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Collection: Financial Literacy - #6 Robert Kiyosaki 'Cash Flow Pattern of Poor, Middle Class & Rich'



[Transcript]

ROBERT KIYOSAKI 00:00

The next thing like I said your banker – My bankers never asked me for my report card yet and my banker – if I'm going to borrow a lot of money from – they want to see my financials.


And what a banker was looking for is your financial IQ, they don't care how your academic IQ, they want to see how smart you are with money. And it's not that I – you know, I wear nice clothes, and have a nice watch, and have a nice house, a nice car... Banker doesn't care because how many people know people who are looking good but are flat broke? (Laughter)


You know what I'm talking about here.


So and that's the big problem here. So when a banker looks at this thing, the bankers look again at cash flow. So when a banker looks at this, let's say the person has a job, the money comes in and the money goes out. They look at that, that's a cash flow pattern of a poor person. If they don't change their pattern, they will be poor.


It is not how much money you make, it is how much you spend is the issue here.


For example, I know I have a doctor friend, he makes about four hundred thousand dollars a year. He's very proud. He has no debts. You know he's one of these people to think that debt is bad, and that's really moronic.


But anyway, so – but he makes four hundred thousand and he spends four hundred thousand. So even though he makes a lot of money, he has a cash flow pattern of a what?


AUDIENCE MEMBER & ROBERT KIYOSAKI 01:16

Poor person.


What the middle class generally tend to do is the first thing they want to do is have a big house and they have a thing called a...


Mortgage. And the definition of mortgage comes from the French word 'mortuus' which means death. That's what it means you know. (Laughter)


So what happens they have a mortgage, got the nice BMW or Mercedes, so they're looking good but going broke, you know. So in the banker, they come in with their nice suits and all this, the banker looks at it and goes, ah, I can see your cash flow pattern is this.


And this is the cash flow pattern of the middle class, it's working hard and going broke, you know, they never get ahead, they buy big houses, they do home equity loans and they think they are Donald Trump with real estate as real estate investors. All they got is a big house, they're in debt too.


A lot of people use their house as an ATM machine, you know every time it goes up in value, they borrow the money out. You know, that is really a loser's point of view there. I mean that's not – bankers love you because you're greatly in debt, but it's not a way to get ahead.


And this is the cash flow pattern of a rich person, they have assets here and so generally what it is, is they have a business, they have real estate and they may have dividends from stocks and bonds and stuff like that. So those are assets.


So often times, I asked people think about it this way, if you stop working today, let's say you're married, you have a spouse, if you stop working today, how much money keeps coming in your pocket? And how much money keeps going out? All the things that are taking money out of your pocket are what?


AUDIENCE MEMBER & ROBERT KIYOSAKI 02:46

Liabilities.


Anything putting money in your pocket is an?


AUDIENCE MEMBER & ROBERT KIYOSAKI 02:49

Assets.


So the reason my wife and I could retire is very simply, we have money going like this, this means we're wealthy, you know, we don't have much in savings and all that, but every month it's hundreds of thousands of dollars going like this, and that's how you get wealthy. You know, just have assets that produce money every single month.


When I did this program in Singapore, I ask people raise their hands and say, would you mind telling me some of the assets you have? A woman raise her hand, she's like – yes, she says, ah, my best asset is my husband. (Laughter)


And I went, I said, ma'am, I'm talking about non-human inanimate objects. She says that's him! (Laughter) But he makes lots of money for me – (Laughter) – you know all that.


I'm not talking about human beings – slavery has been, you know, abolished for a while here and all this. So it has been about assets versus liabilities, the cash flow pattern...


And that's why bankers do not ask you for your what?


Report card.


They want to see your financial statement. If you have a good financial IQ, they'll give you lots of money, even bad financial IQ, they'll give you a credit card or home equity loan. That's the difference here.


And years and years ago, I went to Sunday school – I'm not a Bible scholar, I'm not pushing religion to anybody – but remember the story of the, you know, the rich man, I think he had three sons or something like this.


And he gave one son X amount of dollars, give the second son X amount – a talent he called them – and then the third son a talent. And the first son blew it, got rid of all his money and he said, okay. Second son came in, he said what you do with the money? And the son said I buried it. And then the third son multiplied it, you know, came back with – give him a thousand dollars, came back with five thousand dollars.


And at that point the father or whoever the guy it was, took all of the money and gave it to the what? The third son, who multiplied the money.


And that's what I learned in Sunday school is that – not God – whoever does not like people who blow their money, people would just bury the money. See the poor spend their money, the middle class bury their money, you know, just put it in 401Ks or savings, and the rich know how to multiply their money.


So, the real key is this, it's not so much how much income you make, but where you put your money.


It's expenses. Do you expense your money at this way? This way? Or this way?


And that's why people who always trying to make more money and if they don't get ahead very simply because they're looking in the wrong place. It's over here. It's what do you spend your time and money on?


That's why I thank you guys for, you know, being here tonight, and those of you at home supporting public television and your education, you're spending time and hopefully some money to support your education in a great cause here.


And that's really important is how you spend your time and your money. That makes a difference.


 

[YAPSS Takeaway]

It is not how much money you make, it is how much you spend is the issue between the poor, the middle class and the rich.

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