‘Rich Dad’ Robert Kiyosaki on the 90/10 Rule: Why Only a Small Percentage Is Actually Rich
Robert Kiyosaki, financial guru and author of the bestselling book, “Rich Dad Poor Dad,” talks and writes a fair amount about a concept he calls the 90/10 rule. According to Kiyosaki, the rule explains why only a small percentage of people are truly wealthy.
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Here’s a breakdown of Kiyosaki’s insights to help you understand how and why this rule applies to your financial life. This is why only a small percentage of people are actually rich.
Understanding the 90/10 Rule
Kiyosaki’s 90/10 rule says this: 90% of people earn only 10% of the world’s money. The secret to being part of the wealthy minority, he says, lies in positioning yourself to have low income and high expenses. At first glance, this may seem counterintuitive, but Kiyosaki explains that it’s all about understanding how money really works.
Read Next: How Much Does the Average Middle-Class Person Have in Savings?
The Financial Statement of the Rich
To illustrate his point, Kiyosaki shows a diagram of a smart investor’s financial statement. In this diagram, expenses are sky high, but a significant portion of those expenses flows back into the income column. How?!
Well, Kiyosaki says that by utilizing tax and corporate laws to your advantage, you can actually make more money and, in turn, stay rich.
The Financial Statement of the Poor
In contrast, Kiyosaki also presents a diagram of the traditional way of thinking about money, which he attributes to the majority of the population. In this scenario, money comes in through the income column and goes out through the expense column, never to return.
This is why many people struggle to save money, live frugally and cut back on expenses — they’re not leveraging their expenses to generate more income.
The Importance of Financial Education
Kiyosaki adds that understanding your financial statements is an incredibly important part of this entire equation. You can do that by asking yourself what percentage of your expenses ends up back in your income column each month. When you do this, he says, you will start to see the world of wealth differently. This shift in perspective is what separates the rich from the poor.
Seeking Guidance and Cracking the Code
Not so fun fact: This can all feel a little overwhelming. If you’re struggling to understand how to make this work for you, Kiyosaki suggests finding someone you trust to discuss your financial future. Maybe it’s a friend who’s good with money or a certified financial planner.
The good news is, Kiyosaki says that once you crack the code, you’ll move from a world of “not enough money” to one of “too much money.” Not bad!
Although a little complicated to understand at first, Kiyosaki’s 90/10 rule is an interesting insight into why he believes the rich stay rich — and the rest of us don’t. By understanding how the truly wealthy use their expenses to generate more income, we can look closely at our own finances and see what we can do to mimic this behavior. All of this adds up to a richer — and more rewarding! — financial future.
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This article originally appeared on GOBankingRates.com: ‘Rich Dad’ Robert Kiyosaki on the 90/10 Rule: Why Only a Small Percentage Is Actually Rich
