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Rich Dad Radio Show: In-Your-Face Advice on Investing, Personal Finance, & Starting a Business
Why Paying Cash Is Keeping You Poor (What the Rich Know About Debt)
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From unsolved mysteries to unexplained phenomena. From comedy gold to relationship fails. Amazon Music's got the most ad free top podcasts included with Prime. Because the only thing that should interrupt your listening is, well, nothing. Download the Amazon music app today. That's the sound of a big deal at Wayfair. That sound happens a lot. Dream sofa for half the price. Big deal. New dining table you've been eyeing for months.
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Big deal.
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Finally picking up those last few pieces and finishing that bedroom. Now that's a really big deal. Whatever your home needs, Wayfair has the selection, the savings and over millions of five star reviews to back it up. Shop Wayfair.com today before someone else snags your big deal.
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Wayfair. Every style, every home. The rich have more debt than you'll ever have. And. And that's their secret. In the next few minutes, I'm going to show you how to use debt the way wealthy people do. To buy everything you want and get richer in the process. Stay with me.
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This is the Rich Dad Radio Show. The good news and bad news about money.
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Here's Robert Kiyosaki. Hello, hello, hello. Welcome to Rich Dad Radio. This is Robert Kiyosaki. Today is just you and me, and we're talking about what the rich are teaching their kids about money, what the rich are teaching their kids about debt. The rich have more debt than you. Way more. And that's exactly why they're rich. That sounds wrong, doesn't it? That's because you are taught wrong on purpose. See, most people spend their whole lives running from debt, terrified of it, cutting up credit cards, living below their means, proud of themselves for staying out of debt. And they stay poor. Meanwhile, the wealthy, they're borrowing millions, tens of millions, and getting richer every single day. So what's the difference? It's not the amount of debt, it's the type of debt. And more importantly, it's who pays that debt. Because here's what nobody told you in school, what your parents didn't understand, what your financial advisor won't say. There's debt that makes you rich and there's debt that keeps you poor. And until you know the difference, you're playing a game you cannot win. Let me explain. You've heard it a thousand times. Cut up your credit cards, get out of debt, live below your means. And look, for most people, that's probably good advice. I'll say it again. For most people, cutting up credit cards is smart, because most people don't respect the power of debt. But here's the problem with that advice. It doesn't make you rich. It keeps you safe. It keeps you small. It keeps you living a smaller life than you actually want. And if you're okay with that, fine. But if you want to be wealthy, if you want the finer things in life, if you want financial freedom, then you need to understand something my rich dad taught me a long time ago. He said the rich have more debt than the poor. The difference is they have good debt. And the poor and middle class are loaded up with bad debt. Good debt puts money in your pocket. Bad debt takes money out of your pocket. That's it. That's the whole game. Good debt, that's a loan on a rental property where your tenant pays a rent and the rent covers the mortgage and expenses. Money flows into your pocket every month. That's good debt. Bad debt, that's your car payment, your house payment, the credit card you use to buy that couch. Money flows out of your pocket every month. That's bad debt. Now, here's where people get confused. They think debt itself is the problem. It's not. My rich dad used to say, you should treat all debt, good or bad, the same way you treat a loaded gun, with a lot of respect. Think about that. A gun in the hands of a trained person, that's protection. That's power. A gun in the hands of someone who doesn't respect it, that's dangerous. That's deadly. Debt works the same way. People who don't respect the power of debt get financially killed by it. People who do respect it, who learn to harness it, they become rich beyond their wildest dreams. So when someone tells you to cut up your credit cards and live below your means, what they're really saying is you can't be trusted with a loaded gun. And maybe they're right. Maybe you can't. But if you want to be wealthy, you need to learn. Because the rich, they're not avoiding debt. They're using it every single day. And there's a reason why. A reason most people never figure out. I remember this one time, a friend of mine came over to my house, big smile on his face. Robert, come outside, he says, I want to show you something. So I walk outside, and there's his car sitting in my driveway. Used older model. Paint's fading a little. He's beaming. I got an amazing deal, he tells