Once we had this knowledge of the power of money working for us, he wanted us to be financially smart and not let bullies push us around. You need to know the law and how the system works. If you're ignorant, it is easy to be bullied. If you know what you're talking about, you have a fighting chance. That is why he paid so much for smart tax accountants and attorneys. It was less expensive to pay them than pay the government. His best lesson to me, which I have used most of my life, is "Be smart and you won't be pushed around as much." He knew the law because he was a law-abiding citizen. He knew the law because it was expensive to not know the law. "If you know you're right, you're not afraid of fighting back." Even if you are taking on Robin Hood and his band of Merry Men.

My highly educated dad always encouraged me to seek a good job with a strong corporation. He spoke of the virtues of "working your way up the corporate ladder." He didn't understand that, by relying solely on a paycheck from a corporate employer, I would be a docile cow ready for milking.

When I told my rich dad of my father's advice, he only chuckled. "Why not own the ladder?" was all he said.

As a young boy, I did not understand what rich dad meant by owning my own corporation. It was an idea that seemed impossible, and intimidating. Although I was excited by the idea, my youth would not let me envision the possibility that grownups would someday work for a company I would own.

The point is, if not for my rich dad, I would have probably followed my educated dad's advice. It was merely the occasional reminder of my rich dad that kept the idea of owning my own corporation alive and kept me on a different path. By the time I was 15 or 16, I knew I was not going to continue down the path my educated dad was recommending. I did not know how I was going to do it, but I was determined not to head in the direction most of my classmates were heading. That decision changed my life.

It was not until I was in my mid-20s that my rich dad's advice began to make more sense. I was just out of the Marine Corps and working for Xerox. I was making a lot of money, but every time I looked at my paycheck, I was always disappointed. The deductions were so large, and the more I worked, the greater the deductions. As I became more successful, my bosses talked about promotions and raises. It was flattering, but I could hear my rich dad asking me in my ear: "Who are you working for? Who are you making rich?"

In 1974, while still an employee for Xerox, I formed my first corporation and began "minding my own business." There were already a few assets in my asset column, but now I was determined to focus on making it bigger. Those paychecks with all the deductions made all the years of my rich dad's advice make total sense. I could see the future if I followed my educated dad's advice.

Many employers feel that advising their workers to mind their own business is bad for business. I am sure it can be for certain individuals. But for me, focusing on my own business, developing assets, made me a better employee. I now had a purpose. I came in early and worked diligently, amassing as much money as possible so I could begin investing in real estate. Hawaii was just set to boom, and there were 4 fortunes to be made. The more I realized we were in the beginning stages of a boom, the more Xerox machines I sold. The more I sold, the more money I made, and, of course, the more deductions there were from my paycheck. It was inspiring. I wanted out of the trap of being an employee so badly that I worked harder, not less. By 1978,I was consistently one of the top five salespeople in sales, often No. 1. I badly wanted out of the rat race.

In less than three years, I was making more in my own little corporation, which was a real estate holding company, than I was making at Xerox. And the money I was making in my asset column, in my own corporation, was money working for me. Not me pounding on doors selling copiers. My rich dad's advice made much more sense. Soon the cash flow from my properties was so strong that my company bought me my first Porsche. My fellow Xerox salespeople thought I was spending my commissions. I wasn't. I was investing my commissions in assets.

My money was working hard to make more money. 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. I began to work harder for Xerox. The plan was working, and my Porsche was the proof.

By using the lessons I learned from my rich dad, I was able to get out of the "proverbial rat race" of being an employee at an early age. It was made possible because of the strong financial knowledge I had acquired through these lessons. Without this financial knowledge, which I call financial IQ, my road to financial independence would have been much more difficult. I now teach others through financial seminars in the hope that I may share my knowledge with them. Whenever I do my talks, I remind people that financial IQ is made up of knowledge from four broad areas of expertise.

No. 1 is accounting. What I call financial literacy. A vital skill if you want to build an empire. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down. This is the left brain side, or the details. Financial literacy is the ability to read and understand financial statements. This ability allows you to identify the strengths and weaknesses of any business.

No. 2 is investing. What I call the science of money making money. This involves strategies and formulas. This is the right brain side, or the creative side.

