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This publication is designed to provide competent and reliable informationregarding the subject matter covered. However, it is sold with the understandingthat the author and publisher are not engaged in rendering legal, financial, orother professional advice. Laws and practices often vary from state to state and iflegal or other expert assistance is required, the services of a professional shouldbe sought. The authors and publisher specifically disclaim any liability that isincurred from the use or application of the contents of this book.Copyright 2008 by Robert T. Kiyosaki All rights reserved. Except aspermitted under the U.S. Copyright Act of 1976, no part of this publication maybe reproduced, distributed, or transmitted in any form or by any means, or storedin a database or retrieval system, without the prior written permission of thepublisher.Images/Text/Data from Audio-Visual Methods in Teaching 3rd edition by Dale,1969 used here with the permission of Wadsworth, a division of ThomsonLearning. All rights reserved. Text and images may not be cut, pasted, altered,revised, modified, scanned, or adapted in any way without the prior writtenpermission of the publisher: www.thomsonrights.com.CASHFLOW, Rich Dad, Rich Dad’s Advisors, Rich Dad’s Seminars, EBSI, B-ITriangle are registered trademarks of CASHFLOW Technologies, Inc.Business PlusHachette Book Group237 Park AvenueNew York, NY 10017
Visit our Web sites at www.HachetteBookGroup.com and www.richdad.com.Business Plus is an imprint of Grand Central Publishing.The Business Plus name and logo are trademarks of Hachette Book Group, Inc.First eBook Edition: March 2008Quotations from the following sources appear in this book: Eleanor Laise, “WhatIs Your 401(k) Costing You?” Wall Street Journal, March 14, 2007.Justin Lahart, “How the ‘Quant’ Playbook Failed,” Wall Street Journal, August24, 2007.ISBN: 978-0-446-51591-7
ContentsBestselling Books by Robert T. Kiyosaki & Sharon L. LechterForewordAuthor’s NoteIntroduction: Does Money Make You Rich?Chapter 1: What Is Financial Intelligence?Chapter 2: The Five Financial IQsChapter 3: Financial IQ #1: Making More MoneyChapter 4: Financial IQ #2: Protecting Your MoneyChapter 5: Financial IQ #3: Budgeting Your MoneyChapter 6: Financial IQ #4: Leveraging Your MoneyChapter 7: Financial IQ #5: Improving Your Financial InformationChapter 8: The Integrity of MoneyChapter 9: Developing Your Financial GeniusChapter 10: Developing Your Financial IQAbout the AuthorCashflow ClubsRich Dad’s WisdomFree Audio Download
Bestselling Books by Robert T. Kiyosaki & Sharon L. Lechter
Rich Dad Poor DadWhat the Rich Teach Their Kids About Money that the Poor and Middle ClassDo Not Rich Dad’s CASHFLOW QuadrantRich Dad’s Guide to Financial Freedom Rich Dad’s Guide to InvestingWhat the Rich Invest In that the Poor and Middle Class Do Not Rich Dad’s RichKid Smart KidGive Your Child a Financial Head Start Rich Dad’s Retire Young Retire RichHow to Get Rich Quickly and Stay Rich Forever Rich Dad’s ProphecyWhy the Biggest Stock Market Crash in History is Still Coming. And How YouCan Prepare Yourself and Profit from it!Rich Dad’s Success StoriesReal-Life Success Stories from Real-Life People Who Followed the Rich DadLessons Rich Dad’s Guide to Becoming Rich Without Cutting Up Your CreditCards Turn “Bad Debt” into “Good Debt”Rich Dad’s Who Took My Money?Why Slow Investors Lose and Fast Money Wins!Rich Dad Poor Dad for TeensThe Secrets About Money—That You Don’t Learn In School!Rich Dad’s Escape from the Rat Race How to Become a Rich Kid by FollowingRich Dad’s Advice Before You Quit Your Job10 Real-Life Lessons Every Entrepreneur Should Know About Building aMultimillion-Dollar Business
ForewordI first met Robert Kiyosaki in 2004. We wrote a bestselling book together in2006. As we head into 2008, it’s become even clearer to me that what Roberttalks about and teaches is more important than ever. Financial education iscrucial to this country at this point, and Robert’s acumen in this area cannot bedisputed.Just look at what was discussed in our book, Why We Want You To Be Rich,and then take a look at what has happened since then. I’d say we knew what wewere talking about. Robert is taking you one step further with Rich Dad’sIncrease Your Financial IQ and I have every reason to believe he will be asprescient as we were in 2006. I would advise you to pay attention to what he hasto say.Robert and I have shared concerns and we have traveled similar paths asteachers and businessmen. Both of us had rich dads who helped to shape ourlives, our spirits, and our many successes. We are both entrepreneurs and realestate investors, and we are successful because we had financial education. Weknow its importance and are serious when it comes to financial literacy. Roberthas said, “It’s financial education that enables people to process financialinformation and turn it into knowledge . . . and most people don’t have thefinancial education they need to take charge of their lives.” I couldn’t agreemore.One thing I noticed immediately about Robert is that he is not complacent.He’s very successful already—because he loves what he’s doing. That’s anotherthing we have in common. That’s fortunate for you, because he has a lot of verygood advice to give. As I said in Why We Want You To Be Rich, what’s the pointof having great knowledge and keeping it to yourself? Robert answers thatquestion with every book he writes, and you’re lucky he’s sharing it with you.One of the first steps to getting richer by getting smarter with your money is
