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Increase Your Financial IQ – Book Review

by Ryan Guina

increase-your-financial-iq.jpg“One of the greatest failures of the educational system is the failure to provide financial education to students.”

Those are strong words, and words I believe to be true. This is a quote from Robert Kiyosaki’s book, Increase Your Financial IQ, and I believe it sets the pace for what this book stands for: Financial education.

Just so we’re clear, this book is not how to get rich, or make money, although Kiyosaki does throw out a few ideas on these matters. No, this book is about increasing your financial knowledge. There is a big difference between the two, and it is important not to purchase this book thinking you will get rich from reading it.

However, there are some great observations Kiyosaki makes about how wealthy people deal with money vs. how middle class people deal with money. He outlines his thoughts in what he calls, the Five Financial IQs –

The Five Financial IQs

 

  • Financial IQ #1: Make More Money
  • Financial IQ #2: Protecting your money
  • Financial IQ #3: Budgeting your money
  • Financial IQ #4: Leveraging your money
  • Financial IQ #5: Improving your financial information

Financial IQ #1 – Make More Money. This is a no-brainer, right? Well sometimes it is easier said than done, but Kiyosaki believes anyone can do it. According to RK, making money is all about how you leverage your time and talents. RK is a big fan of business owners working to create alternative and passive income streams instead of trading your time for money.

Financial IQ #2 – Protecting your money. Pay fewer taxes. Kiyosaki is referring to legal ways of reducing your taxes! For many people this is easier said than done, but Kiyosaki gives several examples of how it can be done. Mostly though, he is referring to the types of income and investments you have – for example, owning your own business and using legal business deductions.

Financial IQ #3 - Budgeting your money. The key here is to spend less than you earn. If you budget for a surplus, it will be much easier for you to have extra money to use for step 4 – leveraging your money.

Financial IQ #4 - Leveraging your money. Here, we are talking about investing. Kiyosaki is not talking about investing in mutual funds or stocks, which he things is risky. He recommends investing in real estate, precious metals, or other things you have control over. According to Kiyosaki, he is heavily invested in real estate and he owns a silver mine.

Financial IQ #5 – Improving your financial information. Obviously, you made it this far, so you are doing something right! Seriously though, this goes back to the opening quote of this review. Increasing your financial mindset is one of the most important things you can do for yourself.

What I liked and didn’t like

Like. Kiyosaki is a contrarian, which at times is a good thing. He believes more people should work for themselves to create wealth and alternative income streams instead of relying on trading your time for a paycheck. This is contrary to what many people believe – go to school, get a good job, and save. Not everyone should run their own business, in my opinion, but everyone can do little things to increase their income.

Didn’t like. Kiyosaki is extremely harsh on the stock markets, which in itself is not a bad thing. But it is a bad thing when you make incorrect blanket statements about them. Case in point: “You can train a monkey to save money and invest in mutual funds. That is why the returns on those investment vehicles are historically low.”

Obviously, this is a horrible statement. Many funds have high historic returns, as does the market as a whole. However, there are no guarantees with the market, and the US market is based on the US dollar, which has been steadily losing value for years. I believe this is Kiyosaki’s main contention with the markets.

Buy or don’t buy (or get it free!)

There are a lot of people who do not agree with Kiyosaki’s view points concerning financial matters, and in some cases, I agree. But this book is not about how to make money, it is a different way to think about money. I don’t think this is a great investment for those with an advanced understanding of personal finance, investing, or business, but if you read it you may pick up a few things. I do think this is a good book for people with an entrepreneurial spirit, or those who don’t handle money well. You can buy Increase Your Financial IQ, or you enter a book giveaway and maybe get it free! I have 2 copies available and the contest ends March 29th. Good luck! Update: Giveaway over!


Published or updated January 18, 2013.
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{ 18 comments… read them below or add one }

1 Minimum Wage

All the Financial IQ in the world won’t make you rich if you have no money.

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2 Ron@TheWisdomJournal

“One of the greatest failures of the educational system is the failure to provide financial education to students.”

Great point. Schools also don’t teach correct social skills (how to have a good relationship with your spouse, children, and others). They also don’t teach people the fundamentals of work.

Those three items, personal finance, good relationships, and a strong work ethic are the three most important things someone can learn. But schools are too interested in teaching kids to divide five eighths by three fifths, or rain forest management, or the intricacies of English literature.

