Rich Dad Poor Dad by Robert Kiyosaki (Part II)

In the first segment of this compendium, we delved into the intricate facets of Cash Flow Cycles, liberating oneself from the ceaseless work treadmill, contrasting the philosophies of Rich Dad and Poor Dad, and more.

In the ensuing segment, we will explore The Chronicles of Taxation, a clandestine realm of the affluent, barriers on the path to opulence, and an array of profound insights.

Lesson 4 - The Annals of Taxation and the Potency of Corporations

"My affluent progenitor, in his wisdom, navigated the financial game astutely, principally through the conduit of corporations, which harbored the paramount secret of the prosperous."

An Abbreviated Chronicle of Taxation

"Whenever endeavors to exact tribute from the prosperous are made, the well-to-do don't simply submit. They respond with dexterity. They possess the financial resources, the influence, and the determination to effect change. They do not idly acquiesce to heightened levies."

You might have encountered the adage, "In this world, naught is assured but death and taxes." However, for the better part of human history, taxes bore little resemblance to the contemporary fiscal burden.

Intermittently, monarchs and heads of state would levy taxes to bankroll military campaigns, yet there was no enduring imposition on personal earnings. Even during times of conflict, the peak tax rate in the Roman Empire stood at a mere ~3%.

Initially, both England and the United States had no concept of taxes. It wasn't until 1874 that income tax became a perpetual fixture in England. Almost four decades later, the United States followed suit by enacting the 16th amendment, which cemented income taxation.

These enduring tax measures were introduced under the pretext that they would solely target the affluent, sparing the poorer and middle-class populace from their grasp. Paradoxically, this decision resulted in an adverse consequence: it burdened the very individuals who had supported it - the middle and lower economic strata.

Government Bureaucracy vs Capitalism

"Rich Dad perceived Poor Dad as a government functionary, while he saw himself as a proponent of capitalism. These two perspectives are fundamentally antithetical."

These two roles are propelled by divergent incentives. Place yourself in the shoes of a public servant or government official. Your motivation lies in expenditure and personnel recruitment. The more substantial your agency or institution becomes, the more deeply entrenched and respected it grows. You are incentivized to utilize your entire budget, lest you risk losing it in the ensuing fiscal year. As a political candidate, your campaign does not hinge on fiscal prudence or budgetary equilibrium, but rather on promises of development, creation, or provision to your constituents. Moreover, the monies expended are not from your account but rather derived from the public's taxes.

Conversely, envisage yourself as a Rich Dad, an entrepreneur. Your impetus is to economize and hire solely when necessity dictates. Moreover, as the owner of a business, you wield your capital with efficiency since it is your wealth.

"My affluent progenitor did not deem Robin Hood a hero. He dubbed Robin Hood a miscreant."

The economic principle of redistributing wealth from the affluent to the less fortunate persisted until the government's escalating fiscal requirements necessitated the taxation of the middle and lower classes. This compelled the affluent to seek refuge in an unconventional fortress: the corporation.

The Most Closely Guarded Secret of the Prosperous

The prosperous discovered a stratagem to elude the grasp of taxation, sheltering their assets under the aegis of corporations. When most people hear the term "corporation," they likely conjure images of tangible entities, replete with numerous employees. In truth, a corporation is a mere legal entity, represented by a document.

The affluent employ corporations to preserve their wealth. Why? Because it confers upon them a tax advantage vis-à-vis the less fortunate. Corporate tax rates are notably more favorable compared to personal income levies. Additionally, it affords protection from legal actions.

The fiscal strategy pivots on the income flow. Observe the following sequence: an employee earns income, pays taxes, and subsequently expends it. In contrast, a business proprietor garners income, allocates funds, and subsequently settles taxes.

A corporation wields certain prerogatives that elude an employee, encompassing the capability to defray expenses before taxation. The business owner's earnings transit through the corporation, remunerating them with a salary categorized as an expense. By stipulating a modest salary, one sidesteps the higher tax brackets that afflict higher-earning employees. The antecedent of this pre-tax sum presents an avenue for the affluent to diminish their fiscal burden through deductions and other lawful mechanisms.

