Retire Young Retire Rich
The difference between rich people and poor people is that poor people say ‘I can’t afford it’ more often than rich people. That is the primary difference.
I hear people say, ‘I won’t need much money after I retire. My house will be debt free and my living expenses will go down.’ While it is true that your living expenses may go down, what goes up are your medical expenses.
I will go into the three main assets that make people rich and allow them to retire young. The three assets are:
1. Real estate
2. Paper assets
The reason Kim and I could retire young and retire rich is because we spent our time acquiring assets rather than working for money.
Chapter 1 How to Become Rich and Retire Young
Most people do not think about retiring until it’s too late… or they plan on retiring when they’re sixty-five. I don’t want to do that. I want a better plan. I don’t want to spend my life working just to pay bills. I want to live. I want to be rich. I want to travel the world while I am young enough to enjoy it.
The biggest challenge you have is to challenge your own self-doubt and your laziness.
Rich day often said, “Many people ask me how to do something. I used to tell them until I realized that even after I told them how I did something, they often did not do it. I then realized that it was not the how to but why I do something that is more important. It is the why that gives you the power to do the how to.” He also said, “The reason most people do not do what they can do is because they do not have a strong enough why.” Once you find the why, it is easy to find your own how to to wealth. Instead of looking inside of themselves to find their own why they want to become rich, most people look for the easy road to wealth, and the problem with the easy road is that the easy road usually ends in a dead end.”
As a final comment, I have heard many people say, “Money does not make you happy” That statement has some truth to it. But what money does do is buy me the time to do what I love and pay other people to do what I hate doing.
Chapter 2 Why Retire as Young as You Can?
A suggestion: Regardless if you can retire early or not, I suggest taking at least an hour each month to reflect on your life. Taking the time to reflect on my life I found out:
1. What I thought was important was not that important.
2. What was important was where I was at, not where I was going to.
3. There is no one more important than the person in front of you at that moment. Take that moment to be with him or her.
4. Time is precious, don’t waste it… appreciate it.
5. Sometimes stopping for a moment is harder than staying busy.
Chapter 3 How I Retired Early
Poor Dad’s Lessons
My poor dad often advised, “Go to school, get good grades, find a safe secure job, work hard, and save money.” “Neither a borrower nor lender be.” “A penny saved is a penny earned.” “If you can’t afford something don’t buy it. Always pay cash.”
Rich Dad’s Lessons
If you had a choice of education, would you choose to go to school to learn how to work hard for money, or would you rather go to school to learn how to have money work hard for you?
Chapter 4 How You Can Retire Early
In the broad definition of the word, the word leverage simply means the ability to do more with less.
If you are getting up and going to work only to earn money, rather than working to gain some leveraged advantage in life, the chances are you are falling behind today.
Leverage is the ability to do more and more with less and less.
Being rich is not so much what you know but who you know.
A suggestion: Get a clean sheet of paper and begin to write your answers to this question.
How can I do what I do for more people with less work and for a better price?
Chapter 5 The Leverage of Your Mind
A Most Important Lesson
Rich dad forbade his son and me from saying the words “I can’t afford it.”
What you think is real is your reality.
When he came across that beautiful piece of ocean front property, he refused to say, “I can’t afford it,” even though he did not have the money at that time. Instead he spent months coming up with a plan on how he could afford it. He worked hard at taking what was outside his reality and making it a part of his reality. It was not money that made my rich dad richer. It was his ability to expand his reality that ultimately made him richer and richer.
The #1 Leverage
The number one leverage is the leverage found in your mind because it is where your realities are formed. For Kim and me to retire young and retire rich required us to constantly control, change and expand our realities. Today I tell people, “The first step in going from $50,000 a year and a lot of hard work to $1 million a year with very little work begins with a change of reality.”
Reality change does not necessarily mean bigger or better. A change of reality may simply be a shift in point of view. For example, instead of saying something is “too risky”, as many unsophisticated investors say, ask instead, “What is the risk-reward ratio?” or “How many times will I lose before I win?” Instead of saying, “That piece of land is too expensive,” read a book about a person who could afford that piece of land, or ask someone who could afford that piece of land and find out how they could afford it. The important thing is not the land but the changing of your reality.
A suggestion: One way rich dad had his son and me expand our realities was through reading biographies of people who lived the lives we wanted to live. For example, rich dad had us read the biographies of John D. Rockefeller and Henry Ford. More recently, I have read books by or about Bill Gates, Richard Branson, George Soros, and others.
Chapter 7 How to Work Less and Earn More
If you get a raise you are working for the wrong kind of money.
If you want to retire young and retire rich, you need to work hard for the right kind of income.
In earlier books I discussed the three different types of income, which are:
1. Earned income: Earned income is you working for money. It is the income that comes in the form of a paycheck. It is also the type of income you ask for more of when you ask for a raise, bonus, overtime, commissions, and tips.
2. Portfolio income: Portfolio income is generally income from paper assets such as stocks, bonds, and mutual funds. The vast majority of all retirement accounts are counting on portfolio income in the future.
3. Passive income: Passive income is generally income from real estate. It can also be royalty income from patents or for use of your intellectual property such as songs, books, or other objects of intellectual value.
In rich dad’s mind, the worst kind of income to work hard for was earned income.
1. It is the highest-taxed income and it is the income with the fewest controls over how much you pay in taxes and when you pay your taxes.
2. You personally have to work for it and it takes up your valuable time.
3. There is very little leverage in earned income. The primary way most people increase their earned income is by working harder.
4. There is often no residual value for your work. In other words, you work, get paid, and then have to work again to be paid again.