me. Paid only $3,500 for it. Put in 500 DOL for parts, runs great. I could easily sell this thing for $6,000. He's proud. And then he says, come on, get in. Take it for a spin. Now, I didn't want to be rude, so I got in the car. We drove around the neighborhood. The whole time, I'm sitting there thinking, this thing needs a paint job. The interior smells like old cigarettes. I would never want to own this depressing vehicle. But I smiled. We get back to the house. I hand him the keys and I say, it's a great car. And he smiles even bigger and says, I know it's not a thing of beauty, but I paid cash for it, so I have no debt. Then he drives off, thick black smoke pouring out of the exhaust pipe. And I'm standing there watching him go, and I'm thinking, that's the difference. See, when he was in high school, that car would have been his dream. He would have been the coolest kid in the parking lot. But he's in his 40s now, and he's still proud of the same thing a high school kid would be proud of. No debt. He thinks that makes him smart. But here's what he doesn't realize. He's living below his means. And every time he gets in that car, every time he smells those cigarettes, sees that faded paint, he's a little less happy. His standard of living went up, but his financial intelligence didn't. So now he's stuck. Proud of having no debt, but unhappy with his life. And that's the trap most people fall into. They think avoiding debt is the goal. But the real goal, the real goal is something completely different. So let me tell you about my car story. I get a phone call from my Porsche dealer. He says, robert, the car of your dreams just arrived. I drove down to the showroom immediately, and there it was. A 1989 Porsche Speedster. Now, if you're not a car guy, let me explain something. Porsche only made 8,000 of these over three years. Collectors were buying them in 1989, putting them up on blocks, storing them. If you could even find one for sale, you were looking at 100 to $120,000. But this wasn't just any Speedster. This was Speedster number one, the first one ever built. The one Porsche toured around the world at auto shows, the one on the brochure. It had the turbo body, special plaque from the factory. And after the tour, they put it on blocks, stored it in a warehouse. When I saw it in 1995, it had 2,400 miles on it. Absolutely flawless. The color was perfect. Porsche calls it metallic linen. I sat in the driver's seat, grabbed the steering wheel, and I could smell that rich leather. This was it. The car of my dreams. Kim looked at me and said, do you want it? I nodded. She said, then it's yours. Pause. All you have to do is find an asset to pay for it. Now, that's the difference. See, I didn't have the cash sitting around to buy this car. I could have saved up for it, cut back on expenses, lived below my means for a year or two. But that's not what the rich do. Kim said, find an asset. So I put a deposit on the car, arranged financing with a dealer, and I went out to find the asset that would pay for the car. One week later, I found a mini storage project in Texas. I borrowed money to buy it. Good debt. The cash flow from that property, it paid for the Porsche payment. Bad debt. But here's the magic. A few years later, the Porsche was paid off and I still had the cash flow from the property. So instead of getting poor from buying an expensive car, I got richer and I got the car of my dreams. Think about that. My friend with his $3,500 used car. He paid cash, no debt. He thinks he won, but he's driving around in a depressing vehicle that smells like cigarettes. And he's not any richer than he was before me. I went into debt for a Porsche, but I'm richer now than I was before I bought it. Same thing with Kim's Mercedes convertible. My Bentley. The other cars we own, we didn't pay cash. We borrowed money. But we found assets first, and those assets pay for the liabilities. Now, you might be thinking, robert, that's great for you, but I'm not there yet. I can't do that. And you're probably right, you can't. Not yet. But here's what you need to understand. The reason you can't isn't because you don't have enough money. It's because you don't have enough financial education. And more importantly, it's because your standard of living is changing and you haven't figured out how to keep up with it financially. That's the real problem. And most people never solve it. Your standard of living is constantly changing. When you're 16, a beat up Honda Civic is your dream car. When you're 25, maybe you want something nicer. When you're 40, you definitely want something nicer. That's normal. That's human. Your tastes evolve, your standards go up. The problem is, most people's income doesn't evolve with their standards. So what Happens. They have two choices. Choice one, buy what they want and go into bad debt to get it. Credit cards, car loans, living paycheck to paycheck. That's what most people do. Choice two, live below their means. Buy the cheaper car, the smaller house, the discount clothes. Stay out of debt. That's what the financially responsible people do. And you know what? Both choices make you miserable. The first group is stressed about money all the time. The second