Increase Your Financial IQ Book Review
Increase Your Financial IQ Get Smarter With Your Money is another book in the series by Robert Kiyosaki. This book as a foreword by Donald Trump.
Let me start by saying that fans of Kiyosaki will see this book as one more brick to help them lay the foundation of their financial education. Those who hate Kiyosaki may well want to chuck this book straight into the fire – because he begins the book by reinforcing some of his most controversial opinions.
Your House Is Not An Asset
Lack of financial education causes people to do stupid things or be misled by stupid people. For example, in 1997, when I first published Rich Dad Poor Dad and stated that “Your house is not an asset…your house is a liability,” howls of protest went up.
My book and I were severely criticized. Many self proclaimed financial experts attacked me in the media.
Ten years later in 2007, as the credit markets crumbled and millions of people were in financial free fall- many losing their homes, some declaring bankruptcy, others owing 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, not assets.
Wow. Was that a poorly written “I told you so?”
Lack of humility notwithstanding, I do love the premise of this book. The whole idea behind Increase Your Financial IQ is that knowledge is more valuable than money – that knowledge is the true path to wealth. I couldn’t agree more. As Kiyosaki explains it:
Golf Lessons or Golf Clubs
A friend of mine is a golfing fanatic. He spends thousands of dollars a year on new clubs and every new golf gadget that comes to market. The problem is, he will not spend a dime on golf lessons. Hence his golf game remains the same even though he has the latest and greatest golf equipment. If he invested his money in golf lessons and used last year’s clubs, he might be a much better golfer.
The same nutty phenomenon occurs in the game of money. Billions of people invest their hard-earned money in assets such as stocks and real estate but invest almost nothing in information. Hence their final scores remain about the same.
Chapter 1: What is Financial Intelligence?
Kiyosaki begins this chapter by highlighting the most common money problems – for poor people, and rich people.
The money problems of poor people:
- Not having enough money
- Using credit to supplement money shortages
- The rising cost of living
- Paying more in taxes the more they make
- Fear of emergencies
- Bad financial advice
- Not enough retirement money
The money problems of wealthy people:
- Having too much money
- Needing to keep it safe and invested
- Not knowing whether people like them, or their money
- Needing smarter financial advisors
- Raising spoiled kids
- Estate and inheritance planning
- Excessive government taxes
Kiyosaki then goes on to talk about poor solutions to money problems – the ones we think will work, but never really solve anything.
Money alone does not solve your money problems:
Giving poor people money does not solve their money problems. In many cases, it only prolongs the problem and creates more poor people. Take for instance the idea of welfare. From the time of the Gret Depression until 1996 the government guaranteed money to the nations poor regardless of personal circumstance. All you had to do was qualify for the poverty requirements to receive a government check -perpetually. If you showed initiative, got a job, and earned more than the poverty requirement, the government cut off your benefits.
Of course, the poor then had other costs associated with working that they didn’t have before, such as uniforms, child care, transportation, etc. In many cases they ended up with less money than before they had a job, and less time. The system benefited those who were lazy and punished those who showed initiative. The system created more poor people.
Hard work doesn’t solve money problems.
The world is filled with hard working people who have no money to show for it. Hard working people who earn money, yet grow deeper in debt, needing to work even harder for even more money.
So, what does solve money problems?
Financial intelligence solves money problems:
If you want to increase your financial intelligence, you need to be a problem solver. If you don’t solve your money problems you will never be rich. In fact, you will become poorer the longer the problem persists.
Man! I think this is exceptionally true. If you have a problem with how you manage credit, you certainly become poorer over time – as you watch your credit card interest rates and fees being tacked onto your minimum payments over and over again…
If you ignore your bills, or pay irregularly, you can see your credit score drop, fees get added on, everything. I think Kiyosaki’s advice here is very “common sense”. Obviously we need to solve our money problems in order to get richer instead of poorer. Kiyosaki believes that solving these problems as they occur is what gives us our Financial Intelligence. He also believes that small money problems lead to larger ones.
Rich Dad used the example of having a toothache to illustrate what he meant by a problem leading to other problems. He said, “Having a money problem is like having a toothache. If you do not handle the toothache, it makes you feel bad. If you feel bad, you may not do well at work because you are irritable. Not fixing the toothache can leade to further medical complications because it is easy for germs to breed and spread from your mouth.
One day you lose your job because you have been missing work due to your chronic illness. Without a job you cannot pay your rent. If you fail to solve the problem of rent money, you are on the street, homeless, in poor health, eating out of the garbage, and you still have a toothache.
Kiyosaki encourages solving your money problems while they are small…getting down to the root of them from the very start. Instead of using credit cards to cover a shortage of money, take a different tactic – figure out how to earn more, or spend less.
How the poor handle money problems:
The poor see money problems only as problems. Many feel they are victims of money. Many feel they are the only ones with money problems. They think that if they had more money their money problems would be over. Little do they know that their attitude towards money is the problem. Their attitude creates their money problems. Their inability to solve, or their avoidance of, their money probelms only prolongs the problems and makes them bigger.
Well, I have read time and again that everyone thinks they need more money – just a little more to make things ok. In my own life, I have watched my spending adapt regularly to both more, and less money. For a long time, no matter how much (or how little) money I made, I still had nothing left over to claim as my own.
That’s one reasons that I did find a lot of wisdom in Rich Dad Poor Dad – Kiyosaki advises paying yourself first. Otherwise, you definitely find that you will always need just a little more money to be happy.
How the Middle Class Handle Money Problems:
While the poor are the victims of money, the middle class are prisoners of money.
The middle class solve their money problems differently. Instead of solving the money problem, they think they can outsmart their money problems. The middle class will spend money to go to school, so they can get a secure job.
At the age of fifty many middle aged people discover they are prisoner in their own office. Many are valued employees. They have experience. They earn enough money, and have enough job security. Yet deep down they know that they are trapped financially, and they lack the financial intelligence to escape from their office prison. They look forward to surviving fifteen more years when, at age 65 they can retire and then begin to live. On a leaner budget of course.
This again goes back to some of the points Kiyosaki made in Rich Dad Poor Dad – that you don’t want to be the employee that sits behind the desk and collects a paycheck (unless you want to be trapped at 50!). Instead, Kiyosaki advises owning the company, and being the person that hires the employees and signs the checks.
How the Rich Handle Money Problems:
When the rich have money problems, they use their financial intelligence developed through many years of facing and solving money problems. If the rich don’t know the answer to their money problems, they don’t walk away and throw in the towel. They seek out experts who can help them solve their money problems. In the process, they become financially more intelligent and are that much more equipped to solve the next problem when it comes around.
I don’t know…”Financial Intelligence” is starting to sound a lot like “experience solving financial problems” to me. Even so, success breeds success, and failure is an excellent teacher too.
Next Sunday we’ll move a little deeper into Increase Your Financial IQ with the next section on the Five Basic Financial IQ’s. Grab our free RSS feed so that you don’t miss the next section – and thanks for reading!
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