The Only Rule to Become Rich

Hello people! A short context- the rich dad decides to teach Robert and Mike how to become rich through six main lessons. I've divided Lesson One- The Rich Don't Work for Money into three parts: the first part- The First Meeting with Rich Dad, the second part- The Second Meeting with Rich Dad and the third part The Third Meeting with Rich Dad. Here comes Lesson Two: Why Teach Financial Literacy? (This lesson is narrated by Robert Kiyosaki)

In 1994, I retired at the age of 47, and my wife, Kim, was 37. Retirement does not mean not working. To my wife and me, it means that excluding unforeseen cataclysmic changes, we can work or not work, and our wealth grows automatically, staying way ahead of inflation. It's like planting a tree. You water it for years and then one day it doesn't need you anymore. Its roots have gone down deep enough. Then, the tree provides shade for your enjoyment. Whenever I speak to groups of people, they often ask questions such as, "How do I make millions?" "Is there a good book I would recommend?" "What is the secret to success?" They often are greatly disappointed with my answer. I simply say to them what my rich dad said back to me when I was a little kid, "If you want to be rich, you need to be financially literate."

Rule One. You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule.

"Rich people acquire assets. The poor and middle class acquire liabilities."

"An asset is something that puts money in your pocket. A liability is something that takes money out of your pocket. This is all you need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities."

In 80% of most families, the financial story is a story of working hard to get ahead. Not because they don't make money. But because they spend their lives buying liabilities instead of assets.

The arrows in the diagrams represent the flow of cash or cash flow. The above box is an Income Statement, often called a Profit and Loss Statement. It measures income and expenses. Money in and money out. The bottom box is the Balance Sheet. It is called that because it is supposed to balance assets against liabilities.

For instance, this is the cash flow pattern of a poor person or a young person still at home:

This is the cash flow pattern of a person in the middle class:

This is the cash flow of a wealthy person:

A person can be highly educated, professionally successful and financially illiterate. These people often work harder than they need to because they learned how to work hard, but not how to have their money work for them.

"If you find you have dug yourself into a hole... Stop Digging."

To be continued... Happy Reading!