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Robert Kiyosaki Why the Rich Get Richer

Robert Kiyosaki, Why the Rich Get Richer

To Get Rich, Seek Out Rich Financial Advice

by Robert Kiyosaki

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Posted on Tuesday, May 27, 2008, 12:00AM

I've been on television recently discussing the U.S. financial crisis. These shows often feature a panel of so-called financial experts who rarely agree with each other. The reason their advice is different is simply because each expert speaks to a different segment of the population.

Giving Credit

For example, Suze Orman, Dave Ramsey, and Larry Winget speak to people who are deep in credit card debt. Their advice is excellent, direct, practical, and to the point. I should know -- in the late 1970s, I was one of the debt-ridden people they're speaking to. I was deeply in debt because my business was suffering and I was using credit cards to live on. Instead of paying off my credit card, I'd get a new credit card and use that one to pay off the old credit card. I, too, once used a home equity loan to invest in my business -- and lost it all.

At my lowest point, I was nearly $700,000 in debt. One evening, I attempted to check into a motel in upstate New York and my credit card was declined. I slept in the car that night. Many people might say that this was a horrible experience, but that isn't true -- it was a wake-up call. It was clearly time to look in the mirror and face who I really was. I realized that if I wasn't going to be tough on me, the world would take on the job.

Today, older and wiser, I have tremendous respect for the power of debt and the value of credit. Credit is another word for trustworthiness. I'm currently millions of dollars in debt, but it's good debt invested in income-producing real estate. While millions of homeowners are threatened with foreclosure, my investment real estate is doing very well. In fact, I'm doing even better because more people are renting than buying.

The Strata of Financial Advice

If you're deeply in debt like I was and want to get rich someday, I suggest you start by following the advice of Orman, Ramsey, and Winget. For a certain portion of the population, their advice is very rich indeed.

But there are other types of financial advice, some of it not nearly as beneficial. The lowest kind assures people that the government will take care of them. This is what the people who are counting on Social Security and Medicare have been led to believe. The problem is that the U.S. government is the biggest debtor in the world, and those depending on it to take care of them will only become poorer.

Another type of bad financial advice tells us to get a safe job, save money, live below our means, buy a house, get out of debt, and invest for the long term in a well-diversified portfolio of mutual funds. On those financial TV shows, I get into the most head-butting with the so-called financial experts who subscribe to this philosophy. That's because, according to the Census Bureau, in 1999 the average U.S. income was $49,244. By 2006, the average income declined to $48,201. This means that U.S. workers haven't had a pay raise for seven years. So much for the advice about getting a safe job -- it's the opposite of rich advice.

Diversify at Your Peril

Moreover, in January 2008 the Federal Reserve Board dropped the interest rate twice over a period of just eight days, by a record 1.25 percent. If my crystal ball is accurate, I expect another .5 percent drop sometime later this year. Savers are actually losers, then, because interest rates are low and inflation is high. So urging people to save money isn't rich advice, either.

Finally, the S&P stood at 1,352.99 in March 2008, which is below its mark of 1,362.80 in April of 1999. So much for the advice of investing for the long term in a well-diversified portfolio of mutual funds -- that's also not rich advice.

Warren Buffett has said that diversification is for people who don't know what they're doing. And my rich dad once told me, "Diversifying is like going to a horse race and betting on every horse. The only way you win is if the darkest of dark horses wins." So my concern is that people who follow this second type of financial advice may actually wind up poor in the long term.

Get Rich, Stay Rich

So there's different financial advice for different people, and the price of poor advice is that millions will be poor if they follow advice that isn't aimed at them.

To become rich, I recommend investing in your financial education. There's a difference between that and financial advice. A solid financial education allows you to know the difference between good advice and bad advice, rich advisers and poor advisers.

If you want to become rich -- and remain that way -- it's important to know what financial advice is best for you.

