The Ultimate Wealth Rule: Buy Assets, Avoid Liabilities

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Rich people acquire assets. The poor and

middle class acquire liabilities that they think

are assets.

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You must know the difference between an asset and a liability and buy assets.

If you want to be rich, this is all you need to know. It is rule number one. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people struggle financially because they do not know the difference between an asset and a liability.

“Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets, "said rich dad.

When rich dad explained this to Mike and me, we thought he was kidding. Here we were, nearly teenagers and waiting for the secret to getting rich, and this was his answer. It was so simple that we stopped for a long time to think about it.

“What is an asset?” asked Mike.

“Don’t worry right now,” said rich dad. “Just let the idea sink in. If you can comprehend the simplicity, your life will have a plan and be financially easy. It is simple. That is why the idea is missed.”

“You mean all we need to know is what an asset is, acquire them, and we’ll be rich?” I asked.

Rich dad nodded his head. “It’s that simple.”

“If it’s that simple, how come everyone is not rich?” I asked. Rich dad smiled. “Because people do not know the difference between an asset and a liability.”

I remember asking, “How could adults be so misguided? If it is that simple, if it is that important, why would everyone not want to find out?” It took rich dad only a few minutes to explain what assets and liabilities were.

As an adult, I have difficulty explaining it to other adults. The simplicity of the idea escapes them because they have been educated differently. They were taught by other educated professionals, such as bankers, accountants, real estate agents, financial planners, and so forth. The difficulty comes in asking adults to unlearn or become children again. An intelligent adult often feels it is demeaning to pay attention to simplistic definitions.

Rich dad believed in the KISS principle—Keep It Simple, Stupid (or Keep It Super Simple)—so he kept it simple for us, and that made our financial foundation strong.

So what causes the confusion? How could something so simple be so screwed up? Why would someone buy an asset that was really a liability? The answer is found in basic education.

We focus on the word “literacy” and not “financial literacy.” What defines something to be an asset or a liability are not words. In fact, if you really want to be confused, look up the words “asset” and “liability” in the dictionary. I know the definition may sound good to a trained accountant, but for the average person, it makes no sense. But we adults are often too proud to admit that something does not make sense.

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An asset puts money in my pocket. A liability 

takes money out of my pocket.

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To us young boys, rich dad said, “What defines an asset are not words, but numbers. And if you can’t read the numbers, you can’t tell an asset from a hole in the ground.” “In accounting,” rich dad would say, “it’s not the numbers, but what the numbers are telling you. It’s just like words. It’s not the words, but the story the words are telling you.”

“If you want to be rich, you’ve got to read and understand numbers.” If I heard that once, I heard it a thousand times from my rich dad. And I also heard, “The rich acquire assets, and the poor and middle class acquire liabilities.”

Here is how to tell the difference between an asset and a liability. Most accountants and financial professionals do not agree with the definitions, but these simple drawings were the start of strong financial foundations for two young boys.

This is the cash-flow pattern of an asset

The top part of the diagram is an Income Statement, often called a Profit-and-Loss Statement. It measures income and expenses: money in and money out. The lower part of the diagram is a Balance Sheet. It’s called that because it’s supposed to balance assets against liabilities. Many financial novices do not know the relationship between the Income Statement and the Balance Sheet, and it is vital to understand that relationship.

So, as I said earlier, my rich dad simply told two young boys that “assets put money in your pocket.” Nice, simple, and usable.

Why Teach Financial Literacy

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It’s not how much money you make. It’s how 

much money you keep.

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In 1990, Mike took over his father’s empire and is, in fact, doing a better job than his dad did. We see each other once or twice a year on the golf course. He and his wife are wealthier than you could imagine. Rich dad’s empire is in great hands, and Mike is now grooming his son to take his place, as his dad had groomed us.

In 1994, I retired at the age of 47, and my wife Kim was 37. Retirement does not mean working. For us, it means that, barring unforeseen cataclysmic changes, we can work or not work, and our wealth grows automatically, staying ahead of inflation. Our assets are large enough to grow by themselves. It’s like planting a tree. You water it for years, and then one day it doesn’t need you anymore. Its roots are implanted deep enough. Then the tree provides shade for your enjoyment.

Mike chose to run the empire, and I chose to retire.

Whenever I speak to groups of people, they often ask what I would recommend that they do. “How do I get started?” “Is there a book you would recommend?” “What should I do to prepare my children?” “What is your secret to success?” “How do I make millions?”

Whenever I hear one of these questions, I’m reminded of the following story:

The Richest Businessmen

In 1923 a group of our greatest leaders and richest businessmen held a meeting at the Edgewater Beach hotel in Chicago. Among them were Charles Schwab, head of the largest independent steel company;

Samuel Insull, president of the world’s largest utility; Howard Hopson, head of the largest gas company; Ivar Kreuger, president of International Match Co., One of the world’s largest companies at that time; Leon Frazier, president of the Bank of International Settlements; Richard Whitney, president of the New York Stock Exchange; Arthur Cotton and Jesse Livermore, two of the biggest stock speculators; and Albert Fall, a member of President Harding’s cabinet.

Twenty-five years later, nine of these titans ended their lives as follows: Schwab died penniless after living for five years on borrowed money. Insull died broke in a foreign land, and Kreuger and Cotton also died broke. Hopson went insane. Whitney and Albert Fall were released from prison, and Fraser and Livermore committed suicide.

