Chapter four of Ruch Dad, Poor Dad is upon us. This chapter provides an overview of the value of creating and running a corporation. It guides the readers into another perspective for minding your own business while not encouraging the reader to create a business unless they choose to. Instead he highlights a few of the benefits associated with corporations.
LESSON 4: THE HISTORY OF TAXES AND THE POWER OF CORPORATIONS – “My rich dad just played the game smart, and he did it through corporations—the biggest secret of the rich.” – Robert Kiyosaki
Robert Kiyosaki also provides a list of financial topics which can increase your ability to make fiscally responsible financial decisions. He also provides us with another resource for which to turn if we are curious about corporations and how this structure can increase financial aptitude. He recommends books written by Garrett Sutton as an introduction to this concept.
Here’s 7 lessons extracted from Chapter Four from Robert Kiyosaki:
1. You have to know how to play the game.
“The problem is that 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.”
2. Find ways to minimize your tax burden.
“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 don’t just sit there and voluntarily pay more taxes. Instead, they search for ways to minimize their tax burden.
3. Keep your power.
“If you work for money, you give the power to you employer. If money works for you, you keep the power and control it.”
4. Be smart.
““Be smart and you won’t be pushed around as much. He knew the law because he was a law-abiding citizen and because it was expensive to not know the law.”
5. Turn your dollars into great employees.
“Each dollar in my asset column was a great employee, working hard to make more employees and buy the boss a new Porsche with before-tax dollars.”
6. Financial intelligence is key – learn it and teach it.
“Without this financial knowledge, which I call financial intelligence or financial IQ, my road to financial independence would have been much more difficult. I now teach others in the hope that I may share my knowledge with them.”
7. Financial IQ is made up of:
- Accounting – “The more money you are responsible for, the more accuracy is required, or the house comes tumbling down.”
- Investing – “Investing is the science of “money making money.” This involves strategies and formulas which use the creative right-brain side.”
- Understanding Markets – “Understanding markets is the science of supply and demand. You need to know the technical aspects of the market, which are emotion-driven, in addition to the fundamental or economic aspects of an investment.”
- The Law – “A person who understands the tax advantages and protections provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor.”
- Tax Advantages – “For example, by owning your own corporation, your vacations can be board meetings in Hawaii.”
- Protection From Lawsuits – “The rich hide much of their wealth using vehicles such as corporations and trusts to protect their assets from creditors. When someone sues a wealthy individual, they are often met with layers of legal protection and often find that the wealthy person actually owns nothing.”
Life gets complicated sometimes and finances can be one of the top stressors. While creating a corporation may not be a part of your current financial strategy, it could be worth it in the end to look at all of your available options.
Til next time,
“But I will say that if you own any kind of legitimate assets, I would consider finding out more about the benefits and protection offered by a corporation as soon as possible.” – Robert Kiyosaki