Rich Dad, Poor Dad Part 6

If you do what the ma.s.ses do, you get the following picture.

Income = Work for Owner Expense = Work for Government a.s.set = (none) Liability = Work for Bank As an employee who is also a homeowner, your working efforts are generally as follows: 1. You work for someone else. Most people, working for a paycheck, are making the owner, or the shareholders richer. Your efforts and success will help provide for the owner's success and retirement.

2. You work for the government. The government takes its share from your paycheck before you even see it. By working harder, you simply increase the amount of taxes taken by the government - most people work from January to May just for the government.

3. You work for the bank. After taxes, your next largest expense is usually your mortgage and credit card debt.

The problem with simply working harder is that each of these three levels takes a greater share of your increased efforts. You need to learn how to have your increased efforts benefit you and your family directly.

Once you have decided to concentrate on minding your own business, how do you set your goals? For most people, they must keep their profession and rely on their wages to fund their acquisition of a.s.sets.

As their a.s.sets grow, how do they measure the extent of their success? When does someone realize that they are rich, that they have wealth? As well as having my own definitions for a.s.sets and liabilities, I also have my own definition for wealth. Actually I borrowed it from a man named Buckminster Fuller. Some call him a quack, and others call him a living genius. Years ago he got all the architects buzzing because he applied for a patent in 1961 for something called a geodesic dome. But in the application, Fuller also said something about wealth. It was pretty confusing at first, but after reading it for awhile, it began to make some sense: Wealth is a person's ability to survive so many number of days forward... or if I stopped working today, how long could I survive?

Unlike net worth-the difference between your a.s.sets and liabilities, which is often filled with a person's expensive junk and opinions of what things are worth-this definition creates the possibility for developing a truly accurate measurement. I could now measure and really know where I was in terms of my goal to become financially independent.

Although net worth often includes these non-cash-producing a.s.sets, like stuff you bought that now sits in your garage, wealth measures how much money your money is making and, therefore, your financial survivability.

Wealth is the measure of the cash flow from the a.s.set column compared with the expense column.

Let's use an example. Let's say I have cash flow from my a.s.set column of S"J,000 a month. And I have monthly expenses of 52,000. What is my wealth?

Let's go back to Buckminster Fuller's definition. Using his definition, how many days forward can I survive? And let's a.s.sume a 30-day month. By that definition, I have enough cash flow for half a month.

When I have achieved $2,000 a month cash flow from my a.s.sets, then I will be wealthy.

So I am not yet rich, but I am wealthy. I now have income generated from a.s.sets each month that fully cover my monthly expenses. If I want to increase my expenses, I first must increase my cash flow from a.s.sets to maintain this level of wealth. Take notice that it is at this point that I no longer am dependent on my wages. I have focused on and been successful in building an a.s.set column that has made me financially independent. If I quit my job today, I would be able to cover my monthly expenses with the cash flow from my a.s.sets.

My next goal would be to have the excess cash flow from my a.s.sets reinvested into the a.s.set column. The more money that goes into my a.s.set column, the more my a.s.set column grows. The more my a.s.sets grow, the more my cash flow grows. And as long as I keep my expenses less than the cash flow from these a.s.sets, I will grow richer, with more and more income from sources other than my physical labor.

As this reinvestment process continues, I am well on my way to being rich. The actual definition of rich is in the eye of the beholder. You can never be too rich.

Just remember this simple observation: The rich buy a.s.sets. The poor only have expenses. The middle cla.s.s buys liabilities they think are a.s.sets. So how do I start minding my own business? What is the answer? Listen to the founder of McDonald's.

CHAPTER FOUR.

Lesson Three: Mind Your Own Business In 1974, Ray Kroc, the founder of McDonald's, was asked to speak to the MBA cla.s.s at the University of Texas at Austin. A dear friend of mine, Keith Cunningham, was a student in that MBA cla.s.s. After a powerful and inspiring talk, the cla.s.s adjourned and the students asked Ray if he would join them at their favorite hangout to have a few beers. Ray graciously accepted.

"What business am I in?" Ray asked, once the group had all their beers in hand.

"Everyone laughed," said Keith. "Most of the MBA students thought Ray was just fooling around."

No one answered, so Ray asked the question again. "What business do you think I'm in?"

The students laughed again, and finally one brave soul yelled out, "Ray, who in the world does not know that you're in the hamburger business."

Ray chuckled. "That is what I thought you would say." He paused and then quickly said, 'ladies and gentlemen, I'm not in the hamburger business. My business is real estate."