I doubt if anyone can say what really happened to these men. If you look at the date, 1923, it was just before the 1929 market crash and the Great Depression, which I suspect had a great impact on these men and their lives.

The point is this: Today we live in times of greater and faster change than these men did. I suspect there will be many booms and busts in the coming years that will parallel the ups and downs these men faced. I am concerned that too many people are too focused on money and not on their greatest wealth, their education. If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer despite tough changes. If they think money will solve problems, they will have a rough ride.

Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.

Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep. We’ve all heard stories of lottery winners who are poor, then suddenly rich, and then poor again. They win millions yet are soon back where they started. Or stories of professional athletes, who at the age of 24 are earning millions, but are sleeping under a bridge 10 years later.

I remember a story of a young basketball player who a year ago had millions. Today, at just 29, he claims his friends, attorney, and accountant took his money, and he was forced to work at a car wash for minimum wage. He was fired from the car wash because he refused to take off his championship ring as he was wiping off the cars. His story made national news and he is appealing his termination, claiming hardship and discrimination. He claims that the ring is all he has left and if it was stripped away, he’ll crumble.

I know so many people who became instant millionaires. And while I am glad some people have become richer and richer, I caution them that in the long run, it’s not how much money you make. It’s how much you keep, and how many generations you keep it.

So when people ask, “Where do I get started?” or “Tell me how to get rich quick,” they often are greatly disappointed with my answer. I simply say to them what my rich dad said to me when I was a little kid. “If you want to be rich, you need to be financially literate.”

That idea was drummed into my head every time we were together. As I said, my educated dad stressed the importance of reading books, while my rich dad stressed the need to master financial literacy.

If you are going to build the Empire State Building, the first thing you need to do is dig a deep hole and pour a strong foundation. If you are going to build a home in the suburbs, all you need to do is pour a six-inch slab of concrete. Most people, in their drive to get rich, are trying to build an Empire State Building on a six-inch slab.

Our school system, created in the Agrarian Age, still believes in homes with no foundation. Dirt floors are still the rage. So kids graduate from school with virtually no financial foundation. One day, sleepless and deep in debt in suburbia, living the American Dream, they decide that the answer to their financial problems is to find a way to get rich quick.

Construction on the skyscraper begins. It goes up quickly, and soon, instead of the Empire State Building, we have the Leaning Tower of Suburbia. The sleepless nights return.

As for Mike and me in our adult years, both of our choices were possible because we were taught to pour a strong financial foundation when we were just kids.

Accounting is possibly the most confusing, boring subject in the world, but if you want to be rich long-term, it could be the most important subject. For rich dad, the question was how to take a boring and confusing subject and teach it to kids. The answer he found was to make it simple by teaching it in pictures.

My rich dad poured a strong financial foundation for Mike and me. Since we were just kids, he created a simple way to teach us. For years he only drew pictures and used few words. Mike and I understood the simple drawings, the jargon, the movement of money, and then in later years, rich dad began adding numbers. 

Today, Mike has gone on to master much more complex and sophisticated accounting analysis because he had to in order to run his empire. I am not as sophisticated because my empire is smaller, yet we come from the same simple foundation. Over the following pages, I offer to you the same simple line drawings Mike’s dad created for us. Though basic, those drawings helped guide two little boys in building great sums of wealth on a solid and deep foundation.

Charity in the way of Allah Almighty

One day, a poor man was walking through the streets of Madinah, when he arrived at the home of Sayyidunā Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ. He knocked on the door, and recited some verses of poetry:

Whoever hoped in you and knocked on your door has never been disappointed. You are the possessor of generosity and benevolence, rather, you are the fountainhead of generosity and munificence.

Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ was praying inside at the time. After completing his prayer, he came to the door and saw a villager standing there, whose appearance clearly indicated poverty and hunger. Sayyidunā Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ asked his servant Qanbar رَحْمَةُ الـلّٰـهِ عَلَيْه, "How much wealth is left for our expenses?"

He replied, "There are two hundred dirhams remaining, which are to be spent on your household according to your command."

Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ said, "Go and bring it all, because the person who has come is currently more in need of these dirhams than my household."

So, he رَضِىَ الـلّٰـهُ عَـنْهُ gave the money to that poor man and said, "Take these, and accept my apologies for their small amount, because we are commanded to show kindness in all circumstances. These are few; if there were more, I would have given those to you too." The poor man took the dirhams and departed happily, supplicating for him. Ibn ʿAsakir, vol. 14, p. 185 Summarised

سُبْحٰنَ الـلّٰـه! Look at the generosity of Sayyidunā Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ. His entire household is generous. The holy Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم never said "no"; whatever was asked of him, he granted it. Just as Imam Aḥmad Razā Khan رَحْمَةُ الـلّٰـهِ عَلَيْه beautifully says in his poetry:

Meaning, whoever came to ask the beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم, he never said "no"; rather, he granted whatever was available.

Introduction to the second Prince

The blessed name of Sayyid al-Shuhadāʾ, Sayyidunā Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ, is Ḥusayn. His teknonym is Abū ʿAbdullāh, and his titles include Sibṭ Rasūlillāh and Rayḥānat al-Rasūl (i.e., the flower of the holy Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم).

