THE BIGGEST MISTAKE YOUNG PEOPLE MAKE - ROBERT KIYOSAKI

Summary

In a candid conversation on The Rich Dad Channel, Robert Kiyosaki discusses the critical mistakes young people make regarding financial planning and investment. He emphasizes the importance of investing in assets rather than simply doing what you love. While many young individuals are focused on pursuing their passions, Kiyosaki stresses the value of learning and sometimes enduring tasks you dislike to build a secure financial future. He underscores the necessity of financial education and the strategic use of time to transition from working for money to having money work for you. The discussion navigates through the risks and benefits of different asset types, urging millennials to broaden their scopes beyond the allure of immediate gratification and towards long-term financial stability and prosperity.

Highlights

• Robert Kiyosaki emphasizes the importance of investing wisely, focusing on assets over passions. 🧠
• Youth can be a double-edged sword; it's crucial to use your time to build assets. ⌛
• The 'do what you love' mantra can lead to potential financial traps. 🚫
• Understanding the cash flow quadrant helps in identifying where to generate substantial incomes. 📊
• Investing in businesses and real estate can secure your future rather than indulging in temporary interests. 🏢
• Avoid getting distracted by 'shiny objects' like Bitcoin; focus on solid investments. 💎
• Higher risk investments demand a stronger commitment to education and intelligence. 📚

Key Takeaways

• Your youth is both an asset and a liability; use your time wisely! ⏳
• Financial education is crucial; invest in your knowledge, not just what you love. 📘
• Don't fall for the 'do what you love' trap if it doesn't meet your financial goals. 💰
• Understanding assets, like businesses and real estate, offer long-term benefits. 🏢
• Be aware of the risks associated with shiny objects like Bitcoin. ⚠️
• Investing in what you love can lead to greater financial freedom than doing what you love. 🔑
• Liquid assets are safer, but less liquid investments require higher financial intelligence. 🧠

Overview

In a lively session on The Rich Dad Channel, Robert Kiyosaki sheds light on one of the most significant mistakes he sees young people make today—focusing on doing what they love instead of what secures financial freedom. He challenges the typical narrative that emphasizes passion over financial pragmatism by encouraging millennials to align their actions with long-term financial security.

Kiyosaki narrates his personal journey from aspiring businessman to a successful multimillionaire by persevering through tasks he didn't necessarily love. He stresses that genuine financial education involves understanding the types of assets that can generate future wealth. Unlike risky ventures like Bitcoin and other shiny objects, he suggests focusing on substantial, tangible assets like businesses and real estate.

Furthermore, Kiyosaki differentiates between assets that are liquid and those that are not. The critical takeaway is that liquidity offers flexibility, yet true wealth often lies in less liquid investments that demand a higher financial IQ and dedication. His insights urge young viewers to rethink conventional wisdom and pivot towards investments that promise long-term rewards rather than short-term comfort.

