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Unfair Advantage Book Review by Robert Kiyosaki

As a member of Rich Dad World, I downloaded the online version of this book for a limited time offer only. 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 employed 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 investment and a bad investment; good and bad advice. True financial education allows you to tell the differences and get people to send you money. Many of the billionaires in the top ten on the Forbes list don’t 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 biggest 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 her taxes. With the money saved, it could be channeled into other investments to build your income-generating assets. There are three types of income you pay taxes on:

• Ordinary income: This attracts the highest tax rate, meaning the more you work for money as an employee or on your own, the more tax you pay.

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

• Passive income – this attracts the lowest or zero tax rate, meaning other people’s money works harder for you; you pay less or even no tax.

I agree with Robert that savers are now losers as banks give lower interest to save money in the bank account. Since President Nixon removed the US currency from the gold standards, money stopped being money and became debt. Countries are quick to devalue their money by printing large quantities to help increase their exports to other countries. This increase in inflation thereby decreases your purchasing power, that is, groceries have become more and more expensive. So if you can use the debt to buy assets and put money in your pocket, that’s really an unfair advantage. Many people have become impoverished because they used debt to buy liabilities that take money out of their pocket, worst of all, they think that liabilities are assets.

Robert explains why the next couple of words are oxymorons for those without a financial education. An oxymoron is words that contradict each other. They are 1) Job Security 2) Saving Money 3) Safe Investments 4) Fair Share 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 both the B and I quadrants. The three things to learn are:

• Sale (income control).

• Real estate investment (debt control).

• Technical investments (control markets).

All fund managers advise people to diversify into a portfolio of stocks, bonds, and mutual funds. For those without a solid financial education, you might think this is good advice. However, the fund manager is still putting your money into an asset class that is paper assets. The four basic asset classes that Robert invests in are 1) Businesses 2) Real Estate 3) Paper Assets 4) Commodities. The more he learns and knows about these asset classes, the more control he will have and his risk will be reduced.

Different kinds of people focus on different places on the income statement and balance sheet. The poor focus on spending. The middle class focuses on the bottom. The rich focus on assets. The rich don’t work for money, they make their money work hard for them. Applying the three laws of compensation will allow a person to enjoy an infinite return on investment, leading to 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, there are some efforts to encourage entrepreneurship; Some courses related to it have been established as “Escuela de Emprendedores”. However, this is not in the core curriculum leading to the degree programme. So I doubt what Robert proposed won’t be seen here for a long time until the US has a breakthrough in its education system.

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