Increase Your Financial IQ Book Review Part 3
Every Sunday here at Ask Mr. Credit Card we review a personal finance book. This week we are reviewing Increase Your Financial IQ by Robert Kiyosaki. If you missed the first two sections of the review you can read them here:
In this section of the book Kiyosaki takes an in-depth look at the different Financial IQ’s, beginning with number one.
Financial IQ #1: Making More Money
Kiyosaki spends some time detailing his own history here. How he graduated from school, took a job with Standard Oil, and then left that job and took a huge pay cut to voluntarily serve in Vietnam. After spending five years in the military (one in Vietnam) he was honorably discharged.
When Kiyosaki returned home he took a job with Xerox – because he wanted to learn to be a salesman, and they provided excellent training. He took the job even though it meant he would take yet another pay cut. Kyiosaki claims he did this because the education was more valuable than the immediate income.
After working for Xerox for a couple of years, and eventually becoming their top salesperson, Kiyosaki started his own business – selling nylon surfer wallets. He briefly chronicles the rise and eventual fall of this business, and then the struggle of rebuilding it.
He believes that every step of his journey made him smarter, more financially educated, and it set the stage for his current business success with The Rich Dad Company.
Every Goal Has A Process:
As we all know, every worthwhile goal has a process and takes work. For example, to become a medical doctor there is a rigorous process of education and training. Many people dream of becoming a doctor, but the process gets in their way. Let me tell you, my own process was a lot of work!
One of the reasons people lack financial IQ #1: making more money, is because they want the money, not the process. What many people do not realize is that it’s the process that makes them rich, not the money.
One of the many reasons lottery winners or kids who inherit family wealth are soon broke is because they received the money, but didn’t have to go through the process. Many other people fail to become rich because they value a steady paycheck more than the learning process of becoming financially smarter and richer. They are held back by the fear of being poor. It is this very fear that keeps them from taking the chances and solving the problems required to become rich.
Wow. That’s some of the best wisdom I believe I have ever seen in a financial book. It is the process that makes you rich. The learning new things, learning from your mistakes, failing, picking yourself back up and doing it again.
Maybe I’m odd, but I find it comforting to think of being rich as a process – a path that I am already on even if I dive into the gutter from time to time. It’s a path that I choose, and that I have control of. That is a very different thing than ing a lottery ticket each day and hoping you will get rich without the process. It’s also a very different thing from experiencing failure and deciding to stop.
The process Kiyosaki is talking about means that you pick yourself back up no matter what your failures are, and you learn from them, and you apply that new knowledge to your life.
Emotional Intelligence:
At this point it is important to point out that financial intelligence is also emotional intelligence. Warren Buffett, the world’s richest investor, says, “If you cannot control your emotions, you cannot control your money.” The same is true for your process. One of the toughest parts of my process was not quitting when I was depressed, not losing my temper when I was frustrated, and to continue to study when I wanted to run.
Another reason many people fail in their process is they cannot live without instant gratification. The main reason I mentioned the low pay I received at the start of my life was to illustrate the importance of delayed gratification. Many will sacrifice a richer tomorrow for a few bucks today. I did not make much money in my twenties or thirties, but I make millions today.
In fact, I would say that when it comes to money, emotional intelligence is the most important intelligence of all.
Instant gratification does keep you poor! I lived many years in that cycle – getting a little money, ing everything I could think of with it, and then being broke until my next paycheck. It wasn’t until I learned to save, and to wait for what I wanted, that I was really able to break out of those chains.
It too effort, time, and education as well, but mostly it took self control. Which, when you boil it down, is pretty much what this entire chapter is about: Having the self control to learn, persevere, learn from your mistakes and wait for your reward – instead of expecting the same reward without the work or discipline.
Why The Rich Get Richer:
One of the reasons the poor and middle class struggle is that they work for money and a steady paycheck. The problem with working for money is you have to work harder, longer, or charge more to make more money. The problem with physically working harder and longer is that we all have a finite amount of time and energy.
One of the reasons why the rich get richer is that every year they work to build or acquire more assets. Adding more assets does not require working harder or longer. In fact, the higher a person’s financial IQ, the less he or she works while acquiring more and better assets. You see, assets work for the rich by producing passive income.
This core concept is one of the reasons why I love Kiyosaki’s books. He is right – most people work for money – paychecks – not assets.
What he never really does hit on much (but it’s fairly obvious) is that if you are currently earning a paycheck, and have no assets, use that paycheck to your first assets. Rinse and repeat until you no longer need the paycheck. Then you will no longer be working for money. The longer you do this, the more assets you will build, and the more financially secure you will be.
Be A Problem Solver:
In order to grow wealthy, you must come to terms with the fact that problems will never go away. Each time you find a solution to problem, a new one will pop up. The key is to realize that the process of solving those problems makes you rich. And once you start solving not only your own problems, but other’s as well, then the sky’s the limit.
People will pay money for you to solve their problems. For example, I will pay money to my doctor to keep me healthy. I pay money to my housekeep to keep my house tidy. I shop at my local supermarket because my problem is hunger and starvation if I don’t eat. I pay taxes to public servants to provide a well-run government. I put money into the offering plate at church to support my spiritual guidance and education.
My Wife makes a lot of money because she solves a big problem; the problem of quality housing at an affordable price. The more she works to solve this problem, the more money she makes. I work hard to solve the problem of the need for financial education.
Simply put there are trillions of ways to make more money because there are trillions of, if not infinite, problems to solve. The question is, which problems do you want to solve? The more problems you solve, the richer you will become.
Many people want to get paid for doing nothing, and are unwilling to solve any problems. Or they want to be paid more than the problem they are solving is worth.
This is a very pragmatic approach, isn’t it? It’s very true. If we find a way to solve a problem, or fill a need – not just for ourselves, but for others too – then we can certainly become rich by doing it. Especially when Kiyosaki’s other tenets are put into play – learning from our mistakes, not giving up, and not working for money but rather, for assets.
Kiyosaki On Capitalism:
I included this section here at the end of the review because it made me laugh:
I am a capitlist, not a laborer….Many think of capitalists as pigs. And many are greedy pigs. Yet there are capitalists who do a lot of good, such as provide health care, food, transportation, energy and communications to the world.
As a capitalist who does my best to make the world a better place, my problem is with people who want to be paid for doing nothing, or paid more to do less. In my opinion, a person who wants to be paid more and do less, or nothing, is also a greedy pig.
Here’s to capitalism 🙂
I hope you enjoyed this section of the review. If you’d like to read future personal finance book reviews, be sure to grab our RSS feed – it’s free and it will deliver our articles straight to your feed reader or email.
Next week we’ll take a look at the next section of Rich Dad’s Increase Your Financial IQ. Thanks for reading!
Have you read this book? Do you have a personal finance book you’d like to see us review? Leave a comment below!
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