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617 Comments

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  • Lisa - Monday, December 8, 2008, 12:42PM ET  Report Abuse

    • Overall: 5/5

    This advice is as timely as it was when it was written. We have to invest in our financial education. I think that deep down, we have such a phobia about money that we are in the situation we are in. Once we realize that money can be a good thing, we can lay a solid financial future for ourselves and most important, our children.

  • Marcos - Wednesday, November 19, 2008, 5:20PM ET  Report Abuse

    • Overall: 4/5

    map from MI; I agree with what you said about flourishing in the renters market.I told people who were working with me (as well as investors), not to give up on MI and that it is prime! The market has only but "shifted" from buying and selling, but 'renting'. OH,TOO HAVE A HARVEST IN THE DROUGHT!!!

  • Yahoo! Finance User - Thursday, October 16, 2008, 8:35AM ET  Report Abuse

    • Overall: 5/5

    You're very true Robert, because you've proven it. Are your properties affected by this financial crisis?

  • adam - Tuesday, October 14, 2008, 6:17PM ET  Report Abuse

    • Overall: 5/5

    keep up the great work

  • Yahoo! Finance User - Wednesday, October 8, 2008, 1:44PM ET  Report Abuse

    • Overall: 5/5

    Great job Robert, I love people that talk and later on they have to eat their own S........ words...

  • Yahoo! Finance User - Wednesday, October 8, 2008, 9:48AM ET  Report Abuse

    • Overall: 4/5

    A few months ago when this article was written allot of people wrote in saying Rob was an idiot for saying the feds would lower rates later in the year. They said rates would more likely be raised? Where are all those critics now? Looks like Rob was right once again.

  • Numberone - Thursday, October 2, 2008, 11:27AM ET  Report Abuse

    • Overall: 4/5

    Yahoo! Finance is looking for people who use websites such as Yahoo! Finance to successfully manage their finances or people who have significantly improved their financial situation by educating themselves with information and tools on financial websites. - Have you significantly grown your nest egg and investments using stock research tools on these sites? - Have you pulled yourself out of debt with the help of such websites? - Have you saved $500 dollars or more per month because you used online calculators to help you budget? - Have you made smart changes to mortgage plans based on information you learned on a financial website? What results have you seen since you started using these sites? How have these sites helped you get out or stay out of financial trouble? Tell us your story - you could be included in potential stories in national and regional media. Please email number1users@yahoo.com and include your contact information.

  • Mike - Wednesday, September 24, 2008, 8:06PM ET  Report Abuse

    • Overall: 3/5

    We, as a country, all need to become financially knowledgeable in our own lives, and in our community, state, nation, and world. We are selling our " American Dream " to folks from all over the globe.

  • Trenedy - Wednesday, September 24, 2008, 4:17PM ET  Report Abuse

    • Overall: 2/5

    WHERE IS THE RICH ADVICE HOW DO I GET THE EDUCATION.

  • Leonard - Wednesday, September 24, 2008, 2:03PM ET  Report Abuse

    • Overall: 1/5

    Your advice is lip service. Weak statements trying to get people to buy your JUNK book. You are not a journalist and you know NOTHING about financial advice that's why the banks have your nuts to the tune of millions . Your not even a good ENTERTAINER. I am a former stockbroker and real financial advisor in California with millions off shore. I have help hundreds of my clients out because the "so-called" advisors. Dave Ramsey recommends are so bad. You are out to sell trash books, with bogus crap! .You couldn't sell female companionship at a men's prison!

  • p - Sunday, September 21, 2008, 11:02AM ET  Report Abuse

    • Overall: 5/5

    we people who need financial advice also need the how and where to get and apply such advice

  • Yahoo! Finance User - Monday, September 15, 2008, 6:38PM ET  Report Abuse

    • Overall: 1/5

    This advice is extremely dangerous. First, advocating for people like Ramsey and Orman who's ideas are dangerous. They give advice to the masses when financial advice is needed on a personal level. As for not diversifying, that is the most idiotic idea I could think of utilizing. To grow a portfolio effectively and for the long term diversification is must. There is a reason why modern portfolio theory won a nobel prize in economics. If you think being diversified is two stocks you dont know what your doing. Portfolios are best managed by professional financial advisors. If your not happy with your current advisor find one who you will be happy with. This author obviously does not know the first thing about investing, in addition if he did he would be known by the masses.