Chapter 8 The Fastest Way to Get Rich Quick: A Summary of Mental Leverage
In summary of the importance of mental leverage, I restate that your reality is simply what you think is real. Or as commonly stated, your perception is your reality. When asked, “Is it hard to change one’s reality?” I reply with, “It depends.” For me, it was a personal struggle to shed my poor dad’s reality of what he thought was the smart thing to do and adopt my rich dad’s ideas on what he thought was smart. In many ways, changing one’s reality from a middle class or poor reality to a rich reality may be like learning to eat with your left hand after you have spent years eating with your right. While it is not hard to do, and anyone can do it if they persevere, it may not be the easiest thing to do either.
When asked how to change one’s reality I simply quote Robert Kennedy’s favorite saying:
“Some men see things as they are and say, ‘Why?’ I dream things that never were and say, ‘Why not?’”
Chapter 9 How Fast Is Your Plan?
“I have the need for speed.”
—TOM CRUISE IN TOP GUN
The idea of working all your life, saving, and putting money into a retirement account is a very slow plan. It is a good and sensible plan for 90 percent of the people. But it is not a plan for someone who wants to retire young and retire rich. If you want to retire young and retire rich, you need to have a plan that is far faster than the plans of most people.
In theory, our basic plan through all levels was simple. It was to build business and invest in real estate.
I emphasize the importance of creating your own plan because each of us needs to take into account our own strengths and weaknesses, hopes and desires. One of the first steps in creating your plan is to find out what your native genius is and the process via which you learn best.
How to See the Future
The mistake adults make when looking at the future is that they see the future from their own eyes. That is why so many adults cannot see the changes that are coming. If you want to see how the world will be in ten years, just watch a fifteen-year-old boy or girl. Observe the world from their eyes and you will see the future.
Many people are so afraid of the future, and the possibility that the future could be fun, hip, cool, and exciting, that they would rather stay stuck in the past.
Chapter 10 The Leverage of Seeing a Rich Future
A Plan Is the Bridge to Your Dreams
The reason Kim and I did not take jobs, even though we were strapped for cash, was because we had no plans on being employees in the future. Instead we spent our time in seminars learning either how to build a business or invest in real estate.
If you are truthful and want to change your plans, the first thing to do is change your reality by changing your plans, your words, and your daily actions.
And for many people, one of the first steps on the plan is to stop doing today what you do not want in your future. If you do not want to work hard all your life for earned income, start asking yourself how you can learn to work for passive and portfolio income. Once you come up with some answers, make those answers a part of your plan. It may mean studying more, reading more books, listening to tapes, attending more seminars, starting a home based business, and meeting new friends. In other words, do today what you want for your tomorrows.
SIGHT is what you see with your eyes.
VISION is what you see with your mind.
Finding a high-paying job may seem like the fast way to get rich at the start, but in most cases it is the slow way to become rich in the end.
When it came to buying any investment, he always said, “Your profit is made when you buy, not when you sell.” In other words, he never expected his investment to appreciate in value.
When people ask me “How do I find a mentor?” I often say, “Ask Nightingale-Conant for a catalogue and begin listening to some of the greatest mentors of all time.” As rich dad often said, “The truly rich get rich at home and get rich in their spare time.” He also said, “It is not your boss’s job to make you rich. That is your job.”
I had a plan. I had a plan on how to get out of the rat race. The big difference was that my plan was a rich plan from the start. It was a plan that would allow me to gain a lot of money, but more importantly to gain the words, education, and experience required for the fast track. So invest some time by first choosing your exit strategy, and then begin to create and design your own plan…a plan that will include the education, experience, and the vocabulary required for the fast track.
Chapter 11 The Leverage of Integrity
You are only as good as your word.
Never make promises you don’t plan to keep.
The Most Destructive of All Words
The most life-destroying word of all is the word tomorrow. The poor, the unsuccessful, the unhappy, the unhealthy are the ones who use the word tomorrow the most. The problem with the word tomorrow is that I have never seen a tomorrow. Tomorrows do not exist. Tomorrows only exist in the minds of dreamers and losers. People who put off till tomorrow find that the sins and bad habits of their past eventually catch up with them. All I have are todays. Today is the word for winners and tomorrow is the word for losers.
Chapter 13 The Leverage of Generosity
If you think that your chances for success are best on the path to the top of the corporate ladder of a major corporation, then that is the best path for you, even if it is a 1:1 ratio.
The trouble with working at a job for money is that you have to start over selling your labor each and every morning. In most cases, your labor has no long-term residual value, if you are working for money. On top of that, if you are working for money, then your earning potential is limited. If you work slowly acquiring assets your income potential is infinite and that income can be passed on for generations to come. Your job or profession is not something you can pass on in your will to your children.
Many people say there are generous with their time because they do not have money. People who are generous with their time have lots of time because they give their time. They do not have much money because do not give money. They do not give money because they are tight and stingy with money, always afraid that there is not enough money… so their fear becomes reality. If you want more money, give money…not time. It you want more time, give time.
If you have a hard time giving money, you may want to start giving a little at a time on a regular basis. Each time you give, you will hear your context, or your reality, speaking loudly to you. At the moment you hear your reality speaking to you, and it’s a poor person’s reality, you have the opportunity to choose and rechoose your reality. The moment you give if only a dollar away to your church or your favorite charity, your world has changed. The moment you sincerely build a business or invest to increase your service to more people, you have forever increased your chances of becoming extremely wealthy and retiring young and retiring rich.
Start by Being Generous to Yourself
In book number four, Rich Kid Smart Kid, I wrote about the three piggy bank system for kids, a system Kim and I use today. One piggy bank is for savings, one is for investing, and the other for tithing, giving to church and charity.
One of the reasons poor people are poor is because they treat themselves poorly. And by that he did not mean to run out and buy a new dress or new golf clubs. He meant that poor people do not do things that financially enrich themselves. By paying yourself first, you are financially enriching yourself, your soul, and your future.