Keith said that Ray spent a good amount of time explaining his viewpoint. In their business plan, Ray knew that the primary business focus was to sell hamburger franchises, but what he never lost sight of was the location of each franchise. He knew that the real estate and its location was the most significant factor in the success of each franchise. Basically, the person that bought the franchise was also paying for, buying, the land under the franchise for Ray Kroc's organization.

McDonald's today is the largest single owner of real estate in the world, owning even more than the Catholic Church. Today, McDonald's owns some of the most valuable intersections and street corners in America, as well as in other parts of the world.

Keith said it was one of the most important lessons in his life. Today, Keith owns car washes, but his business is the real estate under those car washes.

The previous chapter ended with the diagrams ill.u.s.trating that most people work for everyone else but themselves. They work first for the owners of the company, then for the government through taxes, and finally for the bank that owns their mortgage.

As a young boy, we did not have a McDonald's nearby. Yet, my rich dad was responsible for teaching Mike and me the same lesson that Ray Kroc talked about at the University of Texas. It is secret No. 3 of the rich.

The secret is: "Mind your own business/' Financial struggle is often directly the result of people working all their life for someone else. Many people will have nothing at the end of their working days.

Again, a picture is worth a thousand words. Here is a diagram of the income statement and balance sheet that best describes Ray Kroc's advice: Most people Your Profession -> Your Income The Rich Your a.s.sets -> Your Income Our current educational system focuses on preparing today's youth to get good jobs by developing scholastic skills. Their lives will revolve around their wages, or as described earlier, their income column. And after developing scholastic skills, they go on to higher levels of schooling to enhance their professional abilities. They study to become engineers, scientists, cooks, police officers, artists, writers and so on. These professional skills allow them to enter the workforce and work for money.

There is a big difference between your profession and your business. Often I ask people, "What is your business?" And they will say, "Oh I'm a banker." Then I ask them if they own the bank? And they usually respond. "No, I work there."

In that instance, they have confused their profession with their business. Their profession may be a banker, but they still need their own business. Ray Kroc was clear on the difference between his profession and his business. His profession was always the same. Me was a salesman. At one time he sold mixers for milkshakes, and soon thereafter he was selling hamburger franchises- But while his profession was selling hamburger franchises, his business was the acc.u.mulation of income-producing real estate.

A problem with school is that you often become what you study. So if you study, say, cooking, you become a chef. If you study the law, you become an attorney, and a study of auto mechanics makes you a mechanic. The mistake in becoming what you study is that too many people forget to mind their own business. They spend their lives minding someone else's business and making that person rich.

To become financially secure, a person needs to mind their own business. Your business revolves around your a.s.set column, as opposed to your income column. As stated earlier, the No. 1 rule is to know the difference between an a.s.set and a liability, and to buy a.s.sets. The rich focus on their a.s.set columns while everyone else focuses on their income statements.

That is why we hear so often: "I need a raise." "If only I had a promotion." "I am going to go back to school to get more training so I can get a better job." "I am going to work overtime." "Maybe I can get a second job." "I'm quitting in two weeks. I found a job that pays more."

In some circles, these are sensible ideas. Yet, if you listen to Ray Kroc, you are still not minding your own business. These ideas all still focus on the income column and will only help a person become more financially secure if the additional money is used to purchase income-generating a.s.sets.

The primary reason the majority of the poor and middle cla.s.s are fiscally conservative-which means. "I can't afford to take risks"-is that they have no financial foundation. They have to cling to their jobs. They have to play it safe.

When downsizing became the "in" thing lo do, millions of workers found out their largest so-called a.s.set, their home, was eating them alive, j Their a.s.set, called a house, still cost them money every month. Their car, another "a.s.set," was eating them alive. The golf clubs in the garage that cost $1,000 were not worth 51,000 anymore. Without job security, they had nothing to fall back on. What they thought were a.s.sets could not help them survive in a time of financial crisis.

1 a.s.sume most of us have filled out a credit application for a banker to buy a house or to buy a car. It is always interesting to look at the "net worth'1 section. It is interesting because of what accepted banking and accounting practices allow a person to count as a.s.sets.

One day, to get a loan, my financial position did not look too good. So I added my new golf clubs, my art collection, books, stereo, television, Armani suits, wrist.w.a.tches, shoes and other personal effects to boost the number in the a.s.set column.

