The Rich Invent Money

This is a summary of Rich Dad Poor Dad Chapter 6

In this chapter, Robert Kiyosaki talks about how the rich are able to invent money. When it comes to making more money, most people have tendencies to simply work harder instead of exploring their options. The other theory people subscribe to is to put a little money away every month into some type of savings account and let the interest compounding work for them overtime. The problem with this theory is that it works extremely slow. If you take inflation and taxes on your interest into account, you'll see that you're getting a very poor return on your money.

The reason that people except such low returns for their money is generally because they don't have any other options. To emphasize the importance of having options, Kiyosaki told the story of a 45 year old manager who was fired by his employer due to a downsizing. The manager was on his knees, in front of news cameras, begging the guards to let him talk to the owners to reconsider his termination. He had a wife and two babies, and he was also afraid of losing the home that he had just bought. This manager had no financial stability outside the comfort of his job and no other options due to his lacking financial intelligence. He was holding on to the old ideas of financial stability and believing that his company would always take care of him. According to Kiyosaki, "limiting your options is the same as hanging on to old ideas." After hearing this story and knowing that there are millions in similar situations, it is easy to see that this hanging on to old ideas is dangerous.

Developing financial intelligence is simply about having more options. Having knowledge of accounting, investing, the markets, and the law will allow you to receive greater returns on your money and build up your assets much faster than the average person. In addition, not only can you learn how to get better returns on your money, you can also invent money. Due to the rapid changes in our economy and the development of the internet, this statement is more true now than it was nearly 10 years ago when Rich Dad Poor Dad was written. The key to unlocking new sources of assets and cash flow can be summed up in this quote by Robert Kiyosaki: "The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant."

Kiyosaki gave several examples of how he has invented money through small company stocks and the real estate market. In one of the examples, he was able to create $190,000 of real estate notes without using his own money. This is how he did it:

There was a time between 1994 and 1997 when the real estate market was depressed and the supply of homes greatly outnumbered the demand. So, a house that was normally worth $100,000 was then worth $75,000. However, instead of shopping at the local real estate office, Kiyosaki searched the county courthouse and spoke to bankruptcy attorneys to find deals. As a result, he was able to get this $75,000 house on contract for $20,000 and a $2000 down payment that he borrowed from a friend. While the acquisition was being processed, he immediately began to offer the home in the newspapers for $60,000 with no money down. The house sold quickly, he asked for a $2500 processing fee, and the remaining $40,000 ($60,000 - $20,000) was added to his asset column as a note charging 10 percent annually. If you do the math, he was receiving around $400 per month for structuring the transaction this way. He was able to complete six deals similar to this one within a 2-3 year period.

The prior example was used to show you that money can be invented if you develop your financial intelligence. As I stated before, developing financial intelligence can also help you to make your money work hard for you. This can be accomplished by learning how to invest. According to Kiyosaki, there are two types of investors. The first type of investor simply purchases an investment as if he was shopping for retail goods. These investments can be real estate, stocks, bonds, etc... and are packaged to be bought in a simple manner. The second type of investor is creative with the way he puts his deals together. Again, this was demonstrated in the last real estate example. The main idea is that financial intelligence is the key to creating money and having money work hard for you.

Note: Remember that this is only a summary of rich dad poor dad. I'm sure you'll get a much more thorough and effective understanding by reading the book. My main focus is to just outline the main ideas and concepts for you. Visit Amazon.com to find Rich Dad Poor Dad for the best price.