  • FORTUNE - Tuesday, September 9, 2008, 1:51AM ET  Report Abuse

    • Overall: 5/5

    EXCELLENT AND MOST INSPIRING COMMENT FOR ANY ONE WHO WANTS TO HAVE FINANCIAL FREEDOM, ASANTE SANA

  • Yahoo! Finance User - Saturday, August 16, 2008, 6:06PM ET  Report Abuse

    • Overall: 4/5

    Excellent advise from Kiyosaki. He always delivers clear, easy to understand advise that sheds light on the whole financial world and the reader's position in it.

  • Brent - Thursday, August 14, 2008, 1:28PM ET  Report Abuse

    • Overall: 1/5

    Your advice is no advice at all. They are simply teaser statements trying to get people to buy your book. You and the Dave Ramsey's and Suze Orman's of the world are journalist and know NOTHING about financial advice. Look at Suze Orman's W-2, her profession, ENTERTAINER. I am a financial advisor in Dallas TX that has had to help clients because the "so-called" advisors Dave Ramsey sent them to or recommends are so bad. You are all out to sell books, TV time, ads and are as bogus as your weak advice.

  • ChillzK - Friday, August 1, 2008, 4:17PM ET  Report Abuse

    • Overall: 5/5

    Great Advice, Love your column! Getting Rich is def. different that saving for retirement.

  • Matt - Sunday, July 27, 2008, 11:04AM ET  Report Abuse

    • Overall: 5/5

    ------Mr. Kiyosaki------, You've helped me alot over the last 8 years. I just found this forum after you mentioned it in the end of Why We Want You To Be Rich. I've seen the negative comments on this forum and I wanted to write and say THANK YOU!!!! I'm self employed ( an S and working on becoming a B ) and I can confidently say you've helped me get this far more than any other influence. So I wanted to say thanks.....

  • Yahoo! Finance User - Friday, July 25, 2008, 5:44PM ET  Report Abuse

    • Overall: 1/5

    Where can I get Rich advice? Oh yeah..I forgot...buy Kiyosaki's advice. Pay for Rich Dad Coaching. Are these articles supposed to help us or Robert get rich?

  • EthanF - Thursday, July 24, 2008, 4:17PM ET  Report Abuse

    • Overall: 2/5

    Where exactly are you going with that article... do you even know?

  • critical investor - Wednesday, July 23, 2008, 4:04PM ET  Report Abuse

    • Overall: 1/5

    Rob,you keep quoting and paraphrasing others' words and speaking about your success stories in each of your articles...you can never refrain yourself from not saying such and such about yourself, pal...you are not in the super wealthy class yet. I don't need to get motivated by you, cause I'm always self-motivated...too bad, I won't buy your books..he3...Is your rich dad really rich? Put your books in the fiction or novel section if what you state is untrue or simply imaginary ...

  • allenEv - Wednesday, July 23, 2008, 7:39AM ET  Report Abuse

    • Overall: 1/5

    Buy when pessimism is high. RK, does yahoo pay you to write that!?

  • FrankRumbauskas - Tuesday, July 22, 2008, 5:17PM ET  Report Abuse

    • Overall: 5/5

    This gets to the bottom of why most advice doesn't work for people who want to get rich: Most of it isn't designed for people who want to be rich! People who want to be rich frequently turn on the cable news channels and get advice intended for people who are content to work until 65. The advice is *not* for people with the drive to become rich. I gather that the poor reviews on this article are from people who do not have the drive and motivation to become rich, and therefore feel the need to denigrate anyone who does. They want the easy way out, but that's not the path to riches.