His blessed birth took place in Madinah al-Munawwarah on the 5$^{th}$ of Shaʿbān, in 4 Hijrī. The noble Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم named him "Ḥusayn" and "Shabbīr", and called him his son.Usd Al-Ghābah, vol. 2, pp. 25-26, selected

Taḥnīk, Adhan, and ʿAqīqah

The beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم recited azan in the right ear of his beloved grandson, Sayyidunā Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ, recited the takbīr in his left ear, and blessed him with supplications while giving him taḥnīk from his blessed mouth. Usd Al-Ghābah, vol. 2, p. 25, summarized

In our society, people rush to name a child, whereas it is mustaḥabb (recommended) to name the child on the seventh day and also perform ʿaqīqah on the seventh day.

Worship of the Prophet’s grandson

O devotees of Imam Ḥusayn! Our Master, the Martyr of Karbala, Sayyidunā Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ was also an ardent worshipper, ascetic, and one who prostrated abundantly. Accordingly, on the night of ʿĀshūrāʾ (i.e., the night of 10th Muḥarram), Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ said to Sayyidunā ʿAbbās رَضِىَ الـلّٰـهُ عَـنْهُ, the Flag-bearer (who was his brother): "May this battle be postponed until tomorrow somehow, so that we may have this night to worship Allah Almighty. Allah Almighty knows well that I have great love for prayer, recitation of the noble Quran, making abundant supplications, and seeking forgiveness. Al-Kāmil fī al-Tārīkh, vol. 3, p. 415

اللهُ اَکْبَر! This is a matter of reflection for us, the devotees of the noble Companions and Ahl al-Bayt, and especially the devotees of Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ, that whilst we cannot even wake up for Fajr, our Imam faced an army of evil enemies who were thirsty for blood, and water was scarce, yet he showed such zeal for prayer in this state of hunger and thirst. He wished for one more night to worship his Lord. The truth is that love leads to obedience.

If only we could attain true love, so that we also obey and follow them.

Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ was very pious, righteous, and one who prostrated a lot.

His mother, Sayyidah Fāṭimah رَضِىَ الـلّٰـهُ عَـنْهُمَا, was also a devoted worshipper; this entire household is a source of pride for us. We seek blessings through their acts of worship, so that Allah Almighty also grants us the blessing of Imam Ḥusayn’s worship, which causes our hearts to also be inclined towards prayer, recitation of the noble Quran, remembrance of Allah Almighty, and ṣalāt upon the beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم.

Reflect! The night of the 10th of Muḥarram was the last night of Imam Ḥusayn's physical life, yet his zeal and devotion for the worship of Allah Almighty was such that even at the very moment of martyrdom, he رَضِىَ الـلّٰـهُ عَـنْهُ was in a state of prostration in the court of Allah Almighty.

If only we too would worship, travel in the way of Allah Almighty to spread the invitation to righteousness and dedicate its reward to the martyrs of Karbala and learn and teach many sunan.

Would that we, the humble servants of Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ, would also spend the days and nights of our lives in worship and spiritual exertions, following in the footsteps of Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ. Remember! It is stated in a blessed Hadith: “A person will be with whom he loves.” Ṣaḥīḥ al-Bukhārī, vol. 4, p. 147, Hadith 6169.

If we continue to claim love for Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ verbally but do not adopt his blessed character, then our love can be challenged. However, following in the footsteps of those whom one loves is the highest degree of love.

Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ had adorned his blessed face with the noble beard, which was the Sunnah of his grandfather صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم. His respected father, Sayyidunā ʿAlī رَضِىَ الـلّٰـهُ عَـنْهُ also had a dense (i.e., full) beard. Let us reflect on what kind of devotees of Ahl al-Bayt and al-Ḥasanayn (i.e., Imam Ḥasan and Imam Ḥusayn رَضِىَ الـلّٰـهُ عَنْهُمَا) we are, when Sayyidunā Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ performed his last Fajr prayer in congregation in his tent while the enemies were brandishing swords from all four sides, and holding up spears and shields.

The true love for Ahl al-Bayt رَضِىَ الـلّٰـهُ عَنْهُمْ lies in following them. The blessed life of Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ teaches us that we should also perform all five prayers in congregation and be ready to offer every kind of sacrifice for the sake of Islam when the time comes.

May Allah grant us true and sincere love for the noble Companions and Ahl al-Bayt رَضِىَ الـلّٰـهُ عَنْهُمْ.

The Grandeur of al-Ḥasanayn رَضِىَ الـلّٰـهُ عَـنْهُ and the Virtues of Ashura

The misfortune of not reciting ṣalāt upon the beloved Prophet ﷺ

It is narrated from Imam Ḥusayn رَضِىَ الـلّٰـهُ عَـنْهُ that the beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم said: "Miserly is the person in whose presence I am mentioned, and he does not recite ṣalāt upon me." JāmiꜤ al-Tirmidhī, vol. 5, p. 321, Hadith 3557.

The grandeur of Sayyidunā Imam Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ

Sayyidunā Abū Hurayrah رَضِىَ الـلّٰـهُ عَـنْهُ, states:

Whenever I saw (the grandson of the Messenger, Imam) Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ, tears would flow from my eyes. The holy Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم came out one day, saw me in the masjid and took my hand, so I walked with him. He did not say anything to me until we entered the market of Banū Qaynuqāʿ and returned from there. Then the holy Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم said, "Where is the small child? Bring him to me!"