No. 3 is understanding markets. The science of supply and demand. There is a need to know the "technical" aspects of the market, which is emotion driven; the Tickle Me Elmo doll during Christmas 1996 is a case of a technical or emotion-driven market. The other market factor is the "fundamental" or the economic sense of an investment. Does an investment make sense or does it not make sense based on the current market conditions.

Many people think the concepts of investing and understanding the market are too complex for kids. They fail to see that kids know those subjects intuitively. For those not familiar with the Elmo doll, it was a Sesame Street character that was highly touted to the kids just before Christmas. Most all kids wanted one, and put it at the top of their Christmas list. Many parents wondered if the company intentionally held the product off the market, while continuing to advertise it for Christmas. A panic set in due to high demand and lack of supply. Having no dolls to buy in the stores, scalpers saw an opportunity to make a small fortune from desperate parents. The unlucky parents who did not find a doll were forced to buy another toy for Christmas. The incredible popularity of the Tickle Me Elmo doll made no sense to me, but it serves as an excellent example of supply and demand economics. The same thing goes on in the stock, bond, real estate and baseball-card markets.

No. 4 is the law. For instance, utilizing a corporation wrapped around the technical skills of accounting, investing and markets can aid explosive growth. An individual with the knowledge of the tax advantages and protection provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor. It's like the difference between someone walking and someone flying. The difference is profound when it comes to long-term wealth.

1. Tax advantages: A corporation can do so many things that an individual cannot. Like pay for expenses before it pays taxes. That is a whole area of expertise that is so exciting, but not necessary to get into unless you have sizable assets or a business.

Employees earn and get taxed and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It's one of the biggest legal tax loopholes that the rich use. They're easy to set up and are not expensive if you own investments that are producing good cash flow. For example; by owning your own corporation - vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses. And on and on - but do it legally with pre-tax dollars.

2. Protection from lawsuits. We live in a litigious society. Everybody wants a piece of your action. 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. They control everything, but own nothing. The poor and middle class try to own everything and lose it to the government or to fellow citizens who like to sue the rich. They learned it from the Robin Hood story. Take from the rich, give to the poor.

It is not the purpose of this book to go into the specifics of owning a corporation. 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. There are many books

written on the subject that will detail the benefits and even walk you through the steps necessary to set up a corporation. One book in particular, Inc. and Grow Rich provides a wonderful insight into the power of personal corporations.

Financial IQ is actually the synergy of many skills and talents. But I would say it is the combination of the four technical skills listed above that make up basic financial intelligence. If you aspire to great wealth, it is the combination of these skills that will greatly amplify an individual's financial intelligence.

In summary

The Rich People With Corporations The People Who Work for Corporations

1. Earn 1. Earn

2. Spend 2. Pay Taxes

3. Pay Taxes 3. Spend

As part of your overall financial strategy, we strongly recommend owning your own corporation wrapped around your assets.

CHAPTER SIX

Lesson Five:The Rich Invent Money

Last night, I took a break from writing and watched a TV program on the history of a young man named Alexander Graham Bell. Bell had just patented his telephone, and was having growing pains because the demand for his new invention was so strong. Needing a bigger company, he then went to the giant at that time, Western Union, and asked them if they would buy his patent and his tiny company. He wanted $100,000 for the whole package. The president of Western Union scoffed at him and turned him down, saying the price was ridiculous. The rest is history. A multi-billion-dollar industry emerged, and AT&T was born.

The evening news came on right after the story of Alexander Graham Bell ended. On the news was a story of another downsizing at a local company. The workers were angry and complained that the company ownership was unfair. A terminated manager of about 45 years of age had his wife and two babies at the plant and was begging the guards to let him talk to the owners to ask if they would reconsider his termination. He had just bought a house and was afraid of losing it. The camera focused in on his pleading for all the world to see. Needless to say, it held my attention.

I have been teaching professionally since 1984. It has been a great experience and rewarding. It is also a disturbing profession, for I have

taught thousands of individuals and I see one thing in common in all of us, myself included. We all have tremendous potential, and we all are blessed with gifts. Yet, the one thing that holds all of us back is some degree of self-doubt. It is not so much the lack of technical information that holds us back, but more the lack of self-confidence. Some are more affected than others.

Once we leave school, most of us know that it is not as much a matter of college degrees or good grades that count. In the real world outside of academics, something more than just grades is required. I have heard it called "guts," "chutzpah," "balls," "audacity," "bravado," "cunning," "daring," "tenacity" and "brilliance." This factor, whatever it is labeled, ultimately decides one's future much more than school grades.