  • Yahoo! Finance User - Tuesday, July 22, 2008, 4:40PM ET  Report Abuse

    • Overall: 1/5

    More advice that is afraid to committ is not what is needed here. Get real

  • Yahoo! Finance User - Tuesday, July 22, 2008, 4:30PM ET  Report Abuse

    • Overall: 1/5

    This one of the worst articles I have ever seen about getting rich!!!!

  • moneymaker - Tuesday, July 22, 2008, 3:37PM ET  Report Abuse

    • Overall: 5/5

    Right on Mr. Kiosaki!!

  • Chris - Tuesday, July 22, 2008, 3:04PM ET  Report Abuse

    • Overall: 2/5

    "Another type of bad financial advice tells us to get a safe job, save money, live below our means, buy a house, get out of debt, and invest for the long term in a well-diversified portfolio of mutual funds." This kind of advice is pretty much crap. Buying a house and getting out of debt (the credit card kind) is superb advice! Only once you eliminate your credit card debt or at least managed it to a degree and have established a safety net of 3-6 months of expenses should you start to invest. I work in this field and there are many fund portfolios that have beat the S&P average for example and the emergence of the ETF funds make these chances even better! This guy is a scare tactic user, I've seen no credentials that make me want to believe him! Other than that he fails to qualify many of his statements, who says live below your means? There's a difference to living conservatively and living outside your means!! And what exactly is a well diversified portfolio? And why is it bad? Don't ask this guy!

  • Yahoo! Finance User - Tuesday, July 22, 2008, 11:07AM ET  Report Abuse

    • Overall: 5/5

    I agree with this article 100%. I am 77 years old and still pursue to educate myself further. It makes life more interesting.

  • Yahoo! Finance User - Monday, July 21, 2008, 10:38PM ET  Report Abuse

    • Overall: 4/5

    Robert, What happened? Its been almost two months and no new article? We're all waiting for some current info/advice, especially now in today's market? What happened to your regular, timely, monthly articles?

  • Yahoo! Finance User - Friday, July 18, 2008, 2:29PM ET  Report Abuse

    • Overall: 3/5

    The problem with mutual funds is they are basically just a company who buys and sells stocks. No different than McDonald's. When you buy mutual fund stock you are banking on the fact that the manager will outperform the market averages or INDEX's, minus expenses, minus profits and that the market will perform well. If you really want to invest in the market I will say your better off finding a good local broker(not the first one you call) to help you out and require you to know something about how "you" want to invest and why. Sure it will take some hard work the first year or so but after that its just a few e-mails from your sources to read each week. A final note. A professional is typically some whos majority of income comes from their profession. There are good professional musicians and their are bad professional musicians. Don't think that just because the person your giving money to is a professional that they are good. Don't think that just because your sister like one professional broker/manager that you will like them too.

  • familyman05 - Friday, July 18, 2008, 1:38PM ET  Report Abuse

    • Overall: 1/5

    Not everyone has the time or the desire to actively manage their portfolio ... and not everyone's portfolio is large enough to allow them to manage it full time. The best way to earn a decent return if you don't have the time or desire to manage your own portfolio is a diversified portfolio of investments ... this is different than betting on all the horses in a race ... a well diversified portfolio will likely return almost 10% annually over the long term, investing in all of the horses is guaranteed to produce a negative return. Taking on a concentrated portfolio requires taking on the systemic risk associated ... meaning you are counting on your information to be better than other investors in these investments in order to get a better than average return. So, the more time, desire, and information you have about your investments the better off you are having a concentrated portfolio ... and if you're portfolio is as big as Warren Buffet's you can actually exercise some control over the investments in your portfolio which allows even greater return with even more concetration ... assuming you can run a company better than the current owners. I would recommend you take your own advice, and realize that the right answer for each person depends on their situation. You state it at the beginning of your column, and then go on to give 'universally applicable' advice like "a diversified portfolio is bad" ... that's right for some and wrong for others, so why don't you qualify it appropriately???

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