Chapters

• 00:00 - 01:00: Introduction: The Biggest Mistake Young People Make The introduction discusses a common misconception among young people regarding financial education. Robert Kiyosaki, with Miss Alex, emphasizes that many young people believe they have plenty of time to think about their financial future because they are still young. This mindset, he argues, can be detrimental as time passes quickly and it's essential to start financial planning early in life.
• 01:00 - 02:00: The Value of Time and Planning for the Future This chapter emphasizes the importance of time as a crucial asset or liability in life. It highlights that despite acquiring material wealth, some individuals may end up having nothing truly valuable if they don't manage their time well. The speaker, having recently turned 70, uses personal observations to stress the significance of planning for the future and making wise use of one's time, as opposed to solely accumulating wealth.
• 02:00 - 03:00: Understanding Assets, Liabilities, and Categories of Work The chapter discusses the challenges and opportunities of being young. It highlights that youthfulness, while filled with excitement and novelty, can also be a liability because young individuals often focus on having fun rather than on critical financial or personal development areas. The lesson emphasized is that many people tend to concentrate a lot of their time and energy on making money, perhaps to the detriment of other important aspects of life.
• 03:00 - 04:00: Choosing Purpose over Passion The chapter discusses the concept of choosing purpose over passion when considering career options. It highlights the common concern people have over selecting a career or starting their own business. The text references the 'cash flow quadrant' from a book, identifying the various roles such as Employee (E), Small Business owner or self-employed (S), which indicate different paths or considerations in one's professional journey. This chapter seems to focus on how purpose can drive career decisions more effectively than mere passion.
• 04:00 - 05:00: Investing in What You Love vs. Doing What You Love The chapter discusses the different paths to success: E (employee), S (small business owner), B (big business owner), and I (investor). The speaker emphasizes that reaching the 'I' category, professional investor, is the most challenging but also the most rewarding financially. The speaker and Kim are currently in this category. The chapter warns against common mistakes young people make, such as focusing prematurely on the wrong category.
• 05:00 - 07:00: The Value of Business and Real Estate The chapter explores the distinction between doing what you love and fulfilling a purpose. Despite popular belief, sometimes achieving your goals and fulfilling your purpose means doing things you dislike. The speaker discusses disliking writing books but acknowledges it's necessary to fulfill their life's purpose. It highlights that being successful often requires doing unpleasant tasks to achieve a greater goal. Many people get caught in the trap of only pursuing what they love, potentially hindering their overall purpose or success.
• 07:00 - 09:00: The Risks and Rewards of Different Investments The chapter discusses the topic of taxes in relation to investments, highlighting the different tax percentages one might encounter, such as 40%, 60%, 20%, and 0%. It reflects on personal experiences, emphasizing the necessity to learn about taxes despite not being particularly interested in the subject. The narrative points out that understanding certain aspects like taxes is sometimes essential to achieve one's financial goals, even if it means dealing with uncomfortable subjects.
• 09:00 - 11:00: The Importance of Education and Learning from Experience In this chapter, the author discusses the importance of education and learning from experiences to achieve one's goals. They emphasize that pursuing passion can often be a self-centered endeavor, whereas having a purpose is about serving others. The author shares their personal journey of learning about debt, insurance, and other financial matters, which they initially disliked, in order to eventually follow their purpose. They distinguish between passion and purpose, arguing that the latter is more beneficial to society. Additionally, the author briefly touches on their investment strategy, indicating a preference for professional investing over traditional options like stocks, bonds, and mutual funds.
• 11:00 - 13:00: Liquidity and Financial Intelligence The chapter discusses the concept of creating personal assets and the financial implications associated with it. The narrator reflects on the common desire to pursue passions, and how financial responsibilities like taxes and lawsuits can impact this pursuit. The discussion includes a critique of the government's taxation policies and the challenges faced when one transitions to higher financial brackets, where they become susceptible to lawsuits. The speaker shares a personal journey of adapting to these financial realities, emphasizing the need to learn about legal issues despite personal distaste for them.
• 13:00 - 15:00: Conclusion: Guidance for Millennials on Investing The conclusion provides guidance for millennials on investing, emphasizing the importance of financial independence and the pursuit of making money alongside freedom. The speaker expresses a preference for having substantial financial resources over not having money and encourages focusing on financial goals. Young people are advised to carefully consider what they love most, be it freedom or financial success, and align their investments accordingly. The chapter highlights personal experiences of having been both financially successful and broke, concluding that financial stability is more desirable.