I saw Imam Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ come and sit in the blessed lap of the beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم. The beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم put his blessed tongue into his blessed mouth and said three times, "O Allah! I love him, so You also love him, and also love whoever loves him."Al-Adab al-Mufrad, p. 304, Hadith 1183, selected Words and Meanings: خنداں: laughing, smiling. مِثْلِ گُل: like a flower.

Meaning, O Messenger of Allah صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم! I implore you by the virtue of those two whom you call your two flowers; when Aḥmad Razā rises on the Day of Judgement, may he be smiling like a flower.

May this supplication be accepted in our favour for the sake of Imam Aḥmad Razā Khan رَحْمَةُ الـلّٰـهِ عَلَيْه. We are the humble servants of al-Ḥasanayn al-Karīmayn رَضِىَ الـلّٰـهُ عَـنْهُمَا, Imam Aḥmad Razā Khan, and all the saints رَحِمَهُمُ الـلّٰـه. May Allah keep us in their service.

The beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم said about both of them that "these two are my flowers". Ṣaḥīḥ al-Bukhārī, vol. 2, p. 547, Hadith 3753

So, Imam Aḥmad Razā Khan رَحْمَةُ الـلّٰـهِ عَلَيْه has used this Hadith in his maqṭaʿ (the final couplet of a poem where the poet mentions his pen name).

Blessed birth of the esteemed Prince

The blessed birth of Imam Abū Muhammad Ḥasan al-Mujtabā رَضِىَ الـلّٰـهُ عَـنْهُ occurred on the 15$^{th}$ of Ramadan, 3 Hijrī. Al-Ṭabaqāt al-Kabīr li Ibn SaꜤd, vol. 6, p. 352

His blessed name is: Ḥasan, his teknonym: Abu Muhammad, and his titles include: Taqī, Sayyid, Sibṭ Rasūlillāh, and al-Sibṭ al-Akbar. He is also called Rayḥānat al-Rasūl (i.e., the flower of the Messenger of Allah).

Resemblance to the beloved Prophet ﷺ

It is narrated from the servant of the beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم, Sayyidunā Anas b. Mālik رَضِىَ الـلّٰـهُ عَـنْهُ, that there was no one who resembled the beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم more than Imam Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ.Ṣaḥīḥ al-Bukhārī, vol. 2, p. 547, Hadith 3752

The profound love of the beloved Prophet ﷺ

O devotees of the Prophet! The beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم loved our Imam Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ very much. The holy Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم would sometimes come out of his house carrying Sayyidunā Imam Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ in his lap, or sometimes on his blessed shoulders. Sometimes he would visit the house of Sayyidah Fāṭimah رَضِىَ الـلّٰـهُ عَـنْهَا to see him and show affection to him. Sayyidunā Imam Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ was also very accustomed to the holy Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم, so much so that sometimes he would climb on his blessed back during prayer.

The holy Prophet's ﷺ affection for Imam Ḥasan رَضِىَ الـلّٰـهُ عَـنْهُ 

Sayyidunā Barāʾ b. ʿĀzib رَضِىَ الـلّٰـهُ عَـنْهُ, relates, “I saw the Beloved Prophet صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم carrying (Imam) Ḥasan b. ʿAlī (رَضِىَ الـلّٰـهُ عَنْهُمَا) on his shoulder and supplicating to Allah Almighty: اَللّٰهُمَّ اِنِّیْ اُحِبُّهٗ فَاَحِبَّهٗ "O Allah! Indeed, I love him, so love him also. Jamiʿ al-Tirmidhī, vol. 5, p. 432, Hadith 3808

The Trap of the Paycheck and the Power of Opportunity

Seeing What Others Miss

As he climbed into his pickup truck outside his convenience store, rich dad said, “Keep working boys, but the sooner you forget about needing a paycheck, the easier your adult life will be. Keep using your brain, work for free, and soon your mind will show you ways of making money far beyond what I could ever pay you. You will see things that other people never see. Most people never see these opportunities because they’re looking for money and security, so that’s all they get. The moment you see one opportunity; you’ll see them for the rest of your life. The moment you do that; I’ll teach you something else. Learn this, and you’ll avoid one of life’s biggest traps.

Mike and I picked up our things from the store and waved goodbye to Mrs. Martin. We went back to the park, to the same picnic bench, and spent several more hours thinking and talking.

We spent the next week at school thinking and talking, too. For two more weeks, we kept thinking, talking, and working for free.

At the end of the second Saturday, I was again saying goodbye to Mrs. Martin and looking at the comic-book stand with a longing gaze. The hard thing about not even getting 30 cents every Saturday was that I didn’t have any money to buy comic books. Suddenly, as Mrs. Martin said goodbye to Mike and me, I saw her do something I’d never seen her do before.

Mrs. Martin was cutting the front page of the comic book in half. She kept the top half of the comic book cover and threw the rest of the book into a large cardboard box. When I asked her what she did with the comic books, she said, “I throw them away. I give the top half of the cover back to the comic-book distributor for credit when he brings in the new comics. He’s coming in an hour.”

Mike and I waited for an hour. Soon the distributor arrived, and I asked him if we could have the comic books. To my delight, he said, “You can have them if you work for this store and do not resell them.”

