Review of the book Unfair Advantage by Robert Kiyosaki

As a member of Rich Dad World, I downloaded the online version of this book only for a limited time offer. This book offers many important financial lessons that will make you realize the importance of being in the B and I quadrants, which I would like to summarize below.

The school system teaches students to be employees and does not prepare them to make sound financial decisions. Financial education in schools teaches children to send money to the government and banks. These kids grow up and don’t know the difference between a good and a bad investment; good and bad advice. True financial education allows you to notice the differences and get people to send you money. Many of the billionaires in the top ten of the Forbes list do not have a formal education like having a degree. They knew that school is not the place for them to be who they are today.

In the US, taxes are the highest expense for people in the E and S quadrants. Getting the right tax advice from the right person is key. The right tax advisor should be able to help you reduce your taxes. With the money saved, it could be funneled into other investments to build your assets and generate income. There are three types of income that you pay taxes on:

• Ordinary income: generates the highest tax rate, that is, the more you work for your money as an employee or self-employed, the more taxes you pay.

• Portfolio income (also known as capital gains) – This generates the second highest tax rate, meaning the more your money works for you, the less tax you pay.

• Passive income: this generates the lowest or no tax rate, that is, the more other people’s money works for you; you pay the minimum or even no tax.

I agree with Robert that savers are now losers, as banks give lower interest rates to save money in the bank account. Ever since President Nixon took the American currency off the gold standards, money stopped being money and became debt. Countries are rushing to devalue their money by printing a large quantity to help increase their exports to other countries. This increases inflation and thus reduces your purchasing power, that is, groceries have become more and more expensive. So if you can use debt to buy assets and put money in your pocket, that’s really an unfair advantage. Many people have become poor because they used debt to buy liabilities that takes money out of their pocket, worst of all, they think that the liability is an asset.

Robert explains why the next couple of words are an oxymoron to those with no financial education. An oxymoron are words that contradict each other. They are 1) Job security 2) Saving money 3) Safe investments 4) Fair participation 5) Mutual fund 6) Diversified portfolio 7) Debt free. Risk is inversely related to control. If you have less control it means that the risk increases in your investment. Rich Dad advised Robert to learn three things if he wanted to be rich like Rich Dad in the B and I quadrants. The three things to learn are:

• Sale (income control).

• Real estate investment (debt control).

• Technical investment (market control).

All fund managers advise people to diversify into a portfolio of stocks, bonds, and mutual funds. For those without a solid financial education, they would think this is good advice. However, the fund manager is still putting his money into an asset class which is the paper asset. The four basic asset classes Robert invests in are 1) Business 2) Real Estate 3) Paper Assets 4) Commodities. The more you learn and know about these asset classes, the more control you have and the lower your risk.

Different classes of people focus on different places on the income statement and balance sheet. The poor focus on expenses. The middle class focuses on liabilities. The rich focus on assets. The rich don’t work for money, they make their money work hard for them. The application of the three laws of compensation will allow a person to enjoy an infinite return on investment, which will generate enormous wealth.

I agree with Robert that we need two types of schools. One suitable for those who want to be in the E and S quadrant and the other for the B and I quadrant. In Singapore, some efforts are being made to encourage entrepreneurship; some courses related to it have been established as “School of Entrepreneurs”. However, this is not in the main curriculum leading to the degree program. Therefore, I doubt that what Robert proposed will not be seen here for long until the United States has a breakthrough in its education system.

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