Final Thoughts: Using Financial Intelligence
When my poor dad said to me, “Go to school, get good grades,
and find a safe secure job,” he was recommending I work for earned
income. When my rich dad said, “The rich don’t work for money.
They have their money work for them,” he was talking about passive
income and portfolio income. Passive income, in most cases, is income
derived from real estate investments. Portfolio income is income
derived from paper assets such as stocks and bonds. Portfolio income
is the income that makes Bill Gates the richest man in the world, not
earned income.
Rich dad used to say, “The key to becoming wealthy is the
ability to convert earned income into passive income or portfolio
income as quickly as possible.” He would say, “Taxes are highest on
earned income. The least-taxed income is passive income. That is
another reason why you want your money working hard for you. The
government taxes the income you work hard for more than the income
your money works hard for.”
In my second book, Rich Dad’s CASHFLOW Quadrant, I explain
the four different types of people who make up the world of business.
They are E (Employee), S (Self-employed), B (Business Owner), and
I (Investor). Most people go to school to learn to be an E or an S. The
CASHFLOW Quadrant is written about the core differences of these
four types and how people can change their quadrant. In fact, most
of our products are created for people in the B and I quadrants.
In Rich Dad’s Guide to Investing, book number three in the Rich
Dad series, I go into more detail on the importance of converting
earned income into passive and portfolio income. Rich dad used to
say, “All a real investor does is convert earned income into passive
and portfolio income. If you know what you’re doing, investing is not
risky. It’s just common sense.”The Key to Financial Freedom
The key to financial freedom and great wealth is a person’s ability to
convert earned income into passive and/or portfolio income. My rich dad
spent a lot of time teaching Mike and me this skill. Having this ability is