People’s lives fall apart because they don’t manage their finances, they act selfishly in their relationships, or they’re just too lazy to do what it takes to succeed…not because they don’t know what chemical reaction occurs when you mix an acid with a base. No one’s life is changed from understanding 99 percent of what is taught in schools, yet we throw billions of dollars at teaching knowledge that won’t make a difference after the semester is over.

(Note to Minimum Wage: Financial IQ comes first, money comes second. If you have money, but no IQ, you won’t have the money very long)

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3 Ryan

Minimum Wage, having a good financial IQ can help you find ways to earn more money or improve your situation. There are many ways to earn more money if you know where to look and what to do.

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4 Ryan

Ron, Excellent points! School does not prepare people for life – it teaches them how to pass standardized tests. In fact, there are some states and/or school districts that base teacher bonuses or other compensation on how well their students score on standardized tests. If that isn’t the worst thing they could do to get teachers to teach test taking vs. knowledge, I don’t know what is.

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5 Ryan

Minimum Wage,

I thought about this a little more, and I think you deserve a more complete response.

Here are a few easy ways to earn a little extra money that anyone can do: There are on-line surveys that pay cash or gift cards, you can start a free blog on blogger, sign up for bank bonuses and referrals, and other things. Some car dealerships even give out $25-50 gift cards for test driving their cars. I know several people who make a couple hundred dollars per month by doing these little things. It can add up quickly!

Anyone can also enter the book giveaway. If they win, they can read the book I send them, or just sell it on Amazon, Half.com, or Ebay. A couple bucks here and there adds up over time.

The point is to actively seek opportunty. Good luck!

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6 Ken Clark, CFP

I’ve never been a huge fan of Kiyosaki. I think a lot of the stuff in his books is based on half-logic, sensationalism, and generally lousy financial advice.

It always strikes me that people who are supposedly making so much money with these innovative methods, would waste their time writing books, much less give away their secrets and dilute their earning potential.

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7 Curt

I love Roberts’s books and have learned a great deal from his advice. But, maybe that’s because I have an entrepreneur spirit. I am also very disappointed in the public school systems ability to teach anything – especially financial education. Kids need to be removed from the game-boys and taught about business, money and investing. One of the best ways to teach your kids about money is to have your own business. That way they will learn just from being around the business. The only down side to owning a business is that you can become so busy that you don’t have time for your kids. The best way that I have found to teach my kids about money is to get involved in passive income or a small part-time business. That way I have time to show them what I am doing.

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8 Mark @ TheLocoMono

RK is a fun fella to read because of the responses from people, some posistive and some negative. In any case,

what I am curious about this particular book is how much of the information is new in comparision to other books like Cash Flow Quadrant, etc…

My other question regarding the Financial IQ vs money debate in this comment thread is this, school is only a system. That’s all. A system designed to teach tools to perform a certain function in exsisting business systems.

Think about it, 30 years ago, they didn’t have computers in school to teach people how to use computers. 15 years ago, they did have computers but not a wide array of software or even the Internet.

Now they have a wide array of software, and the Internet. So the tools have grown.

Regarding financial education in schools, especially public schools which are funded by our tax dollars, who is responsible for making the decision for our curriculumn in school?

Remember, at one time, we banned books in our public school system. Now these books are okay.

If we can teach accounting in school, why can’t we add personal finance to our courses? Is it our public system that is at fault or is it our lack of “public voice” that is at fault? After all, it is YOUR TAX DOLLARS at “work” here.

Where I grew up, it was RARE for any of us to work a part-time job during high school except during summer vacation. In other parts of the country, there are youngsters who work part-time and go to school YEAR-ROUND. Who is getting the better experience with money?

I think financial IQ is useless unless you add experience with money to the equation. You can learn all you want but until you win some and lose some, where’s the value of your IQ?

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9 Ryan

Ken, in many ways, I agree with your statements. Kiyosaki is a sensationalist, because that is what sells. The media does it everyday. It’s all about doom and gloom, scaring people, then offering a solution. However, if you look at some of the principles, I believe they are good.

Curt, Kiyosaki’s writing is definitely geared toward entrepreneurship. But not everyone is, or should be, an entrepreneur. I think owning your business and teaching your children is a great way to go. Everyone involved will benefit. Good luck with your business!

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10 Ryan

Mark, Great reply. I like reading responses about Kiyosaki as well. There is usually no middle ground – people either love him or hate him. I’m actually one of the rare middle ground people. I think he has some solid ideas, and some of what he says can be dangerous if taken too literally. A selective filter needs to be installed before taking everything he, or any other financial guru, says as gospel.