But I was turned down for the loan because I had too much investment real estate. The loan committee did not like that 1 made so much money off of apartment houses. They wanted to know why I did not have a normal job, with a salary. They did not question the Armani suits, golf clubs or art collection. Life is sometimes tough when you do not fit the "standard" profile.

I cringe every time I hear someone say to me that their net worth is a million dollars or $100,000 dollars or whatever. One of the main reasons net worth is not accurate is simply because the moment you begin selling your a.s.sets, you are taxed for any gains.

So many people have put themselves in deep financial trouble when they run short of income. To raise cash, they sell their a.s.sets. First, their personal a.s.sets can generally be sold for only a fraction of the value that is listed in their personal balance sheet. Or if there is a gain on the sale of the a.s.sets, they are taxed on the gain. So again, the government takes its share of the gain, thus reducing the amount available to help them out Of debt. That is why I say someone's net worth is often "worth less" than they think.

Start minding your own business. Keep your daytime job, but start buying real a.s.sets, not liabilities or personal effects that have no real value once you get them home. A new car loses nearly 25 percent of the price you pay for it the moment you drive it off the lot. It is not a true a.s.set even if your banker lets you list it as one. My $400 new t.i.tanium driver was worth S150 the moment I teed off.

For adults, keep your expenses low, reduce your liabilities and diligently build a base of solid a.s.sets. For young people who have not yet left home, it is important for parents to teach them the difference between an a.s.set and a liability. Get them to start building a solid a.s.set column before they leave home, get married, buy a house, have kids and get stuck in a risky financial position, clinging to a job and buying everything on credit. I see so many young couples who get married and trap themselves into a lifestyle that will not let them get out of debt for most of their working years.

For most people, just as the last child leaves home, the parents realize they have not adequately prepared for retirement and they begin to scramble to put some money away. Then, their own parents become ill and they find themselves with new responsibilities.

So what kind of a.s.sets am I suggesting that you or your children acquire? In my world, real a.s.sets fall into several different categories: 1. Businesses that do not require my presence. I own them, but they are managed or run by other people. If I have to work there, it's not a business. It becomes my job.

2. Stocks.

3. Bonds.

4. Mutual funds.

5. Income-generating real estate.

6. Notes (lOUs).

7. Royalties from intellectual property such as music, scripts, patents.

8. And anything else that has value, produces income or appreciates and has a ready market.

As a young boy, my educated dad encouraged me to find a safe job. My rich dad, on the other hand, encouraged me to begin acquiring a.s.sets that I loved. "If you don't love it, you won't take care of it." I collect real estate simply because I love buildings and land. I love shopping for them. 1 could look at them all day long. When problems arise, the problems are not so bad that it changes my love for real estate. For people who hate real estate, they shouldn't buy it.

I love stocks of small companies, especially startups. The reason is that I am an entrepreneur, not a corporate person. In my early years. I worked in large organizations, such as Standard Oil of California, the U.S. Marine Corps, and Xerox Corp. I enjoyed my time with those organizations and have fond memories, but I know deep down I am not a company man. I like starting companies, not running them. So my slock buys are usually of small companies, and sometimes I even start the company and take it public. Fortunes are made in new-stock issues, and I love the game. Many people are afraid of small-cap companies and call them risky, and they are. But risk is always diminished if you love what the investment is, understand it and know the game. With small companies, my investment strategy is to be out of the stock in a year. My real estate strategy, on the other hand, is to start small and keep trading the properties up for bigger properties and, therefore, delaying paying taxes on the gain. This allows the value to increase dramatically. I generally hold real estate less than seven years.

For years, even while I was with the Marine Corps and Xerox, I did what my rich dad recommended. I kept my daytime job, but I still minded my own business. I was active in my a.s.set column. I traded real estate and small stocks. Rich dad always stressed the importance of financial literacy. The better I was at understanding the accounting and cash management, the better I would be at a.n.a.lyzing investments and eventually starting and building my own company.

I would not encourage anyone to start a company unless they really want to. Knowing what I know about running a company, I would not wish that task on anyone. There are times when people cannot find employment, where starting a company is a solution for them. The odds are against success: Nine out of 10 companies fail in five years. Of those that survive the first five years, nine out of every 10 of those eventually fail, as well. So only if you really have the desire to own your own company do I recommend it. Otherwise, keep your daytime job and mind your own business. When I say mind your own business, 1 mean to build and keep your a.s.set column strong. Once a dollar goes into it, never let it come out. Think of it this way, once a dollar goes into your a.s.set column, it becomes your employee. The best thing about money is that it works 24 hours a day and can work for generations. Keep your daytime job, be a great hard-working employee, but keep building that a.s.set column.

