Rich Dad Poor Dad - The History of Taxes and the Power of Corporations

Lesson 4: The History of Taxes and the Power of Corporations

Income tax has been levied on citizens in England since 1874. In the United States it was introduced in 1913. Since then what was initially a plan to tax only the rich eventually “trickled down” to the middle class and the poor.

The rich have a secret weapon to shelter themselves from heavy taxation.

It’s called the Corporation. It isn’t a building with the company name and logo in brass signage out front. A corporation is simply a legal document in your attorney’s file cabinet duly registered under a government state agency. Corporations offer great tax advantages and protection from lawsuits. It’s the legal way to protect your wealth, and the rich have been using it for generations. Do your own research and find out what tax laws will bring you the best advantages.

The Golden Rule: PAY YOURSELF FIRST.

Rich dad says paying yourself first forces you to create more sources of

income to cover your expenses. It’s a simple rule that works like this:

The Rich with Corporations People who work for

corporations:

Earn Earn

Spend

Pay taxes

Pay taxes Spend

Key Financial IQ Components:

It helps to take some courses to gain financial literacy; rich dad stresses

the importance of learning –

1. Accounting. It pays to know how to read financial statements. When

acquiring businesses or assets you need to quickly see the financial

standing of the company you are acquiring. Many grown adults do not

know how to balance a balance sheet. In the long term, this knowledge

will pay off for you and your business.

2. Investment Strategy. This skill will sharpen with experience. Talk to

investors and observe how they play the game. Kiyosaki and Mike

spent many boyhood hours sitting in on Rich Dad’s meetings with

brokers, accountants, and attorneys.

3. Market Behavior. Know the laws of Supply and Demand. No business

owner can do without understanding these basic principles of the

market. Bill Gates saw what people needed. Open your eyes to

opportunities. Look at what sells and who buys.

4. Law Kiyosaki recommends doing everything you can to grow your

business within legal boundaries. Know your corporate, state, and

accounting laws.

Lesson 5: The Rich Invent Money

Self-confidence coupled with high financial IQ can certainly earn more for you

than merely saving a little bit every month.

Make good use of your time and find the best deals.

An example: In the early 90’s the Phoenix economy was bad. Homes once

valued at $100,000 sold for $75,000. Kiyosaki shopped at bankruptcy courts and

bought the same houses at only $20,000. He resold these properties for $60,000

making a cool $40,000 profit. After six more transactions of the same manner he

made a total $190,000 in profit and it only took 30 hours of work time.

Rich Dad explains there are Two Types of Investors:

1. Buyers of Packaged Investments.

This is when you call a retail outlet, real estate company, stockbroker

or financial planner and put your money in ready-made investments.

It’s a simple, clean way of investing.

2. The Professional Investor

Design your own investment. Assemble a deal and put together

different components of an opportunity. Rich dad encourages this type.

You need to develop three main skills to be this type of investor,

namely how to:

o Identify an opportunity everyone else has missed.

o Raise capital

o Organize smart people

Identify an opportunity everyone else has missed.

Learn to identify hidden Freebies in business deals. For example: The real

business of McDonald’s isn’t hamburgers. It’s the free real estate underneath

each franchise, on every important intersection, in cities all over the world that is

the real wealth of its owners.

THERE IS ALWAYS RISK. You need to learn how to manage risk and not avoid

it.