Lesson 5 - The Prosperous Forge Money

The Psyche and Your Financial Operating System

The prevailing modus operandi for accruing wealth among the masses echoes the mantra of "Secure a stable job, toil assiduously, and accumulate your path to economic emancipation." In stark contrast, the affluent do not barter time for an hourly wage; instead, they focus on creating assets. The pursuit of financial intelligence is indispensable to augment your asset base.

"The most potent asset at our disposal is our intellect. When honed adroitly, it can generate colossal affluence. Conversely, an untamed intellect can foment abject poverty, which could persist for generations."

In the current era of information proliferation, the paramount asset you possess is your intellect. Conventional routes to prosperity are no longer tenable. To embark on an expedition of financial intelligence, the following facets warrant attention:

1. Financial Acumen - Proficiency in interpreting and deciphering financial documents is essential. A business's financial statements unveil its strengths and weaknesses.
2. Investment Techniques - Investment is the art of money breeding.
3. Acumen in Supply and Demand
4. Knowledge of Legal Norms - Familiarity with local and federal regulations is crucial; adherence to the established rules is paramount.
5. 
   

The acquisition of financial intelligence will unshackle your vision, revealing lucrative business prospects beyond the time-honored paradigm of employment. Commit to perpetual learning and progression in these four domains.

Timing and Boldness

"In the pragmatic realm, success is not necessarily a function of sagacity; instead, it often hinges on audacity."

Individuals endowed with financial acumen perennially enjoy an abundance of alternatives for accumulating wealth, as they perpetually explore novel avenues for investment and asset creation. The refrain of waiting for the opportune moment or the perfect idea is futile. Proactivity coupled with judicious risk-taking can furnish a decisive advantage.

Lesson 6 - Work to Cultivate Knowledge, Not Just to Acquire Wealth

"Job" elucidates as "Just Over Broke." Unfortunately, this characterizes the predicament of millions.

Taking the Long View

"Do individuals contemplate their trajectory or merely their next paycheck?"

If you must procure employment and labor under someone else's aegis, labor to acquire fresh knowledge. Most individuals prioritize immediate remuneration and readily accept lucrative positions devoid of educational prospects. They forgo roles that could equip them with the competencies needed for long-term success.

During your nascent phases, emphasize the acquisition of novel proficiencies over financial gain and occupational security.

Specialization versus Versatility

"Occupational security was paramount in the eyes of my educated father. However, my affluent father ascribed supreme importance to learning."

Your education should pivot on mastering the following:

1. Effective cash flow management and capital allocation.
2. System administration, facilitating efficient time allocation and planning.
3. Team recruitment and motivation.
4. Specialized expertise encompassing sales, copywriting, and marketing.
5. Proficiency in communication, embracing writing, public speaking, and negotiation.

The conventional wisdom that discourages job-hopping is, in Robert's estimation, misguided. Diversifying your employment experiences will furnish a broader knowledge base and pay dividends in the long run.

Talent versus Financial Acumen

"The globe abounds with gifted individuals languishing in indigence."

Talent, in isolation, is inadequate for realizing prosperity. Many gifted individuals subsist in impoverishment or are relegated to low-wage vocations. Their plight is compounded by their failure to cultivate the skills necessary to transmute talent into financial reward.

Lesson 7 - Overcoming Hurdles

The fundamental disparity between prosperous individuals and those of modest means resides in their responses to fear.

Numerous factors can obstruct one's march toward financial success. The most conspicuous among them include:

1. Fear: Fear of losing wealth eclipses the desire to amass it.
2. Cynicism: Cynics propagate skepticism and discredit the feasibility of achieving affluence.
3. Indolence: Lethargy and an aversion to change inhibit progress.
4. Maladaptive Habits: Spending behaviors are dictated by habits, which frequently sabotage financial growth.
5. Arrogance: Often, individuals employ arrogance as a façade for their lack of knowledge.