As your cash flow grows, you can buy some luxuries. An important distinction is that rich people buy luxuries last, while the poor and middle cla.s.s tend to buy luxuries first. The poor and the middle cla.s.s often buy luxury items such as big houses, diamonds, furs, jewelry or boats because they want to look rich. They look rich, but in reality they just get deeper in debt on credit. The old-money people, the long-term rich, built their a.s.set column first. Then, the income generated from the a.s.set column bought their luxuries. The poor and middle cla.s.s buy luxuries with their own sweat, blood and children's inheritance.

A true luxury is a reward for investing in and developing a real a.s.set. For example, when my wife and I had extra money coming from our apartment houses, she went out and bought her Mercedes. It did not take any extra work or risk on her part because the apartment house bought the car. She did, however, have to wait for it for four years while the real estate investment portfolio grew and finally began throwing off enough extra cash flow to pay for the car. But the luxury, the Mercedes, was a true reward because she had proved she knew how to grow her a.s.set column. That car now means a lot more to her than simply another pretty car. It means she used her financial intelligence to afford it.

What most people do is they impulsively go out and buy a new car, or some other luxury, on credit. They may feel bored and just want a new toy. Buying a luxury on credit often causes a person to sooner or later actually resent that luxury because the debt on the luxury becomes a financial burden.

After you've taken the time and invested in and built your own business, you are now ready to add the magic touch-the biggest secret of the rich. The secret that puts the rich way ahead of the pack. The reward at the end of the road for diligently taking the time to mind your own business.

CHAPTER FIVE.

Lesson Four:The History of and The Power of Corporation I remember in school being told the story of Robin Hood and his Merry Men. My schoolteacher thought it was a wonderful story of a romantic hero, a Kevin Costner type, who robbed from the rich and gave to the poor. My rich dad did not see Robin Hood as a hero. He called Robin Hood a crook.

Robin Hood may be long gone, but his followers live on. How often I still hear people say, "Why don't the rich pay for it?" Or "The rich should pay more in taxes and give it to the poor."

It is this idea of Robin Hood, or taking from the rich to give to the poor that has caused the most pain for the poor and the middle cla.s.s. The reason the middle cla.s.s is so heavily taxed is because of the Robin Hood ideal. The real reality is that the rich are not taxed. It's the middle cla.s.s who pays for the poor, especially the educated upper-income middle cla.s.s.

Again, to understand fully how things happen, we need to look at the historical perspective. We need to look at the history of taxes. Although my highly educated dad was an expert on the history of education, my rich dad fas.h.i.+oned himself as an expert on the history of taxes.

Rich dad explained to Mike and me that in England and America originally, there were no taxes. Occasionally there were temporary taxes levied in order to pay for wars. The king or the president would put the word out and ask everyone to "chip in." Taxes were levied in Britain for the fight against Napoleon from 1799 to 1816, and in America taxes were levied to pay for the Civil War from 1861 to 1865.

In 1874, England made income tax a permanent levy on its citizens. In 1913, an income tax became permanent in the United States with the adoption of the 16th Amendment to the Const.i.tution. At one time, Americans were anti-tax. It had been the excessive tax on tea that led to the famous Tea Party in Boston Harbor, an incident that helped ignite the Revolutionary War. It took approximately 50 years in both England and 'a the United States to sell the idea of a regular income tax. ; What these historical dates fail to reveal is that both of these taxes were initially levied against only the rich. It was this point that rich dad wanted Mike and me to understand. He explained that the idea of taxes was made popular, and accepted by the majority, by telling the poor and the middle cla.s.s that taxes were created only to punish the rich. This is how the ma.s.ses voted for the law, and it became const.i.tutionally legal. Although it was intended to punish the rich, in reality it wound up punis.h.i.+ng the very people who voted for it, the poor and middle cla.s.s.

"Once government got a taste of money, the appet.i.te grew," said rich dad. "Your dad and I are exactly opposite. He's a government bureaucrat, and I am a capitalist. We get paid, and our success is measured on opposite behaviors. He gets paid to spend money and hire people. The more he spends and the more people he hires, the larger his organization becomes. In the government, the larger his organization, the more he is respected. On the other hand, within my organization, the fewer people I hire and the less money I spend, the more I am respected by my investors. That's why I don't like government people. They have different objectives from most business people. As the government grows, more and more tax dollars will be needed to support it."

