Robert Kiyosaki has one glaring message. The U.S. needs financial education. Right now our education system is broken and nothing is being taught that prepares people for financial freedom. All of Robert's books are good and teach basics about financial education and the need for continuous learning. Rich Dad / Poor Dad is another famous book by this author. We will profile that book in a separate summary
The Cashflow Quadrant is a very important concept that people need to cement in their memory if they want to get a handle on financial freedom. The quadrant consists of the following:
1.) E - Stands for employee
2.) S - Stands for small business or self-employed
3.) B - Stands for big business (500 employees or more)
4.) I - Stands for investor
Traditional education prepares us for the E and S quadrant. The mantra has been go to school and then college to hopefully get a good job and save in a 401K for retirement. As many of you know this is not a good model in this day and age. On a side note, I was very fortunate to grow up with an excellent financial teacher. My father taught the principles that Mr. Kiyosaki teaches in his books Rich Dad / Poor Dad, The Cashflow Quadrant and this book Unfair Advantage. I can also tell you that most people are financially uneducated. Authors like Mr. Kiyosaki as well as Dave Ramsey are really needed and our doing what should be taught in our school system at a national level.
Why is this important to me?
This can be answered by asking a few more questions. Do you know the difference between good debt and bad debt? Can you define an asset and liability in simple terms?
Do you know there are three types of taxes for income?
If you are unclear on any of these then you need to read this book. In short form, I will answer all of these questions. Good debt is anything that spits of positive cash flow and increases in value. Thus if you have a debt on a rental house that yields positive monthly cash flow then that is good debt. If you have credit card debt that you don't pay off each month then that is bad debt. In a nutshell, good debt makes you money and bad debt costs you money.
Assets and liabilities! Anything that generates positive cash flow is an asset while anything that costs you money is a liability. Example: A business that generates monthly profit is an asset. Your home is a liability. I know many of you will disagree with this but your home costs you money each month. This is not a bad thing but because you need a place to live but it is a liability.
The three types of income include: Ordinary, Portfolio and Passive. We will get into more detail on how these play a role in your financial freedom later in this summary. This book is important to you if you want to be financially free and escape the rat race of running out of money before the end of each month.
There are several examples and details outlined in Unfair Advantage but for the sake of time we will cover each in summary.
1.Knowledge - Knowledge put to use equates to power. There are several ways to make money be it in a business, real-estate, stock market, content creation, licensing deals, internet marketing or several other endeavors. The point here is that nothing happens without educating yourself. Warren Buffet the second riches man in the world is known for his constant reading and learning abilities. The premise of Unfair Advantage is with very high financial education, money flows in rather than out. You can pay zero in taxes and earn millions with very low risk by using other people's money in good or bad economics. This creates an extreme unfair advantage.
2.Taxes - Taxes are government incentives to get people to do what they want them to do. Thus because businesses create jobs and wealth, they have tax strategies as incentives to keep the economy going. There is one huge premise that people need to understand. I will lay out the difference. When you are an employee, you work, pay your taxes and then get your money to pay your expenses. When you are a business, you work, pay all your expenses and then pay taxes on what is left. This is totally legal and can boost rates of return legally. Remember one thing - Tax avoidance is prudent while tax evasion means jail time.
3.Debt - Good debt creates true wealth by allowing you to use OPM (Other People's Money). This is very powerful and requires discipline. This is one area I
wish this book talked about in more detail. Please note that debt used wisely can create leverage and unlimited wealth. To much debt used wrong can create financial ruin. Also, know that 85+% of the U.S. population has too much BAD debt. This is not what we are talking about. This needs to be taken care of as well to truly achieve financial freedom. The use of debt is an advanced strategy and needs to be used wisely which requires financial education.
- Whilst it is recognized that South Africa is still in a process of transition regarding higher education to address the imbalances of the past, it should also b