Robert Kiyosaki: How To Manage Your Money Better Than You Are Right Now

©Robert Kiyosaki

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If you’ve ever struggled with managing your money effectively or making it work for you, you’re not alone. Many people have a hard time saving money, investing wisely and managing their finances.

As a financial guru, entrepreneur and creator of the Rich Dad Company, Robert Kiyosaki, understands this plight well. On his blog, he wrote about the best ways to strategically manage your money so that you’re not gambling it away.

Many of these ways are easy to implement, meaning you can start doing them even if you don’t have much experience managing your finances. You’ll just need some practice, discipline, and financial education.

That being said, here are the best ways to manage your finances better than you’re doing right now, according to Kiyosaki.

Build Your Financial Literacy

One of the first things Kiyosaki pointed out in his article about managing money is that many of the methods are similar to gambling. Take investing as an example. Even the safest investments come with some level of risk. Whenever you invest, you’ll need to account for this and pay close attention to where your money is going and how it’s changing.

Unlike gambling at a casino, however, you can make managing your money — and investing — feel less like a gamble by improving your financial education and literacy. The more you understand the potential risks and gains, the more control you’ll have over your money.

To start improving your financial education, Kiyosaki suggested fully immersing yourself in a specific topic — like investing or credit. You can do this in several ways, such as through workshops, books, or online learning.

Take your time and make sure you have a solid grasp on whatever subject you’ve chosen before moving on to the next one. Once you’re confident in your own financial literacy, you can then make a “big leap forward,” as Kiyosaki put it.

Avoid ‘Safe’ Investments

Kiyosaki puts a lot of emphasis on investing, specifically in cash flow assets that help build net worth. This can include things like investing in a certain commodity, purchasing commercial real estate, or starting a business.

But as Kiyosaki pointed out, investing does come with its own risks. This is true even if you try to stick with “safe” investments. These so-called “safe” investments might even be riskier in some ways to income-producing assets.

Many financial planners will suggest new or individual investors to put their money in savings accounts, 401(k)s, and mutual funds. The problem is that some of these types of investments don’t grow as much as you’re going to need them to.

Take a savings account, for example. Even in a high-yield account, your money might not grow very much or very quickly. This can be especially problematic if the value of the dollar drops more than the potential yield.

Mutual funds, which contain bonds, stocks, and other securities, may be a better option for those preparing for retirement. The issue, Kiyosaki said, is that these often come with additional fees that people don’t always factor in.

As for the 401(k) and other retirement plans, you might also have to deal with additional fees or penalties. Not only that, but once you contribute money, you’re giving up control over it.

Understand Risk Management

Learning how to understand and manage the risks of investing is a vital part of being able to handle your money better. Kiyosaki pointed out that even if you use a financial advisor to help, you’re still going to have to deal with some degree of risk.

That’s why he recommended learning about risk management yourself. By doing this, you’ll be better equipped to manage your own investments. You can also reduce your risk level.

Know Your ‘Personal Financial Statement’

Kiyosaki also brought up the importance of becoming an expert on your own “personal financial statement.” This is essentially the foundation needed for financial success and stability.

When you have this statement, you’ll be able to more easily track your income, expenses, assets, and liabilities. You’ll also become more knowledgeable about your own cash flow.

Understand the Issue With Saving

Simply putting your money in a savings account can be problematic for many reasons. For one, most traditional savings accounts don’t have a very high yield. If your money does grow, it will typically be extremely slow or even in negligible amounts. And with inflation, you might end up losing value on your savings over time.

Instead of relying on savings accounts, Kiyosaki suggested learning about smart investing. In particular, he emphasized purchasing assets that help you “hedge against inflation.”

Understand Capital Gains and Cash Flow

Last but not least, Kiyosaki wrote about the importance of understanding capital gains vs. cash flow — and choosing the option that works best for you and your investment strategy.

Investors who prioritize cash flow tend to purchase an asset and keep it so that they can benefit from regular returns every month, quarter, or year. These investors will only rarely sell these income-producing assets.

Investors who focus on capital gains may do so with greater risk. This is because, as Kiyosaki put it, capital gains investments require repetitive action and don’t come with a guaranteed success rate. To illustrate this, he used the example of buying, fixing, and flipping a home — you might see great returns, or you might not. Either way, you’ll have to repeat the process over and over again to build wealth.

While it’s up to you which method you choose, Kiyosaki suggested the cash flow option as it allows you to build wealth slowly but surely over time, while earning regular passive income.

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