My educated dad sincerely believed that government should help people. He loved John F. Kennedy and especially the idea of the Peace Corps. He loved the idea so much that both he and my mom worked for the Peace Corps training volunteers to go to Malaysia, Thailand and the Philippines. He always strived for additional grants and increases in his budget so he could hire more people, both in his job with the Education Department and in the Peace Corps. That was his job.

From the time I was about 10 years old, I would hear from my rich dad that government workers were a pack of lazy thieves, and from my poor dad I would hear how the rich were greedy crooks who should be made to pay more taxes. Both sides have valid points. It was difficult to go to work for one of the biggest capitalists in town and come home to a father who was a prominent government leader. It was not easy knowing who to believe.

Yet, when you study the history of taxes, an interesting perspective emerges. As I said, the pa.s.sage of taxes was only possible because the ma.s.ses believed in the Robin Hood theory of economics, which was to take from the rich and give to everyone else. The problem was that the government's appet.i.te for money was so great that taxes soon needed to be levied on the middle cla.s.s, and from there it kept "trickling down."

The rich, on the other hand, saw an opportunity. They do not play by the same set of rules. As I've stated, the rich already knew about corporations, which became popular in the days of sailing s.h.i.+ps. The rich created the corporation as a vehicle to limit their risk to the a.s.sets of each voyage. The rich put their money into a corporation to finance the voyage. The corporation would then hire a crew to sail to the New World to look for treasures. If the s.h.i.+p was lost, the crew lost their lives, but the loss to the rich would be limited only to the money they invested for that particular voyage. The diagram that follows shows how the corporate structure sits outside your personal income statement and balance sheet.

How the Rich Play the Game Is reduced/diminished by expenses a.s.sets ------------------------------------------------> Income (through personal corporation) It is the knowledge of the power of the legal structure of the corporation that really gives the rich a vast advantage over the poor and the middle cla.s.s. Having two fathers teaching me, one a socialist and the other a capitalist, I quickly began to realize that the philosophy of the capitalist made more financial sense to me. It seemed to me that the socialists ultimately penalized themselves, due to their lack of financial education. No matter what the "Take from the rich" crowd came up with, the rich always found a way to outsmart them. That is how taxes were eventually levied on the middle cla.s.s. The rich outsmarted the intellectuals, solely because they understood the power of money, a subject not taught in schools.

How did the rich outsmart the intellectuals? Once the "Take from the rich" tax was pa.s.sed, cash started flowing into government coffers. Initially, people were happy. Money was handed out to government workers and the rich. It went to government workers in the form of jobs and pensions. It went to the rich via their factories receiving government contracts. The government became a large pool of money, but the problem was the fiscal management of that money. There really is no recirculation. In other words, the government policy, if you were a government bureaucrat, was to avoid having excess money. If you failed to spend your allotted funding, you risked losing it in the next budget.

You would certainly not be recognized for being efficient. Business people, on the other hand, are rewarded for having excess money and are recognized for their efficiency.

As this cycle of growing government spending continued, the demand for money increased and the "Tax the rich" idea was now being adjusted to include lower-income levels, down to the very people who voted it in, the poor and the middle cla.s.s.

True capitalists used their financial knowledge to simply find a way to escape. They headed back to the protection of a corporation. A corporation protects the rich. But what many people who have never formed a corporation do not know is that a corporation is not really a thing. A corporation is merely a file folder with some legal doc.u.ments in it, sitting in some attorney's office registered with a state government agency. It's not a big building with the name of the corporation on it. It's not a factory or a group of people. A corporation is merely a legal doc.u.ment that creates a legal body without a soul. The wealth of the rich was once again protected. Once again, the use of corporations became popular-once the permanent income laws were pa.s.sed- because the income-tax rate of the corporation was less than the individual income-tax rates. In addition, as described earlier, certain expenses could be paid with pre-tax dollars within the corporation.

This war between the haves and have-nots has been going on for hundreds of years. It is the "Take from the rich" crowd versus the rich. The battle is waged whenever and wherever laws are made. The battle will go on forever. The problem is, the people who lose are the uninformed. The ones who get up every day and diligently go to work and pay taxes. If they only understood the way the rich play the game, they could play it too. Then, they would be on their way to their own financial independence. This is why I cringe every time I hear a parent advise their children to go to school, so they can find a safe, secure job. An employee with a safe, secure job, without financial apt.i.tude, has no escape.

Average Americans today work five to six months for the government before they make enough to cover their taxes. In my opinion, that is a long time. The harder you work, the more you pay the government. That is why I believe that the idea of "Take from the rich" backfired on the very people who voted it in.