to take advantage of opportunities when they present themselves. Right now youare holding a great opportunity. My advice to you is to read Rich Dad’s IncreaseYour Financial IQ and to pay attention. You will be on the right path to financialfreedom, and on the right path to big success. By the way, don’t forget to ThinkBig. We’ll see you in the winner’s circle.Donald J. Trump
Author’s NoteMoney Is Not EvilOne of the greatest failures of the educational system is the failure to providefinancial education to students. Educators seem to think that money has somesort of quasi-religious or cultlike taint to it, believing that the love of money isthe root of all evil.As most of us know, it is not the love of money that is evil—it is the lack ofmoney that causes evil. It is working at a job we hate that is evil. Working hardyet not earning enough to provide for our families is evil. For some, beingdeeply in debt is evil. Fighting with people you love over money is evil. Beinggreedy is evil. And committing criminal or immoral acts to get money is evil.Money by itself is not evil. Money is just money.Your House Is Not an AssetThe lack of financial education also causes people to do stupid things or bemisled by stupid people. For example, in 1997, when I first published Rich DadPoor Dad and stated that “Your house is not an asset . . . your house is aliability,” howls of protest went up. My book and I were severely criticized.Many self-proclaimed financial experts attacked me in the media. Ten yearslater, in 2007, as the credit markets crumbled and millions of people were infinancial free fall—many losing their homes, some declaring bankruptcy, othersowing more on their house than it was worth as real estate dropped in value—these individuals painfully found out that their homes are indeed liabilities, notassets.
Two Men, One MessageIn 2006, my friend Donald Trump and I wrote a book entitled Why We Want YouTo Be Rich. We wrote about why the middle class was falling behind and whatwe thought the causes of the decline were. We said that many of the causes werein the global, government, and financial markets. This book was also attacked bythe financial media. But by 2007, most of what we said had come true.Obsolete AdviceToday, many financial experts continue to recommend, “Work hard, save money,get out of debt, live below your means, and invest in a well-diversified portfolioof mutual funds.” The problem with this advice is that it is bad advice—simplybecause it is obsolete advice. The rules of money have changed. They changedin 1971. Today there is a new capitalism. Saving money, getting out of debt, anddiversifying worked in the era of old capitalism. Those who follow the “workhard and save money” mantra of old capitalism will struggle financially in theera of new capitalism.Information vs. EducationIt is this author’s opinion that the lack of financial education in our schoolsystems is a cruel and evil shame. In today’s world, financial education isabsolutely essential for survival, regardless of whether we are rich or poor, smartor not smart.As most of us know, we now live in the Information Age. The problem withthe Information Age is information overload. Today, there is too muchinformation. The equation below explains why financial education is soimportant.Information Education KnowledgeWithout financial education, people cannot process information into usefulknowledge. Without financial knowledge, people struggle financially. Withoutfinancial knowledge, people do things such as buy a house and think their home
is an asset. Or save money, not realizing that since 1971, their money is nolonger money but a currency. Or do not know the difference between good debtand bad debt. Or why the rich earn more yet pay less in taxes. Or why the richestinvestor in the world, Warren Buffett, does not diversify.Leaping LemmingsWithout financial knowledge, people look for someone to tell them what to do.And what most financial experts recommend is to work hard, save money, getout of debt, live below your means, and invest in a well-diversified portfolio ofmutual funds. Like lemmings simply following their leader, they race for thecliff and leap into the ocean of financial uncertainty hoping they can swim to theother side.