You observations regarding schools are spot on. There are a lot of issues that can’t be fixed overnight, and there are a lot of problems that people may recognize, but not have the power or drive to change.

As for your last point, Kiyosaki actually mentions having money and needing it to work on your financial IQ. Experience does count for a lot! Thanks for the great comment!

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11 Mark @ TheLocoMono

I am a middle ground person too. :)

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12 AJC @ 7million7years

Rich people make their money in businesses and keep their money in real-estate … pure and simple. It’s what Robert Kiyosaki did (his business was writing books and making/selling ‘Cashflow’ games). Anybody can start a business, just try it part time and limit your financial risk … if it takes off, fine … if not, try again …

BTW: Ken, rich people DO write books and blogs – some to make money, others simply to teach … there are no ads or products for sale on my blog.

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13 Ryan

AJC, I think your comment is interesting. Make money from a business and keep it in real estate – I’m assuming this is because it is easier to shelter the money from certain taxes, and if done correctly the money will continue to earn passive income through rentals, leases, etc.?

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14 AJC @ 7million7years

Perhaps … but, I never invest with the idea of minimizing taxes as my prime objective.

Rather, businesses do one thing really well: produce free cash (if your business doesn’t do this, then you really just have a job!).

Free cash is useless, except for three purposes:

1. Reinvesting in the business to make it grow even faster

2. Increased lifestyle for the owner

3. To fund property acquisitions (build up for a deposit and/or any paying mortgages if the rent doesn’t).

Of these, guess which ones I like!

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15 Mark @ TheLocoMono

@ Ken – First of all, I would like to give you a penny for your thought. There is no secret when it comes to making money. It is a math formula.

Make 1 product and sell it for double the cost of manufacturing it. If it cost 1 dollar to make it, sell it for 2. If two people want it, either make 2 products (like cars) or open up for bidding (like artwork).

With that in mind, Ryan, consider this, if the demand for the business product dies, the cash flow stops.

Where better to put that money you accumulate from your business than land, if not for tax purposes but for finite demand.

There is only so much land on Earth that as long as we keep growing our population, the demand for land will always go up.

So in the end, demand for land equals increase in land value which has the greatest potentional for additional income with the least amount of taxes.

As Einstein said, its all relative. :)

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16 Santiago

Mr. Clark,

Let me begin by saying that I’m trying to restrain myself from calling you an idiot. Well, I just did.

I may not agree with everything Mr. Kiyosaki is selling but, like his Poor Dad, he is first and foremost an EDUCATOR which is obviously something I can’t say for you.

Writing books does not dilute his earning potential. On the contrary, it increases it. Any idiot can see that.

On a personal level, I’ve never made much money in my life BUT, because of what Mr. Kiyosaki has taught us in his books, I have now put myself in position to achieve financial freedom. How, you ask? I simply tapped into my potential and have put my God-given abilities to good use. Now, as I continue to build for the future, it’s just a matter of time before money starts falling from the sky.

See, Mr. Clark? Everyone has a gift and Mr. Kiyosaki teaches us to tap into it. Some of the ideas he has given us are just steppingstones to achieve a greater goal.

Keep up the good work, RK!

S Monge

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17 Halaseh

This is one of the worst books I have ever read… all the ideas in it can be summarized in maximum 10 pages!!!! He keeps repeating and repeating the same ideas, which are maybe correct in a computer game not in real life.

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18 Sonny DeLara

I admire Robert’s sincere initiative to educate the mankind on financial education. This serious topic seem to be lacking big time in our educational system.

It’s unfortunate for those that don’t get the messages, perhaps there’s a conflict of interest in their profession.

Understanding what’s going on today, and where we are heading in the near future is vital.

We nearly hit the 2nd Great Depression in Q1 last year. How did that look like for those that rely on 401k, Social Security, Medicare had that occurred?

Could a similar type of this serious instance happen again in the future? You bet!
The key question is, are you prepared for it, or are you still relying on the default retirement plans I listed above? If it’s the latter, good luck!

The textbook “Increase Your Financial IQ” along w/ “Conspiracy of the Rich” are excellent, IMHO. For those that still don’t get the messages, who are still in denial that it’s all talk, doom and gloom stories, it’s just unfortunate for them.

I personally learned a whole lot reading Robert’s materials, along w/ Keith Cunningham’s (one of Robert’s Rich Dad). I understand the importance of Financial Education, which I would mention again, is lacking big time in this country. Yes, there’s a conspiracy going on, and it’s either you’re in the know, or in denial and prefer to decode average information.

Just my .02 cents,
Sonny

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