Inside each of us is one of these brave, brilliant and daring characters. There is also the flip side of that character: people who could get down on their knees and beg if necessary. After a year in Vietnam, as a Marine Corps pilot, I intimately got to know both of those characters-inside of me. One is not better than the other.

Yet, as a teacher, I recognized that it was excessive fear and self-doubt that were the greatest detractors of personal genius. It broke my heart to see students know the answers, yet lack the courage to act on the answer. Often in the real world, it's not the smart that get ahead but the bold.

In my personal experience, your financial genius requires both technical knowledge as well as courage. If fear is too strong, the genius is suppressed. In my classes I strongly urge students to learn to take ?risks, to be bold, to let their genius convert that fear into power and brilliance. It works for some and just terrifies others. I have come to realize that for most people, when it comes to the subject of money, they would rather play it safe. I have had to field questions such as: Why take risks? Why should I bother developing my financial IQ? Why should I become financially literate?

And I answer, "Just to have more options."

There are huge changes up head. Just as I started with the story of the young inventor Alexander Graham Bell, in the coming years there will be more people just like him. There will be a hundred people like Bill Gates and hugely successful companies like Microsoft created every year, all over the world. And there also will be many more bankruptcies, layoffs and downsizing.

So why bother developing your financial IQ? No one can answer that but you. Yet, I can tell you why I myself do it. I do it because it is the most exciting time to be alive. I'd rather be welcoming change than dreading change. I'd rather be excited about making millions than worrying about not getting a raise. This period we are in now is a most exciting time, unprecedented in our world's history. Generations from now, people will look back at this period of time and remark at what an exciting era it must have been. It was the death of the old and birth of the new. It was full of turmoil and it was exciting.

So why bother developing your financial IQ? Because if you do, you will prosper greatly. And if you don't, this period of time will be a frightening one. It will be a time of watching people move boldly forward while others cling to decaying life rings.

Land was wealth 300 years ago. So the person who owned the land owned the wealth. Then, it was factories and production, and America rose to dominance. The industrialist owned the wealth. Today, it is information. And the person who has the most timely information owns the wealth. The problem is, information flies all around the world at the speed of light. The new wealth cannot be contained by boundaries and borders as land and factories were. The changes will be faster and more dramatic. There will be a dramatic increase in the number of new multimillionaires. There also will be those who are left behind.

Today, I find so many people struggling, often working harder, simply because they cling to old ideas. They want things to be the way they were; they resist change. I know people who are losing their jobs or their houses, and they blame technology or the economy or their boss. Sadly they fail to realize that they might be the problem. Old ideas are their biggest liability. It is a liability simply because they fail to realize that while that idea or way of doing something was an asset yesterday, yesterday is gone.

One afternoon I was teaching investing using a board game I had invented, CASHFLOW, as a teaching tool. A friend had brought someone along to attend the class. This friend of a friend was recently divorced, had been badly burned in the divorce settlement, and was now searching for some answers. Her friend thought the class might help.

The game was designed to help people learn how money works. In playing the game, they learn about the interaction of the income statement with the balance sheet. They learn how "cash flows" between

the two and how the road to wealth is through striving to increase your monthly cash flow from the asset column to the point that it exceeds your j monthly expenses. Once you accomplish this, you are able to get out of the "Rat Race" and out onto the "Fast Track".

As I have said, some people hate the game, some love it, and others miss the point. This woman missed a valuable opportunity to learn something. In the opening round, she drew a "doodad" card with the boat on it. At first she was happy. "Oh, I've got a boat." Then, as her friend tried to explain how the numbers worked on her income statement and balance sheet, she got frustrated because she "had never liked math. The rest of her table waited while her friend continued explaining the relationship between the income statement, balance sheet and monthly cash flow. Suddenly, when she realized how the numbers worked, it dawned on her that her boat was eating her alive. Later on in the game, she was also "downsized" and had a child. It was a horrible game for her.

After the class, her friend came by and told me that she was upset. She had come to the class to learn about investing and did not like the idea that it took so long to play a silly game.

Her friend attempted to tell her to look within herself to see if the game "reflected" on herself in any way. With that suggestion, the woman demanded her money back. She said that the very idea that a game could be a reflection of her was ridiculous. Her money was promptly refunded and she left.