Remember our old business partnership? Well, Mike and I revived it. Using a spare room in Mike’s basement, we began piling hundreds of comic books in that room. Soon our comic-book library was open to the public. We hired Mike’s younger sister, who loved to study, to be head librarian. She charged each child 10 cents admission to the library, which was open from 2:30 p.m. to 4:30 p.m. every day after school. The customers, the children of the neighborhood, could read as many comics as they wanted in two hours. It was a bargain for them since a comic cost 10 cents each, and they could read five or six in two hours.

Mike’s sister would check the kids as they left to make sure they weren’t borrowing any comic books. She also kept the books, logging in how many kids showed up each day, who they were, and any comments they might have. Mike and I averaged $9.50 per week over a three-month period. We paid his sister one dollar a week and allowed her to read the comics for free, which she rarely did since she was always studying.

Mike and I kept our agreement by working in the store every Saturday and collecting all the comic books from the different stores. We kept our agreement to the distributor by not selling any comic books. We burned them once they got too tattered. We tried opening a branch office, but we could never quite find someone as trustworthy and dedicated as Mike’s sister. At an early age, we found out how hard it was to find good staff.

Three months after the library first opened, a fight broke out in the room. Some bullies from another neighborhood pushed their way in, and Mike’s dad suggested we shut down the business. So our comic-book business shut down, and we stopped working on Saturdays at the convenience store. But rich dad was excited because he had new things he wanted to teach us. He was happy because we had learned our first lesson so well: We learned to make money work for us. By not getting paid for our work at the store, we were forced to use our imaginations to identify an opportunity to make money. By starting our own business, the comic-book library, we were in control of our own finances, not dependent on an employer. The best part was that our business generated money for us, even when we weren’t physically there. Our money worked for us.

Instead of paying us money, rich dad had given us so much more.

Thinking Beyond the Numbers: Rich Dad on Logic vs. Emotion

 “But don’t we have business schools?” Mike asked. “And haven’t you encouraged me to go for my MBA?”

“Yes,” said rich dad. “But all too often business schools train employees to become sophisticated bean-counters. Heaven forbid a bean-counter takes over a business. All they do is look at the numbers, fire people, and kill the business. I know this because I hire bean-counters. All they think about is cutting costs and raising prices, which cause more problems. Bean-counting is important. I wish more people knew it, but it, too, is not the whole picture,” added rich dad angrily.

“So is there an answer?” asked Mike.

“Yes,” said rich dad. “Learn to use your emotions to think, not think with your emotions. When you boys mastered your emotions by agreeing to work for free, I knew there was hope. When you again resisted your emotions when I tempted you with more money, you were again learning to think in spite of being emotionally charged. That’s the first step.”

“Why is that step so important?” I asked.

“Well, that’s up to you to find out. If you want to learn, I’ll take you boys into the briar patch, a place almost everyone else avoids. If you go with me, you’ll let go of the idea of working for money and instead learn to have money work for you.”

“And what will we get if we go with you. What if we agree to learn from you? What will we get?” I asked.

“The same thing Brer Rabbit got,” said rich dad, referring to the classic children’s story.

“Is there a briar patch?” I asked.

“Yes,” said rich dad. “The briar patch is our fear and greed. Confronting fear, weaknesses, and neediness by choosing our own thoughts is the way out.”

“Choosing our thoughts?” Mike asked, puzzled.

“Yes. Choosing what we think rather than reacting to our emotions. Instead of just getting up and going to work because not having the money to pay your bills is scaring you, ask yourself, ‘Is working harder at this the best solution to this problem?’ Most people are too afraid to rationally think things through and instead run out the door to a job they hate. The Tar Baby is in control. That’s what I mean by choosing your thoughts.”

“And how do we do that?” Mike asked.

“That’s what I will teach you. I’ll teach you to have a choice of thoughts rather than a knee-jerk reaction, like gulping down your morning coffee and running out the door.

“Remember what I said before: A job is only a short-term solution to a long-term problem. Most people have only one problem in mind, and it’s short-term. It’s the bills at the end of the month, the Tar Baby. Money controls their lives, or should I say the fear and ignorance about money controls it. So they do as their parents did. They get up every day and go work for money, not taking the time to ask the question,

‘Is there another way?’ Their emotions now control their thinking, not their heads.”

“Can you tell the difference between emotions thinking and the head thinking?” Mike asked.

“Oh, yes. I hear it all the time,” said rich dad. “I hear things like, ‘Well, everyone has to work.’ Or ‘The rich are crooks.’ Or ‘I’ll get another job. I deserve this raise. You can’t push me around.’ Or ‘I like this job because it’s secure.’ No one asks, ‘Is there something I’m missing here?’ which would break through the emotional thought and give you time to think clearly.”

As we headed back to the store, rich dad explained that the rich really did “make money.” They did not work for it. He went on to explain that when Mike and I were casting five-cent pieces out of lead, thinking we were making money, we were very close to thinking the way the rich think. The problem was that creating money is legal for the government and banks to do, but illegal for us to do. There are legal ways to create money from nothing, he told us.

Rich dad went on to explain that the rich know that money is an illusion, truly like the carrot for the donkey. It’s only out of fear and greed that the illusion of money is held together by billions of people who believe that money is real. It’s not. Money is really made up. It is only because of the illusion of confidence and the ignorance of the masses that this house of cards stands.

He talked about the gold standard that America was on, and that each dollar bill was actually a silver certificate. What concerned him was the rumor that we would someday go off the gold standard and our dollars would no longer be backed by something tangible.

