Why Investing Isnt Risky

My poor dad always said "Work hard and save money."

My rich dad said, "Working hard and saving money are important if you want to be secure and comfortable. But if you want to be rich, working hard and saving money will probably not get you there. On top of that, people who work hard and save money are often the same people that say, 'Investing is risky.'"

There were many reasons rich dad reminded Mike and me that working hard and saving money was not the way he got rich. He knew that working hard and saving money was good for the masses but not for anyone wanting to become rich.

There were three reasons why he recommended finding a different plan to becoming rich. These are the reasons.

1. He would say, "People who work hard and save money have a hard time getting rich because they pay more than their fair share of taxes. The government taxes people like this when they earn, when they save, when they spend, and when they die. If you want to be rich you will need greater financial sophistication than merely working hard and saving money."

Rich dad explained further by saying, "To put $1,000 in savings, the government has already taken its fair share out in taxes. So it might take $1,300 or more in earnings just to save $1,000. Then that $1,000 is immediately being eaten away by inflation, so each year your $1,000 is worth less. The meager sum of interest you are paid is also eaten by inflation as well as taxes. So let's say your bank pays you 5% interest, and inflation runs at 4% and taxes run at 30% of the interest, your net result is a loss of money. That is why rich dad thought that working hard and saving money was a hard way to try and get rich.

2. The second reason was, "People who work hard and save often think investing is risky. People who think things are risky often also avoid learning something new."

3. The third reason was, "People who believe in hard work, saving, and that investing is risky, rarely ever see the other side of the coin."

This chapter covers some of the reasons why or how investing does not have to be risky.

Rich dad had a way of taking very complex subjects and simplifying them so almost everyone could understand at least the basics of what he was talking about. In Rich Dad Poor Dad, I shared the diagrams of the income statement and the balance sheet that he used to teach me the basics of accounting and financial literacy. In CASHFLOW Quadrant, I shared his diagram that explains the core emotional and educational differences between the people found in the four quadrants. In order for me to understand investing, I first needed to fully understand the lessons taught in those two books.

When I was between the ages of 12 and 15, rich dad would occasionally have me sit at his side while he interviewed people who were looking for a job. At 4:30 p.m., which was the time he did all his interviews, I would sit behind a large brown wooden table in a chair next to rich dad. Across the table was a single wooden chair for the person being interviewed. One by one, his secretary would let the prospective employees into the large room and instruct each person to sit in the lone open chair.

I saw grown adults asking for jobs that paid $1.00 an hour, with minimal benefits. Even though I was a young teenager, I knew that it was difficult to raise a family, much less get rich, on $8.00 a day. I also saw people with college degrees, even several with Ph.D.s asking rich dad for managerial or technical jobs that paid less than $500 a month.

After a while, the novelty of sitting behind the table on rich dad's side wore off. Rich dad never said anything to me before, during, or after these interviewing days. Finally, when I was 15 and bored of sitting behind the table, I asked him, "Why do you want me to sit here and watch people ask for jobs? I'm not learning anything and it's getting boring. Besides, it is painful to see grownups so needy for a job and money. Some of those people are really desperate. They can't afford to quit their present job unless you give them another job. I doubt some of them could last three months without a paycheck. And some of them are older than you and obviously have no money. What's happened to them? Why do you want me to see this? It hurts me every time I do this with you. I have no problem with them asking for a job, but it's the desperation for money I can see in their eyes that really bothers me."

Rich dad sat still at the table for a moment, collecting his thoughts. "I've been waiting for you to ask this question," he said. "It hurts me too and that is why I wanted you to see this before you got much older." Rich dad took his legal pad and drew the CASHFLOW Quadrant.

"You are just starting high school. You are soon going to be making some very important decisions about what you will be when you grow up, if you haven't already made them. I know your dad is encouraging you to go to college so you can get a high-paying job. If you listen to his advice, you will be going in this direction." Rich dad then drew an arrow to the E and S side of the Quadrant.

"If you listen to me, you will be studying to become a person on this side of the Quadrant." He then drew an arrow to the B and I side of the Quadrant.

SCHOOL

"You've shown me this and told me this many times," I replied quietly. "Why do you continue to go over it?"

"Because if you listen to your dad, you will soon find yourself sitting in that solitary wooden chair on the other side of the table. If you listen to me, you will be sitting in the wooden chair on my side of the table. That is the decision you are making, consciously or unconsciously, as you enter high school. I've had you sit on my side of the table because I wanted you to know that there is a difference in points of view. I'm not saying one side of the table is better than the other side. Each side has its pluses and minuses. I just want you to start choosing now which side you want to sit on because what you study from this day forward will determine which side of the table you wind up on. Will you wind up on the E and S side or the B and I side of the table?"

Money Attraction Secrets

Money Attraction Secrets

Discovering The Laws Of The Right Financial Blueprint. I bet you're scared, angry and maybe even confused. These are perfectly rational and appropriate reactions to the worldwide credit crisis that erupted in 2008 and sends shudders through every home in the United States.

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