THE BIGGEST MISTAKE YOUNG PEOPLE MAKE - ROBERT KIYOSAKI Transcription

• 00:00 - 00:30 (gentle music) - Okay, once again, it's Robert Kiyosaki. We're here talking to Miss Alex, and we're also talking about financial education for millennials and money. And I'm glad she's asking me when she's very young, because one of the biggest mistakes, I still hear it today, from young people, oh, I don't have to worry 'cause I'm still? - Young. - Yeah. And that is death to most people. Because eventually you get old
• 00:30 - 01:00 and then you're not young again. So it's a way of saying, when I talk about assets and liabilities, one of the most important things you have in your life is time. It's one of your greatest assets or it's your liability. And being, you know I just turned 70, and I have friends who have nothing. I mean they have zero. Now they've made a lot of money, but they have nothing here. They have nice houses, nice cars, 16 wives, 19 kids, I don't know what they have,
• 01:00 - 01:30 but do you know what I mean? And being young is great, except it can be a liability to you. 'Cause when you're young you're just havin' a lot of fun and life's exciting, you know, it's new. So, at the time, but the thing is, this is the lesson today, is so many people spend their time focusing here. They wanna make a lot of money. And I can hear it in their words.
• 01:30 - 02:00 They say, oh, I want a career. This is career. 'Kay, or, I'm gonna start my own business and this is the chart here, which we've seen. This is the cash flow quadrant, book number two. E is employee. S is small business, self-employed, or a specialist
• 02:00 - 02:30 like a doctor or lawyer or web designer. B is big business, 500 employees or more. And I is professional investor. So, when I was your age, I knew I wanted to get here. This takes time. This is the hardest, you know? This is where the mega bucks are, and Kim and I are here. And the money is massive. But it takes time to get there. The big mistake I see young people make is they focus here.
• 02:30 - 03:00 And the words are, I wanna do what I love. That's the track. You see, in the real life, sometimes you have to do what you hate. Like, people think I like to write books. I hate writing books. But it fills my purpose in life. It's not my passion, my purpose in life. Because my purpose was to get here. A lot of these guys get trapped here doing what they love,
• 03:00 - 03:30 and as we've talked about on earlier episodes of this, you guys pay the highest taxes. 40% here, 60% in taxes here, 20% here, and then 0% here. So when I was in my, before my 20s, I knew I wanted to go there. And it wasn't doing what I love. I had to learn what I didn't want to learn. I sometimes had to do what I hated. I had to learn about taxes.
• 03:30 - 04:00 I had to learn about debt. I had to take classes, I had to learn about insurance. So I was doing a lot of things I hated doing so I could come over here. These guys never do this, 'cause they want to live their passion. I want my passion. The difference is passion is greedy, purpose is for the people. So my purpose was to come over here so I could serve more people. 'Kay? So I have employees here and all this. I don't buy stocks, bonds, mutual funds, because as a professional investor
• 04:00 - 04:30 I can create my own assets. 'Kay? Any comments on anything so far? - Yeah, if you ask anyone, they all say they want to do what they love. - And they're talkin' about here. And this is where you get taxed. - [Alexandra] Yeah. - And coming here I was doing fine over here 'cause I didn't have much money. (laughs) 'Cause the government takes all your money anyway, right? 40% in taxes, nobody's gonna sue you. But you come over here, they sue you. 'Kay, so I had to learn about lawsuits. I hated it, but I learned it.
• 04:30 - 05:00 So the big mistake for young people who say I'm gonna do what I love, which is fine over here, but what do you love the most? Well, I loved my freedom. And I know it sounds greedy, but I love making money. I'd rather have a lot of money than no money. I've been both. I've been broke, I've been down, and everything. But I'd rather have a lot of money. So it was worth my purpose to get over here. The big mistakes I see young people making is here.
• 05:00 - 05:30 You know, they think about what they wanna do, what they love, and what I'm saying to the millennials right now, invest in what you love. There's a very big difference. In other words, think about this side first. Most young people, or should I say short-sighted people, they think this is it or this is it. But this is the one here. So when I was your age, I knew that the assets I wanted to acquire,
• 05:30 - 06:00 the richest people own businesses. Over here, these guys are small businesses, self-employed. You're self-employed if you can't stop working. I stopped working years ago because I have businesses. Very big difference. It was painful, but I got there. So number one is a business. So when I was in my 20s, I knew I was gonna do whatever it took, school, study, learn about taxes, debt, insurance, accounting, lawsuits, and all this, through business.