Every time people try to punish the rich, the rich don't simply comply, they react. They have the money, power and intent to change things. They do not just sit there and voluntarily pay more taxes. They search for ways to minimize their tax burden. They hire smart attorneys j and accountants, and persuade politicians to change laws or create legal loopholes. They have the resources to effect change.

The Tax Code of the United States also allows other ways to save on taxes. Most of these vehicles are available to anyone, but it is the rich who usually look for them because they are minding their own business. For example, "1031" is jargon for Section 1031 of the Internal Revenue Code, which allows a seller to delay paying taxes on a piece of real estate; that is sold for a capital gain through an exchange for a more expensive piece of real estate. Real estate is one investment vehicle that allows such a great tax advantage. As long as you keep trading up in value, you I will not be taxed on the gains, until you liquidate. People who do not take advantage of these tax savings offered legally are missing a great opportunity to build their a.s.set columns.

The poor and middle cla.s.s do not have the same resources. They sit there and let the government's needles enter their arm and allow the blood donation to begin. Today, I am constantly shocked at the number of people who pay more taxes, or take fewer deductions, simply because they are afraid of the government. And I do know how frightening and intimidating a government tax agent can be. I have had friends who have had their businesses shut down and destroyed, only to find out it was a mistake on the part of the government. I realize all that. But the price of working from January to mid-May is a high price to pay for that intimidation. My poor dad never fought back. My rich dad didn't either. He just played the game smarter, and he did it through corporations-the biggest secret of the rich.

You may remember the first lesson I learned from my rich dad. I was a little boy of 9 who had to sit and wait for him to choose to talk to me. I often sat in his office waiting for him to "get to me." He was ignoring me on purpose. He wanted me to recognize his power and desire to have that power for myself one day. For all the years I studied J and learned from him, he always reminded me that knowledge was power. And with money comes great power that requires the right knowledge to keep it and make it multiply. Without that knowledge, the world pushes you around. Rich dad constantly reminded Mike and me that the biggest bully was not the boss or the supervisor, but the tax man. The tax man will always take more if you let him.

The first lesson of having money work for me, as opposed to working for money, is really all about power. If you work for money, you give the power up to your employer. If your money works for you, you keep and control the power.

Once we had this knowledge of the power of money working for us, he wanted us to be financially smart and not let bullies push us around. You need to know the law and how the system works. If you're ignorant, it is easy to be bullied. If you know what you're talking about, you have a fighting chance. That is why he paid so much for smart tax accountants and attorneys. It was less expensive to pay them than pay the government. His best lesson to me, which I have used most of my life, is "Be smart and you won't be pushed around as much." He knew the law because he was a law-abiding citizen. He knew the law because it was expensive to not know the law. "If you know you're right, you're not afraid of fighting back." Even if you are taking on Robin Hood and his band of Merry Men.

My highly educated dad always encouraged me to seek a good job with a strong corporation. He spoke of the virtues of "working your way up the corporate ladder." He didn't understand that, by relying solely on a paycheck from a corporate employer, I would be a docile cow ready for milking.

When I told my rich dad of my father's advice, he only chuckled. "Why not own the ladder?" was all he said.

As a young boy, I did not understand what rich dad meant by owning my own corporation. It was an idea that seemed impossible, and intimidating. Although I was excited by the idea, my youth would not let me envision the possibility that grownups would someday work for a company I would own.

The point is, if not for my rich dad, I would have probably followed my educated dad's advice. It was merely the occasional reminder of my rich dad that kept the idea of owning my own corporation alive and kept me on a different path. By the time I was 15 or 16, I knew I was not going to continue down the path my educated dad was recommending. I did not know how I was going to do it, but I was determined not to head in the direction most of my cla.s.smates were heading. That decision changed my life.

It was not until I was in my mid-20s that my rich dad's advice began to make more sense. I was just out of the Marine Corps and working for Xerox. I was making a lot of money, but every time I looked at my paycheck, I was always disappointed. The deductions were so large, and the more I worked, the greater the deductions. As I became more successful, my bosses talked about promotions and raises. It was flattering, but I could hear my rich dad asking me in my ear: "Who are you working for? Who are you making rich?"

In 1974, while still an employee for Xerox, I formed my first corporation and began "minding my own business." There were already a few a.s.sets in my a.s.set column, but now I was determined to focus on making it bigger. Those paychecks with all the deductions made all the years of my rich dad's advice make total sense. I could see the future if I followed my educated dad's advice.