“If that happens, boys, all hell will break loose. The poor, the middle class, and the ignorant will have their lives ruined simply because they will continue to believe that money is real and that the company they work for, or the government, will look after them.”

We really did not understand what he was saying that day, but over the years, it made more and more sense.

Escaping the Emotional Trap of Fear and Greed

 “By not giving in to your emotions, you were able to delay your reactions and think. That is important. We will always have emotions of fear and greed. From here on in, it’s imperative for you to use those emotions to your advantage, and for the long term to not let your emotions control your thinking. Most people use fear and greed against themselves. That’s the start of ignorance. Most people live their lives chasing paychecks, pay raises and job security because of the emotions of desire and fear, not really questioning where those emotion-driven thoughts are leading them. It’s just like the picture of a donkey dragging a cart with its owner dangling a carrot just in front of its nose. The donkey’s owner may be going where he wants to, but the donkey is chasing an illusion. Tomorrow there will only be another carrot for the donkey.”

“You mean the moment I picture a new baseball glove, candy and toys, that’s like a carrot to a donkey?” Mike asked.

“Yes, and as you get older, your toys get more expensive —a new car, a boat, and a big house to impress your friends,” said rich dad with a smile. “Fear pushes you out the door, and desire calls to you. That’s the trap.”

“So what’s the answer,” Mike asked.

“What intensifies fear and desire is ignorance. That is why rich people with lots of money often have more fear the richer they get. Money is the carrot, the illusion. If the donkey could see the whole picture, it might rethink its choice to chase the carrot.”

Rich dad went on to explain that a human’s life is a struggle between ignorance and illumination.

He explained that once a person stops searching for information and self-knowledge, ignorance sets in. That struggle is a moment-to-moment decision—to learn to open or close one’s mind.

“Look, school is very important. You go to school to learn a skill or profession to become a contributing member of society. Every culture needs teachers, doctors, mechanics, artists, cooks, businesspeople, police officers, firefighters, and soldiers. Schools train them so society can thrive and flourish,” said rich dad. “Unfortunately, for many people school is the end, not the beginning.”

There was a long silence. Rich dad was smiling. I didn’t comprehend everything he said that day. But as with most great teachers, his words continued to teach for years.

“I’ve been a little cruel today,” said rich dad. “But I want you to always remember this talk. I want you to always think of Mrs. Martin. And I want you always to remember that donkey. Never forget that fear and desire can lead you into life’s biggest trap if you’re not aware of them controlling your thinking. To spend your life living in fear, never exploring your dreams, is cruel. To work hard for money, thinking that it will buy you things that will make you happy is also cruel. To wake up in the middle of the night terrified about paying bills is a horrible way to live. To live a life dictated by the size of a paycheck is not really living a life. Thinking that a job makes you secure is lying to yourself. That’s cruel, and that’s the trap I want you to avoid. I’ve seen how money runs people’s lives. Don’t let that happen to you. Please don’t let money run your life.”

A softball rolled under our table. Rich dad picked it up and threw it back.

“So what does ignorance have to do with greed and fear?” I asked.

“Because it is ignorance about money that causes so much greed and fear,” said rich dad. “Let me give you some examples. A doctor, wanting more money to better provide for his family, raises his fees. By raising his fees, it makes health care more expensive for everyone.

It hurts the poor people the most, so they have worse health than those with money. Because the doctors raise their fees, the attorneys raise their fees. Because the attorneys’ fees have gone up, schoolteachers want a raise, which raises our taxes, and on and on and on. Soon there will be such a horrifying gap between the rich and the poor that chaos will break out and another great civilization will collapse. History proves that great civilizations collapse when the gap between the haves and have-nots is too great. Sadly, America is on that same course because we haven’t learned from history. We only memorize historical dates and names, not the lesson.”

“Aren’t prices supposed to go up?” I asked.

“In an educated society with a well-run government, prices should actually come down. Of course, that is often only true in theory. Prices go up because of greed and fear caused by ignorance. If schools taught people about money, there would be more money and lower prices. But schools focus only on teaching people to work for money, not how to harness money’s power.”

The 8-Hour Lie: Why "Not Caring About Money" is Costing You

So many people say, “Oh, I’m not interested in money.” Yet they’ll work at a job for eight hours a day.

“So what do we do?” I asked. “Not work for money until all traces of fear and greed are gone?”

“No, that would be a waste of time,” said rich dad.

“Emotions are what make us human. The word ‘emotion’ stands for ‘energy in motion.’ Be truthful about your emotions and use your mind and emotions in your favor, not against yourself.”

“Whoa!” said Mike.

“Don’t worry about what I just said. It will make more sense in years to come. Just be an observer, not a reactor, to your emotions. Most people do not know that it’s their emotions that are doing the thinking. Your emotions are your emotions, but you have got to learn to do your own thinking.”

“Can you give me an example?” I asked.

“Sure,” replied rich dad. “When a person says, ‘I need to find a job,’ it’s most likely an emotion doing the thinking. Fear of not having money generates that thought.”

“But people do need money if they have bills to pay,” I said.

“Sure they do,” smiled rich dad. “All I’m saying is that it’s fear that is all too often doing the thinking.”

“I don’t understand,” said Mike.

“For example,” said rich dad. “If the fear of not having enough money arises, instead of immediately running out to get a job, they instead might ask themselves this question: ‘Will a job be the best solution to this fear over the long run?’ In my opinion, the answer is no. A job is really a short-term solution to a long-term problem.”