• 06:00 - 06:30 Next is real estate. I love real estate. But most people can't do what I do 'cause they don't have a business. It's catch 22. They don't have enough money to get over here. Your mom just made that switch 'cause she uses other people's money. - [Alexandra] Yeah. (laughs) - So, the reason I make more money is because, it's not that I'm doing what I love, I do, sometimes, what I hate, so I can have the assets that I love. I love having a business.
• 06:30 - 07:00 You know, if I didn't have a business, you wouldn't be here. Darren wouldn't be here. I wouldn't have a CEO and President. I wouldn't have accountants. I wouldn't have attorneys. So the business affords me the lifestyle I want. And then I invest in real estate. I've never gone past a piece of land or a building I did not love. And then, what most people invest in from there is paper. And that's fine, that's stocks, bonds,
• 07:00 - 07:30 mutual funds, savings, ETFs. Not my game. I don't love it. I actually hate it. But these guys, it's perfect for them to have paper, stocks, bonds, mutual funds, ETF, and all that. Because they're focused over here. They wanna do what they love. They wanna climb the ladder, they want their career, they want this, I'm gonna become president, you know? That's not what I wanted. I wanted to be a football star. But this is for the middle class here. That's fine, you can get rich here too. I just don't like it.
• 07:30 - 08:00 It's not exciting to me. And then the last one are commodities. And the four basic, there's a lotta commodities, like food. Farmers get rich, they provide food, which is good. I invest in food. I invest in avocado farms that provide food. Oil, gold, silver. I love those things. I love avocados. (laughs) You know? - [Alexandra] I love avocados. (laughs) - Yeah, I know. So I'm doing what I love.
• 08:00 - 08:30 I love trees, I love plants, you know, things like this. So, I'm doing what I love here, here, and here. I don't like stocks, bonds, mutual funds, ETF, 401(k)s, IRAs. It doesn't excite me. You know? This excites me. So I invest in what I love rather than do what I love. And these guys do what they love but most of them never get over here. And this is like Steve Jobs, Zuckerberg,
• 08:30 - 09:00 Bezos of Amazon, and they have all the money in the world. That was my plan. Any comments, any questions on that? - So as you mentioned, a lot of people are talking about how they wanna do what they love, right? And I think you have a very valid point on investing in what you love. Because a lot of people, just to say that they're entrepreneurs or investing, they're investing in the whole Bitcoin outrage and the cryptocurrencies. And I felt like I wasn't actually pursuing what I loved,
• 09:00 - 09:30 or I was falling off the wagon, because I wasn't really interested in Bitcoin. But, I realized that that's just not my thing. I'm not investing in what I love if I'm doing that in Bitcoin. What I wanna do is invest in real estate. So I love looking at properties. I love looking at houses, fixer-uppers, and looking at the numbers. That's my passion. Maybe I got it from my mom, who knows? But Bitcoin isn't my thing. So I have no reason to feel like I'm not doing what I love just because I'm not investing in Bitcoin. - And that's kind of the attitude.
• 09:30 - 10:00 In my world, like I said, I see people, they chase shiny objects. And what a shiny object means is, you know, when you're fishing you throw a lure out, this little shiny object goes. And the fish comes and (imitates splashing) where they jump it. That's what most people do. Bitcoin today, it's a shiny object. I'm not saying you can't make a lot of money in it. But most people are chasing shiny objects. They wanna make money. They're not building an asset here. The reason I don't do it here, this is the highest risk.
• 10:00 - 10:30 Now, this is what I know. The higher the risk, the more education it takes. For example, if I flew. You know, if I wanted to just fly my little Cessna 172 around the place, not much risk in that. But when I had to go to Vietnam to fly, the risk went up. I had to study harder, become better, work harder at it. The reason most people stay in paper, 401(k)s, IRAs, and chasing shiny objects like Bitcoin,
• 10:30 - 11:00 is because they don't want to take the risk here. They're huge. You've gotta study. That's why we have our Rich Dad's Education, Rich Dad's Coaching. All of you guys are allowed to take courses on all of this if you come here. It takes no intelligence to be here. It takes no intelligence to buy Bitcoin. I mean, I have four Bitcoin. No, five Bitcoin. It doesn't take, you know, I don't have to do anything. Over here, I have to know a lot.
