English is that the colonists in America protested excess taxes by organizing the Boston Tea Party. America grew rapidly from the 1800s to the 1900s simply because we were a low-tax country. Being a low tax haven, the United States attracted entrepreneurs from all over the world who wanted to get rich quickly. In 1913, however , we passed the 16th Amendment, which made taxation of the rich possible, and that was the end of the low -tax state. Yet, the rich have always found a way out of the trap, which is why the laws are different for the different quadrants, especially favoring the B quadrant, the quadrant of the ultra-rich of America.

The rich have gotten even for the tax law change of 1913 by slowly changing laws and putting the pressure back on the other quadrants. So the slow creep of taxation has looked like this:

In 1943, the Current Tax Payment Act was passed. Now, instead of just taxing the rich, the federal government was allowed to tax everyone in the E quadrant. If you were an employee, in the E quadrant, you could no longer pay yourself first because the government got paid first. People are always shocked to see how much is taken out in both direct taxes as well as hidden taxes from their paycheck.

In 1986, the Tax Reform Act was passed. This law change dramatically affected anyone who was a professional worker—people such as doctors, lawyers, accountants, architects, engineers, etc. This law change prevented someone in the

S quadrant from using the same tax laws used by the B quadrant. For example, if an S quadrant person has the same income as a B quadrant person, the S quadrant worker will have to pay a beginning tax rate of 35% (50% when you include social insurance taxes). On the other hand, the B quadrant person could possibly pay 0% on the same amount of income.

In other words, the golden rule—“He who makes the rules keeps the gold”—was once again true. The rules are made from the B quadrant and have been made from there ever since 1215, when the barons forced the king to sign the Magna Carta. Maybe the B in the B quadrant stands for baron.

Some of these laws and changes were explained in more detail in Rich Dad Poor Dad and in CASHFLOW Quadrant.

Even after I had decided to follow rich dad's investment plan instead of my poor dad's plan, rich dad shared with me a simple analysis about my chances for success in life that reinforced my decision. Drawing the CASHFLOW Quadrant, he said, “Your first decision is to figure out in which quadrant you have the most chance of achieving long-term financial success.”

employers will pay the big money for, so you'll probably never make enough money as an employee to invest with. Besides, you're sloppy, you get bored easily, you don't have a very long attention span, you tend to argue, and you don't follow instructions well. Therefore, your chances for financial success in the E quadrant don't look very good. ”

Pointing to the S quadrant, he said, “S stands for smart. That is why so many doctors, lawyers, accountants, and engineers are in the S quadrant. You're bright, but you're not that smart. You were never much of a student. The S also stands for star. You'll probably never be a rock star, movie star, or sports star , so your chances of making the big money in the S quadrant are slim.”

“That leaves the B quadrant, ” rich dad continued. “This quadrant is perfect for you. Since you lack any special talent or expertise, your chances for attaining great wealth will be in this quadrant. ”

And with that comment, I was certain. I decided that my best chance for great wealth and financial success would be through building a business. The tax laws were in my favor, and my lack of stardom in the other quadrants just made my decision easier.

I try to pass along the bits of wisdom I learned from my rich dad in the seminars I present today. When I am asked how I invest, I usually tell the group about investing through a business, or as rich dad said, “My business buys my assets.”

To the statement that not everyone can own a business, I remind people that less than 100 years ago, most people did own their own businesses. Just 100 years ago, approximately 85% of the U.S. population were either independent farmers or small shopkeepers. I know that both sets of my grandparents were small-business owners. Only a small percentage of the population was comprised of employees. I then say, “It seems that the Industrial Age—with its promise of high-paying jobs, job security for life, and pension benefits—has bred that independence out of us.” I also add that our educational system was designed to create employees and professional people, not entrepreneurs, so it would be only natural for people to feel that starting a business would be risky.

1. Chances are that you all have the potential to be great business owners if you have the desire to develop the skills. Our ancestors developed and depended upon their entrepreneurial skills. If you do not have a business today, the question is: Do you want to go through the process of learning how to build a business? You are the only one who can answer that question.

2. When people say, “I have no money to invest,” or “I need a real estate deal I can buy for no money down,” I reply, “Maybe you should switch quadrants and invest from the quadrant that allows you to invest with pre-tax dollars. Then you might have a lot more money to invest.”

One of the first considerations in your investment plan should be to decide in which quadrant lies the best opportunity for you to make the most money quickly. That way, you can begin investing for the highest returns, with the least risk, and you'll have the best chance of becoming very, very rich.