“But my dad is always saying, ‘Stay in school and get good grades, so you can find a safe, secure job,’” I interjected, somewhat confused.

“Yes, I understand he says that,” said rich dad, smiling. “Most people recommend that, and it’s a good path for most people. But people make that recommendation primarily out of fear.”

“You mean my dad says that because he’s afraid?”

“Yes,” said rich dad. “He’s terrified that you won’t earn enough money and won’t fit into society. Don’t get me wrong. He loves you and wants the best for you. I too believe an education and a job are important, but it won’t handle the fear. You see that same fear that makes him get up in the morning to earn a few bucks is the fear that is causing him to be so fanatical about your going to school.”

“So what do you recommend?” I asked.

“I want to teach you to master the power of money, instead of being afraid of it. They don’t teach that in school and, if you don’t learn it, you become a slave to money.”

It was finally making sense. He wanted us to widen our views and to see what the Mrs. Martins of this world couldn’t see. He used examples that sounded cruel at the time, but I’ve never forgotten them. My vision widened that day, and I began to see the trap that lay ahead for most people.

“You see, we’re all employees ultimately. We just work at different levels,” said rich dad. “I just want you boys to have a chance to avoid the trap caused by those two emotions, fear and desire. Use them in your favor, not against you. That’s what I want to teach you. I’m not interested in just teaching you to make a pile of money. That won’t handle the fear or desire. If you don’t first handle fear and desire, and you get rich, you’ll only be a highly paid slave.”

“So how do we avoid the trap?” I asked.

“The main cause of poverty or financial struggle is fear and ignorance, not the economy or the government or the rich. It’s self-inflicted fear and ignorance that keep people trapped. So, you boys go to school and get your college degrees, and I’ll teach you how to stay out of the trap.”

The pieces of the puzzle were appearing. My highly educated dad had a great education and a great career, but school never told him how to handle money or his fear of it. It became clear that I could learn different and important things from two fathers.

“So you’ve been talking about the fear of not having money. How does the desire for money affect our thinking?” Mike asked.

“How did you feel when I tempted you with a pay raise? Did you notice your desires rising?”

We nodded our heads.

People’s lives are forever controlled by two emotions: fear and greed.

 “Good,” rich dad said softly. “Most people have a price. And they have a price because of human emotions named fear and greed. First, the fear of being without money motivates us to work hard, and then once we get that paycheck, greed or desire starts us thinking about all the wonderful things money can buy. The pattern is then set.”

“What pattern?” I asked.

“The pattern of get up, go to work, pay bills; get up, go to work, pay bills. People’s lives are forever controlled by two emotions: fear and greed. Offer them more money and they continue the cycle by increasing their spending. This is what I call the Rat Race.”

“There is another way?” Mike asked.

“Yes,” said rich dad slowly. “But only a few people find it.”

“And what is that way?” Mike asked.

“That’s what I hope you boys will learn as you work and study with me. That is why I took away all forms of pay.”

“Any hints?” Mike asked. “We’re kind of tired of working hard, especially for nothing.”

“Well, the first step is telling the truth,”said rich dad.

“We haven’t been lying,” I said.

“I did not say you were lying. I said to tell the truth,”rich dad retorted.

“The truth about what?” I asked.

“How you’re feeling,” rich dad said. “You don’t have to say it to anyone else. Just admit it to yourself.”

“You mean the people in this park, the people who work for you, Mrs. Martin, they don’t do that?” I asked.

“I doubt it,” said rich dad. “Instead, they feel the fear of not having money. They don’t confront it logically. They react emotionally instead of using their heads,” rich dad said. “Then, they get a few bucks in their hands and again, the emotions of joy, desire, and greed take over. And again they react, instead of think.”

“So their emotions control their brain,” Mike said.

“That’s correct,” said rich dad. “Instead of admitting the truth about how they feel, they react to their feelings and fail to think. They feel the fear so they go to work, hoping that money will soothe the fear, but it doesn’t. It continues to haunt them and they return to work, hoping again that money will calm their fears, and again it doesn’t. Fear keeps them in this trap of working, earning money, working, earning money, hoping the fear will go away. But every day they get up, and that old fear wakes up with them. For millions of people that old fear keeps them awake all night, causing a night of turmoil and worry. So they get up and go to work, hoping that a paycheck will kill that fear gnawing at their soul. Money is running their lives, and they refuse to tell the truth about that. Money is in control of their emotions and their souls.”

Rich dad sat quietly, letting his words sink in. Mike and I heard what he said but didn’t understand fully what he was talking about. I just knew that I often wondered why grownups hurried off to work. It did not seem like much fun, and

they never looked that happy, but something kept them going.

Realizing we had absorbed as much as possible of what he was talking about, rich dad said, “I want you boys to avoid that trap. That is really what I want to teach you. Not just to be rich, because being rich does not solve the problem.”

“It doesn’t?” I asked, surprised.

“No, it doesn’t. Let me explain the other emotion: desire.

Some call it greed, but I prefer desire. It’s perfectly normal to desire something better, prettier, more fun, or exciting. So people also work for money because of desire. They desire money for the joy they think it can buy. But the joy that money brings is often short-lived, and they soon need more money for more joy, more pleasure, more comfort, and more security. So they keep working, thinking money will soothe their souls that are troubled by fear and desire. But money can’t do that.”