• 11:00 - 11:30 Over here, I have to know a lot. I have to study. So, if you wanna chase shiny objects like the stock market and all that, you can get rich there. It's really easy to get in here. It's really hard here. Any comments, any questions? Does that make sense? - Yeah. - They're chasing shiny objects. - So, I do agree with you when you talk about Bitcoin being a shiny object that everybody is chasing, right? And one of my favorite stories that you've told is about your mentor Frank, when he sent you to Peru
• 11:30 - 12:00 so you could learn a valuable lesson about maybe something that wasn't such a shiny object and turned into be, because shiny objects change every day. - I wanted to learn, you know they have ICOs? - Mm-hmm. - Initial coin offerings? I wanted to learn about IPOs, initial public offering. And it's how you take a business and turn it into paper. You turn it into stock. So, I went to see my friend Frank who was hardcore here. I don't know how many companies he started taking public.
• 12:00 - 12:30 And I said, Frank, and he didn't know me from Adam, and I said I wanna learn to do an IPO. And he goes, yeah, you and everybody else. He said, most guys don't have it. They don't have the guts. They don't have the determination. And they're wimps. And I said, I wanna learn. He says, how bad? This is up here in Scottsdale, Arizona. I said, badly. He says, okay, this is Wednesday. Be in Lima, Peru on Saturday. I went, on Saturday? And we were shooting our video for the CASHFLOW game, you know?
• 12:30 - 13:00 He says, how bad do you want it? I said, badly. He says, you know, you meet my president in Lima. Frank never traveled. You meet my president in Lima and I'll find out how bad you want it. So that was Wednesday. Wednesday night, I was on a plane to Lima, Peru. I had to pay full boat. I paid my own way. Most employees can't stand that, 'cause they don't have any money. I flew into Lima, Peru. I went to look at three gold mines, with Frank's president.
• 13:00 - 13:30 It was an experience, an education, I would've never had if I hadn't shown up. It cost me probably 15 to $20,000 just for airfare on that thing. I get back on Tuesday to talk to Frank and I said, Frank, there's nothing there. He says, I coulda told you that. So why'd you send me? I wanted to find out how badly you wanna learn. He says, most people don't have it. They want a job, they want job security,
• 13:30 - 14:00 they want a paycheck, they want a 401(k). And that's why they don't get to come here. That's why they don't get to come over here. Nothing right or wrong, you know? I don't ever want to be here. I knew when I was your age I wanted to come here, but the higher the risk, the higher the returns, but also the higher dedication, education, and study you have to go through. And I'm making millions and millions. I make more in a day than many people make in a lifetime.
• 14:00 - 14:30 But it was worth it. Did I lose? Sometimes, yes. But it was worth it. You go to school here, you take no risk. That's why my poor dad was poor. He didn't like to make mistakes. 'Kay? - I love that story, Robert. Thank you for sharing it. - I'll leave you one last word that's very very important for people to understand at a young age. And the word is called liquidity. The reason this is better
• 14:30 - 15:00 for most people is because it's liquid. You can buy a stock, you make a mistake, you get out. You buy an ETF, you make a mistake, you get out. It's good, it's important. The moment you go into real estate, you're not liquid. That's why you gotta be smarter going in. 'Cause if you make a mistake, you can't get out. You buy a bad piece of property, you ride it down. And the same is businesses. You're in there. You're solid, you can't get out.
• 15:00 - 15:30 Rich Dad's gotten in trouble, you know, with money and all businesses are. I can't quit. Employees just quit and they leave and they run like little rats, you know? But if you're in here or here, you can't get out. So that's why liquidity is crucial. It's very important, which means, that's why I have Rich Dad's Coaching, Rich Dad's Education, we have all our programs and all this. But most people are not willing to do the study 'cause they wanna do what they love,
• 15:30 - 16:00 rather invest and acquire what they love. That make sense to you? - Yeah, totally. - So stocks, bonds, mutual funds, ETFs, savings, they're good 'cause they're liquid. You can make a mistake and get out. These things, hard to get out of. Including gold, gold's hard to get out of sometimes. Gold's more liquid than this. Oil is tough to get out of. You make a mistake there, you're gonna ride that baby down, you know? Silver's pretty easy. But the word is liquidity.
• 16:00 - 16:30 The less liquid, the higher your financial IQ. You've got to be so much smarter. And most people, they have it. They have that ability to be that smart. But they'd rather do what they love rather than invest in what they love. Got it? - Yeah, of course. Thank you, Robert. And I also wanna give you thanks for sharing this topic on investing in what you love,
• 16:30 - 17:00 because I hope that this can be a guidance for every millennial out there as opposed to what we're traditionally taught in doing what you love.