Overcoming the Fear of Monetary Loss

Both the affluent and less privileged harbor fears, but their responses diverge markedly. The affluent can confront the prospect of fiscal loss, while the less fortunate often succumb to paralysis.

The underprivileged frequently avoid addressing fear and finances altogether. Whereas they perceive losses as permanent and irrevocable, the wealthy regard setbacks as transient and instructive. Failures constitute valuable lessons and transitory impediments on their voyage to prosperity.

Conquering Cynicism

"Cynics criticize, champions scrutinize."

Cynicism and uncertainty are predominant obstacles to financial growth. When one doubts the feasibility of prosperity and harbors self-distrust, opportunities are apt to elude them in favor of a risk-averse stance. Cynics enumerate myriad reasons why endeavors are bound to falter, yet they seldom venture to test these claims themselves. The affluent, in contrast, continually assess and explore how ambitions can materialize.

Overcoming Indolence

Many individuals passively accept the status quo and eschew aspirations of improved circumstances. By altering one's mindset from "I cannot afford it" to "How can I afford it," the cognitive pathways are activated, fostering inventive solutions. Instantly dismissing possibilities by declaring "I cannot afford it" stifles ambition. A modicum of avarice, albeit restrained, aids in surmounting indolence.

Conquering Maladaptive Habits

To nurture sound financial habits, it is advisable to allocate a portion of one's income to self-preservation foremost. In the majority of cases, bills are settled ahead of personal remuneration. This practice inversely commits the individual to creative methods of augmenting earnings and discharging obligations. If personal remuneration is prioritized, motivation to seek supplementary means of acquiring revenue is kindled.

Overcoming Arrogance

"Many employ arrogance to veil their ignorance."

Robert often observed that individuals who lacked knowledge would frequently employ arrogance as a facade during discussions. When it comes to investments and wealth creation, one should never presume to possess complete understanding. An open-minded stance to alternate perspectives is warranted, while an inflated sense of self-assuredness should be eschewed.

Lesson 8 - Commencing the Journey

To inaugurate your odyssey towards financial independence, consider the ensuing ten steps:

Discover a Purpose

Identify a cause greater than yourself, one that sustains you and propels you past impediments.

Make Daily Choices in Alignment with Your Objective

Decisions you make daily reflect your true self. Opt to be affluent, impoverished, or middling via your daily choices. Beware of imprudent spending habits; the impoverished frequently suffer from them.

Select Your Companions Discerningly

Discerning the voices you heed is pivotal; they shape your decisions and the opportunities you encounter.

Master What You Have Learned and Pursue Further Knowledge

One becomes what they study. As in the saying, "You are what you eat," contemporary relevance stems not from what you already know, but from your capacity to acquire new knowledge promptly.

Cultivate Self-Discipline: Pay Yourself First

If bill payments supersede personal remuneration, one is beholden to obligations. Paying oneself first ensures perpetual asset accumulation and diminishes the likelihood of incurring consumer debt.

Compensate Generously for Expert Counsel

Information is invaluable. If you lack expertise in a certain domain, do not begrudge paying someone who does. The cost of information is but a fraction of the return it can furnish.

Strive for a Break-even Investment Outcome

Whenever you invest, the primary goal is to recuperate the initial outlay as swiftly as possible. Once the initial investment is reclaimed, any further income derived from the asset constitutes a supplementary bonus, impervious to market fluctuations.

Leverage Assets, Not Capital, for Luxuries

Extravagances should never be financed through debt. Only funds generated by assets can be allocated for luxury expenses. Such fiscal prudence demands discipline that many lack, leading them into servitude to the debt that facilitated luxury acquisition instead of prioritizing asset building.

Identify Heroes

Heroes inspire and guide our journeys. Invest time and effort in choosing financial role models. Their wisdom and experiences will shape your financial odyssey.

Give Generously and Reap the Rewards

Teaching is an endeavor of profound educational value. The more you teach others, the more you learn. Share your knowledge, wealth, and love with others, driven by the joy of giving rather than the expectation of reciprocity.

This is the second part of Rich Dad Poor Dad click here to read first part