In 2014, Forbes compiled list of history’s 100 best money quotes. No. 47 was a statement by Robert Kiyosaki: “It’s not how much money you make, but how much money you keep, how hard it works for you and how many generations you keep it for.”
Kiyosaki built his Rich Dad Poor Dad empire on the shoulders of his 1997 book by the same name. It is estimated the investor, author, speaker, consultant and lightning rod for controversy has parlayed his original success into an $80 million fortune, according to Celebrity Net Worth. Here are six things he thinks you should do with your money right now.
1. Accumulate Cash-Flowing Assets — Not Savings — for Retirement
Kiyosaki is a major proponent of having enough money to retire comfortably after your earning years — but he doesn’t believe in saving or the traditional “nest egg” philosophy. The reason? Saving enough for retirement requires investors to answer three questions:
- How long will I live?
- At what rate will inflation rise?
- How will the markets behave?
Since no one can answer those questions, saving for retirement is gambling with your future, according to Kiyosaki. Instead, develop cash-flowing assets, not a finite pile of money.
“By purchasing and saving cash-flowing assets, you could build a pipeline of cash flow for life — a pipeline that would produce cash in good times and bad, in market booms and market crashes,” he told blogger Jeff Rose in a post on DailyFinance. “Your cash flow would increase automatically with inflation and, at the same time, allow you to pay less in taxes. [This] means your standard of living does not have to decrease, but can actually increase.
You can earn cash flow from real estate rentals, stocks via dividends, from bonds via interest, or from oil, books, and patents via royalties. In other words, there are many ways to stress-free retirement freedom. All you have to do is change your definition of ‘nest-egg’ and you can survive at your current standard of living for as long as you live, whether you work or not. And you’ll leave infinite money for your loved ones, too.”
Related: What’s in Robert Kiyosaki’s Wallet?
2. Pay Yourself First
Most people want to accumulate savings or give to charity but they view those goals as luxuries that they can only dabble in after their bills are paid. Kiyosaki wants you to pay yourself first. When you view the accumulation of surplus as a bill that — like the rent and utilities — simply must be paid, you will treat your own financial goals as seriously as you do your traditional expenses.
“Most people use their budget as a plan to become poor or middle class rather than to become rich,” he wrote on GOBankingRates. “My budget is a plan to become rich. You have to make a surplus an expense.”
3. Invest in Systems, Not Products
Kiyosaki is constantly bombarded with pitches from people who believe their amazing product is worth his investment. He rarely invests, even when he loves the product. Why? Kiyosaki believes that the best product is nothing without a business system to back it up. Similarly, a great system can lift an average product.
“The most important thing is the system behind the product or idea,” he wrote on his site. “Case in point, most of us can cook a better hamburger than McDonald’s, but few of us can build a better business system. Rich dad said, ‘The product is the least important piece to inspect when evaluating a business.’ He believed that a truly successful business was built on systems and that the product didn’t have to be the best if the systems were world class. It still had to be good, just not the best.”
4. Use Other People’s Money to Invest
Kiyosaki started his journey toward wealth while he and his wife spent three weeks living as a homeless couple. His overarching philosophy is that you don’t need money to invest — you need ideas. People with money will buy into ideas if you develop them and articulate them correctly.
“I’m often asked how to start investing with little or no money,” he wrote on Facebook. “Please hear this as this is the hardest thing for people to understand: You do NOT invest with money! You invest with your mind! No matter what the field, your biggest asset is your mind. Once you have knowledge, you find deals, find your team and use other people’s money. You sell the deal and your team to get investment money.”
5. Invest Only Where You Can Influence Transactions
Many people rely on the direction of their broker. Kiyosaki wants you to take the opposite approach and use your broker as a tool, which you direct into and out of transactions.
“Sophisticated investors who have inside influence can direct how the investment is sold or expanded,” he wrote on his site. “As outside investors in other companies, sophisticated investors carefully track the performance of their investments and direct their broker to buy or sell appropriately. Many investors today rely on their brokers to know when to buy and sell. That is not sophisticated. It’s foolish.”
6. Control Terms and Agreements of Your Investments
The “Rich Dad” philosophy is based on control — control of your finances, control of your expenses and control of your life. Kiyosaki believes that you should always extend that control further and further into your financial life — including to the terms that bind you to your investments.
“The sophisticated investor is in control of the terms and conditions of the agreements he or she makes when on the inside of the investment,” he wrote on his site. “For instance, when I rolled over the sale of several of my small houses into a small apartment building, I used a Section 1031 exchange (U.S. law), which allowed me to roll over the gain. I didn’t have to pay taxes on the sale because I controlled the terms and conditions of the agreement.”