group, they're depressed because every time they settle for less than what they really want, a little piece of their happiness dies. They're driving that $3,500 car when they're 40 years old and they tell themselves, at least I have no debt. But they're not happy. And here's the kicker. Here's what nobody tells you. Living below your means actually cost you more in the long run. I know that sounds backwards, but think about it. My friend bought that cheap car for $3,500. How long will it last? Three years? Five? Then he'll buy another cheap car, and another, and another. Over his lifetime, he'll spend hundreds of thousands of dollars worth of on cars he doesn't even like. Me. I bought assets that pay for the cars. I want, cars that make me happy. And those assets keep paying me long after the cars are paid off. So who really spent more? The guy living below his means his whole life? Or the guy who learned to use good debt to pay for bad debt? My rich dad used to say something that confused people. He'd say, some people believe God wants us to live frugally, avoid temptation, deny ourselves the finer things. Pause. Other people believe God created these wonderful things for us to enjoy. He'd look at me and say, it's up to you which view you want to believe. I chose the second one. I believe we're supposed to enjoy life the finer things, the beautiful things. But here's the key. Without sacrificing your financial future to get them. That's the game. And most people never learn how to play it. They either deny themselves and stay unhappy, or they indulge themselves and go broke. Both are losing strategies. But there's a third option. And if you're sitting there right now, buried in bad debt, wondering if this even applies to you, I need to tell you something important. Bad debt is just a symptom. It's not the real problem. Most people think if I could just get out of debt, everything would be fine. No, it wouldn't. Because bad debt is just the tip of the iceberg. It's the product of something deeper. Something most people never want to look at. Bad debt comes from being controlled by your emotions. Your fear, your greed. Warren Buffett says it perfectly. If you cannot control your emotions, you cannot control your money. Think about that. Every bad financial decision you've ever made came from emotion. You bought that car because you were afraid of looking poor. You bought that house because you wanted to impress people. You used that credit card because you felt like you deserved something nice. Emotion. Emotion. Emotion. And until you deal with that, getting out of debt doesn't solve anything. You'll just end up back in debt again. Because the problem isn't the debt. The problem is you. Your relationship with money. Your financial education, your ability to control your emotions when money is involved. See? Remember what I said at the beginning? The rich have more debt than you, but they have good debt. Because they're not making emotional decisions. They're making intelligent decisions. They understand the difference between an asset and a liability. They understand cash flow. They respect the power of debt, like respecting a loaded gun. And they use it to get richer. You, you're either terrified of debt or you're drowning in it. Both positions come from the same place. Lack of education, lack of emotional control. That's why my rich dad said, you need to treat debt with respect. Not fear, not recklessness. Respect. Learn how it works. Learn how to harness it. Or cut up your credit cards and live below your means. Both are valid choices. But only one leads to wealth. Only one lets you enjoy the finer things in life without sacrificing your future. The choice is yours. But understand this. Every choice has a price tag. My rich dad used to say something that stuck with me. He'd say, some people believe God wants us to be poor. Live humbly, avoid the temptations of nice things. He'd pause. Other people believe God created this beautiful world with all its abundance for us to enjoy. Then he'd look at me and say, which God do you believe in? I chose abundance. I chose to believe we're meant to enjoy this life. The beautiful cars, the nice homes, the freedom that wealth provides. But not at the cost of my financial future. Not by drowning in bad debt. Not by being controlled by my emotions. That's the difference between rich and poor. Poor people either deny themselves or they go broke trying to have nice things. Rich people, they'll learn the rules. They'll learn how to use good debt to pay for bad debt. They'll learn to control their emotions. They'll learn to respect the power of money. And once you see it, you can't unsee it, you'll start noticing it everywhere. The guy proud of his $3,500 car with no debt. The couple drowning in credit card payments for stuff they don't even use anymore. And the wealthy quietly borrowing millions and getting richer every single day. Same world, different rules. The question is, which game are you playing? Thank you for your time. Thank you for caring about your future. Thank you for understanding that you are the only one who cares about taking care of you. Take care, Sam. This podcast is a presentation of Rich Dad Media Network.