This Book Is Not about Financial AdviceThis book will not tell you what to do. This book is not about financial advice.This book is about your becoming financially smarter so you can process yourown financial information and find your own path to financial nirvana.In sum, this book is about becoming richer by becoming smarter. This book isabout increasing your financial IQ.
IntroductionDoes Money Make You Rich?The answer is No. Money alone does not make you rich. We all know peoplewho go to work every day, working for money, making more money, but fail tobecome richer. Ironically, many only grow deeper in debt with each dollar theyearn. We have all heard stories of lottery winners, instant millionaires, who areinstantly poor again. We have also heard stories of real estate going intoforeclosure. Instead of making homeowners richer, more financially secure, realestate drives homeowners out of their homes and into the poorhouse. Many of usknow of individuals who have lost money investing in the stock market. Maybeyou are one of those individuals. Even investing in gold—the world’s only realmoney—can cost the investor money.Gold was my first real investment as a young adult. I began investing in goldbefore I began investing in real estate. In 1972, at the age of twenty-five, I beganbuying gold coins when gold was approximately 70 an ounce. By 1980, goldwas approaching 800 an ounce. The frenzy was on. Greed overtook caution.Rumors were that gold was going to hit 2,500 an ounce. Greedy investorsbegan piling on, buying gold, even though they had never done so before. Butinstead of selling some of my gold coins and making a small profit, I hung on,also hoping that gold would go higher. About a year later, as gold dropped below 500 an ounce, I finally sold my last coin. From 1980, I watched as gold driftedlower and lower till it finally bottomed out at 250 in 1999.Although I did not make much money, gold taught me many priceless lessonsabout money. Once I realized that I could lose money investing in real money,gold, I realized that it was not gold, the asset, that was valuable. It was theinformation relative to the asset that ultimately made a person rich or poor. Inother words, it is not real estate, stocks, mutual funds, businesses, or money thatmakes a person rich. It is information, knowledge, wisdom, and know-how, a.k.a.
financial intelligence, that makes one wealthy.Golf Lessons or Golf ClubsA friend of mine is a golfing fanatic. He spends thousands of dollars a year onnew clubs and every new golf gadget that comes to market. The problem is, hewill not spend a dime on golf lessons. Hence his golf game remains the same,even though he has the latest and greatest in golf equipment. If he invested hismoney in golf lessons and used last year’s clubs, he might be a much bettergolfer.The same nutty phenomenon occurs in the game of money. Billions of peopleinvest their hard-earned money in assets such as stocks and real estate, but investalmost nothing in information. Hence their financial scores remain about thesame.Not a Magic FormulaThis book is not a get-rich-quick book or a book about some magic formula.This book is about increasing your financial intelligence, your financial IQ. It isabout getting richer by getting smarter. It is about the five basic financialintelligences that are required to grow richer, regardless of what the economy,stocks, or real estate markets are doing.The New Rules of MoneyThis book is also about the new rules of money, rules that changed in 1971. It isbecause of these changes in the rules that the old rules are obsolete. One of thereasons why so many people are struggling financially is because they continueto operate according to the old rules of money, old rules such as work hard, savemoney, get out of debt, invest for the long term in a well-diversified portfolio ofstocks, bonds, and mutual funds. This book is about playing by the new rules ofmoney, but to do so requires increasing your financial intelligence and yourfinancial IQ.After reading this book, you will be better
Rich Dad Poor Dad for Teens The Secrets About Money—That You Don’t Learn In School! Rich Dad’s Escape from the Rat Race How to Become a Rich Kid by Following Rich Dad’s Advice Before You Quit Your Job 10 Real-Life Lessons Every Entrepreneur Should Know About Building a Multimillion-Dollar Business . Foreword I first met Robert Kiyosaki in 2004. We wrote a bestselling book together in .
