Sharon Lechter - The Rich Dad Philosophy

The Rich Dad Philosophy

The main goal of Kiyosaki's anecdotal lessons in the Rich Dad series of books is to create financially literate and aware persons who can support themselves on their investments alone, rather than running the "rat race" and living paycheck to paycheck. To do this they advocate investments such as real estate and small businesses. They clearly define the difference between an asset and a liability. Kiyosaki defines "assets" as things that generate money, such as rental properties or businesses and "liabilities" as things that cost money, such as house payments, cars and so on. Financial leverage is also a key component towards becoming rich. Lechter advocates learning to take existing infrastructures and systems and applying them to your project.

Lechter stresses what she calls "financial literacy" as the means to obtaining wealth. She says that life skills are often best learned through experience and that there are important lessons not taught in school. According to Lechter, in order to obtain financial freedom, one must be either be a business owner or an investor, generating passive income.

Lechter and Kiyosaki speak often of what they call "The Cashflow Quadrant," a conceptual tool that aims to describe how all the money in the world is earned. Depicted in a diagram, this concept entails four groupings, split with two lines (one vertical and one horizontal). In each of the four groups there is a letter representing a way in which an individual may earn income. The letters are as follows.

• E: Employee — Working for someone else
• S: Self-employed or Small business owner — Where a person owns his own job and is his own boss.
• B: Business owner — Where a person owns a "system" of making money, rather than a job to make money.
• I: Investor — Spending money in order to receive a larger payout in return.

For those on the left side of the divide ("E" and "S"), Lechter and Kiyosaki say that they may never obtain true wealth. Conversely, those on the right side of the divide ("B" and "I") are supposedly following the only road to true wealth.