“Even rich people do this?” Mike asked.

“Rich people included,” said rich dad. “In fact, the reason many rich people are rich isn’t because of desire, but because of fear. They believe that money can eliminate the fear of being poor, so they amass tons of it, only to find the fear gets worse. Now they fear losing the money. I have friends who keep working even though they have plenty. I know people who have millions who are more afraid now than when they were poor. They’re terrified of losing it all. The fears that drove them to get rich got worse. That weak and needy part of their soul is actually screaming louder. They don’t want to lose the big houses, the cars and the high life money has bought them. They worry about what their friends would say if they lost all their money. Many are emotionally desperate and neurotic, although they look rich and have more money.”

“So is a poor man happier?” I asked.

“No, I don’t think so,” replied rich dad. “The avoidance of money is just as psychotic as being attached to money.”

As if on cue, the town derelict went past our table, stopping by the large rubbish can and rummaging around in it. The three of us watched him with great interest, when before we probably would have just ignored him.

Rich dad pulled a dollar out of his wallet and gestured to the older man. Seeing the money, the derelict came over immediately, took the bill, thanked rich dad profusely, and hurried off, ecstatic with his good fortune.

“He’s not much different from most of my employees,” said rich dad. “I’ve met so many people who say, ‘Oh, I’m not interested in money.’ Yet they’ll work at a job for eight hours a day. That’s a denial of truth. If they weren’t interested in money, then why are they working? That kind of thinking is probably more psychotic than a person who hoards money.”

As I sat there listening to my rich dad, my mind flashed back to the countless times my own dad said, “I’m not interested in money.” He said those words often. He also covered himself by always saying, “I work because I love my job.”

The Rich Don’t Work for Money

I didn’t tell my poor dad I wasn’t being paid. He wouldn’t have understood, and I didn’t want to try to explain something I didn’t understand myself.

For three more weeks, Mike and I worked three hours every Saturday for nothing. The work didn’t bother me, and the routine got easier, but it was the missed baseball games and not being able to afford to buy a few comic books that got to me.

Rich dad stopped by at noon on the third week. We heard his truck pull up in the parking lot and sputter when the engine was turned off. He entered the store and greeted Mrs. Martin with a hug. After finding out how things were going in the store, he reached into the ice cream freezer, pulled out two bars, paid for them, and signaled to Mike and me.

“Let’s go for a walk, boys.”

We crossed the street, dodging a few cars, and walked across a large grassy field where a few adults were playing softball. Sitting down at a lone picnic table, he handed Mike and me the treats.

“How’s it going, boys?”

“Okay,” Mike said.

I nodded in agreement.

“Learn anything yet?” rich dad asked.

Mike and I looked at each other, shrugged our shoulders, and shook our heads in unison.

Avoiding One of Life’s Biggest Traps

“Well, you boys had better start thinking. You’re staring at one of life’s biggest lessons. If you learn it, you’ll enjoy a life of great freedom and security. If you don’t, you’ll wind up like Mrs. Martin and most of the people playing softball in this park. They work very hard for little money, clinging to the illusion of job security and looking forward to a three week vacation each year and maybe a skimpy pension after forty-five years of service. If that excites you, I’ll give you a raise to 25 cents an hour.”

“But these are good, hardworking people. Are you making fun of them?” I demanded.

A smile came over rich dad’s face.

“Mrs. Martin is like a mother to me. I would never be that cruel. I may sound unkind because I’m doing my best to point something out to the two of you. I want to expand your point of view so you can see something most people never have the benefit of seeing because their vision is too narrow. Most people never see the trap they are in.”

Mike and I sat there, uncertain of his message. He sounded cruel, yet we could sense he was trying to drive home a point.

With a smile, rich dad said, “Doesn’t those 25 cents an hour sound good? Doesn’t it make your heart beat a little faster?”

I shook my head no, but it really did. Twenty-five cents an hour would be big bucks to me.

“Okay, I’ll pay you a dollar an hour,” rich dad said, with a sly grin.

Now my heart started to race. My brain was screaming, “Take it. Take it.” I could not believe what I was hearing. Still, I said nothing.

“Okay, two dollars an hour.”

My little brain and heart nearly exploded. After all, it was 1956 and being paid $2 an hour would have made me the richest kid in the world. I couldn’t imagine earning that kind of money. I wanted to say yes. I wanted the deal. I could picture a new bicycle, new baseball glove, and the adoration of my friends when I flashed some cash. On top of that, Jimmy and his rich friends could never call me poor again. But somehow my mouth stayed shut.

The ice cream had melted and was running down my hand. Rich dad was looking at two boys staring back at him, eyes wide open and brains empty. He was testing us, and he knew there was a part of our emotions that wanted to take the deal. He understood that every person has a weak and needy part of their soul that can be bought, and he knew that every individual also had a part of their soul that was resilient and could never be bought. It was only a question of which one was stronger.

“Okay, five dollars an hour.”

Suddenly I was silent. Something had changed. The offer was too big and ridiculous. Not many grown-ups in 1956 made more than that, but quickly my temptation disappeared, and calm set in. Slowly, I turned to my left to look at Mike. He looked back at me. The part of my soul that was weak and needy was silenced. The part of me that had no price took over. I knew Mike had gotten to that point too.