“ It is well enough that people of the nation do not understand our banking system, for if they did, I believe there would be a revolution before tomorrow morning.”
–Henry Ford

Some may consider those to be strong words, words that many believe to be true. This quote is found in the book that I will be introducing written by author Robert Kiyosaki titled “ Increase Your Financial IQ” the quote sets the pace for what this book stands for: Financial Education. Robert Kiyosaki’s objective through out the book is to illustrate for the reader the major differences between how wealthy people think about and deal with money vs. how the middle class and poor deal with money. He outlines his thoughts in what he calls, the Five Financial IQs. According to Kiyosaki it is not money but knowledge that makes one rich (pg 200).

Robert Kiyosaki was born April 8, 1947 to a middle class family. Kiyosaki is an investor, businessman, self-help author and motivational speaker. Along with being a successful author, he is also the creator of the Rich Dad brand, as well as a real estate mogul owning millions of dollars in real estate assets. Kiyosaki is best known for his “Rich Dad Poor Dad” book and other materials published and found on the top 10 best-seller lists of The Wall Street Journal, USA Today and the New York Times. Before becoming a best selling author he began his career as a salesman for the Xerox Corporation a company that sells copy machines. In his popular book “Rich Dad Poor Dad” he illustrates the many lessons he received from his rich dad growing up. He explains about the relationship with his real dad a teacher who later ran for a political office who came to be known as his poor dad. His rich dad was his best friends father who ended up being one of the wealthiest men in his home state of Hawaii. The lessons he received from his rich dad are the lessons that have set the foundation for his success and the principals found in his book “Increase your financial IQ”.
This book although part of Robert Kiyosaki’s Rich Dad Poor Dad series is not a how to get rich, or how to make more money type of book. The book deals with increasing ones financial knowledge. Robert Kiyosaki believes that the rich get richer while the poor get poorer because of the differences in their IQ, not regular IQ, but financial IQ. Kiyosaki also believes the more that people increase their knowledge and understanding of the monetary system their philosophies about money will change. These philosophies are what the rich use to increase their wealth, society can then take these steps to control their own destiny and create wealth through alternative income streams. This is contrary to conventional wisdom or what some may see as years of social conditioning. Social conditioning which instructs society to rely on trading your time for a paycheck, handing your money over to a so called expert, going to school, getting a good job, or living frugally and saving your pennies.

What is financial intelligence or Financial IQ? Financial intelligence is the intelligence we use to solve our specific financial problems, and financial IQ measures, or quantifies, our results (Pg 29). The author believes that one of the biggest reasons the people of the United States lack financial intelligence and are low on financial literacy is that the school system is designed to develop employees and not business owners or investors. Kiyosaki is a strong proponent of teaching financial literacy to America’s youth through board games, public televisions, and his books. Kiyosaki introduces the Five Financial IQs which he laid out in this book and are as follows 1: Make More Money, 2: Protecting your money, 3: Budgeting your money, 4: Leveraging your money, 5: Improving your financial information.

In the first IQ; Make More Money the author deals with ones earning potential. Kiyosaki believes anyone can increase their earning potential by going through and learning from the process of developing certain set of skills. Kiyosaki believes that making money is all about leveraging your time and talents. The beliefs of the author are that society should focus on learning to create new passive income streams instead of trading time for money. The Second IQ protecting your money teaches that everyone should make themselves aware of the many avenues used to separate people from their money. Some of the avenues that are mentioned are things such as taxes, politicians, bankers, and brokers. Kiyosaki is referring to legal ways of reducing taxes, for example, owning your own business and using legal business deductions. The idea is that between two people one earning $50,000 dollars but keeping 75% of it and another earning $100,000 but only keeping 50% of it, the one earning $50,000 has a higher financial IQ. That individual would have a perceived higher IQ because they are keeping more of their earned income. The author refers to the types of income and investments that people so often have, yet know very little about. Investments such as 401k’s and IRA’s in which there are many front load fees and yield very low returns on investment.

The third: Financial IQ; Budgeting your money is said to be one of the most important, the book defines budget as a plan for the coordination of resources and expenditures (pg 71). Robert Kiyosaki talks about two types of budgeting one for deficit and the other for surplus. He says the key to becoming rich is to budget for surplus (pg 71) The main lesson to be learned here is to increase your means so that your spending less than what you earn and to invest the difference. Kiyosaki explains when people begin to have control of their leveraged assets, then there is no risk involved. This is why he invests most of his money in real estate, because in his opinion it is the bank that is taking the real risk by allowing him the opportunity to leverage his money. For example if he buys a house for $100,000 he only has to put in 10% out of pocket and the bank will assume the risk for the other 90%. That leads to the fourth; Financial IQ; leveraging your money. Kiyosaki is not talking about investing in mutual funds or stocks; he thinks those vehicles are way too risky. He recommends starting small and learning about investing in real estate, precious metals, and things that give the investor control. Improving financial information is the fifth Financial IQ This means making sure to continue education in financial matters. Not necessarily book smart education, but education of the history of money, the trends and happenings around the globe and how it affects our monetary system. Kiyosaki emphasizes that becoming rich is about information and intelligence not gold (pg148).

If we go back to the opening quote of this paper, we can get an idea that even Henry Ford understood that there was more knowledge to be gained than what the average person knew. There are people that I hear from time to time say that our money is backed by gold. These individuals either don’t know or don’t realize that President Nixon in 1971 took the United States off the gold standard leaving our currency to be known as fiat currency backed only by the faith of the U.S government. Just that bit of knowledge alone can affect the way people invest and approach their financial life. If society takes the time to really educate ourselves on the monetary system and how they can increase there wealth I believe we would accomplish more as a nation. Although we are known as one of the wealthiest nations in the world only 2% of the population really accounts for that wealth. Increasing ones financial literacy and IQ is one of the most important things a person can do as an individual and together as a society.

Bibliography

Kiyosaki, Robert. Increase your Financial IQ, Get Smarter with your money. New York: Boston Plus 2008
Kiyosaki Robert T; Lechter, Sharon L. C.P.A. , Rich Dad, Poor Dad Warner Books Ed., 2000
The World Distribution of Household Wealth by the Helsinki- based World Institute for Development Economics Research