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In Chapter 4, Kiyosaki makes an argument for understanding the critical importance of comprehending legal and tax advantages as integral components of building enduring wealth. Kiyosaki opens the chapter with a description of the Robin Hood fable and explains why his rich dad challenges it. Kiyosaki states that the rich, unlike the middle class, are not really taxed, and that the middle class, which is taxed, in turn pays for the poor.
Kiyosaki highlights the contrasting tax treatment of business owners with corporate structures, such as C corps, S corps, or LLCs, versus employees who work for corporations. Business owners can leverage the tax code to their benefit by earning, spending, and then paying taxes on their income, while in contrast employees are taxed first on their income, leaving them with less to cover their expenses.
Moreover, Kiyosaki emphasizes the protective shield provided by corporate structures against lawsuits. Wealthy individuals often shield their assets by controlling them through corporations, making it difficult for potential litigants to access their personal wealth, a tactic which ensures that even if someone sues a wealthy individual, they might discover that the person owns nothing in their name while retaining control over everything.
In this exploration of taxes and corporations, Kiyosaki reinforces the idea that financial intelligence, or “Financial IQ,” involves not only understanding accounting and investment strategies but also the legal and tax aspects of wealth-building. By grasping these nuances, people can then optimize their financial decisions by working toward achieving long-term financial security and success.
In this chapter, Kiyosaki delves into the concept of “inventing money,” which involves identifying opportunities or deals that others may overlook due to lack of skills, knowledge, resources, or contacts. In addition, this chapter introduces two types of investors:
(1) Investment Package Investors are individuals who choose to entrust their money to developers or fund managers, often by purchasing shares of an ETF or participating in real estate crowdfunding ventures. This approach is typical for most people, as it requires less active involvement in managing investments.
(2) Professional Investors, who according to Kiyosaki take a more hands-on approach, actively manage their investments, research markets to find lucrative opportunities and enlist professionals for daily oversight. What distinguishes professional investors are three key attributes: the ability to identify overlooked opportunities, the capability to raise funds for investment, and the skill to collaborate with other knowledgeable individuals.
Thus, while prime investment opportunities exist everywhere, many individuals lack the financial education to recognize these opportunities. As a result, Kiyosaki encourages readers to adopt a proactive approach to investing, thereby cultivating their own financial intelligence. By developing the ability to identify opportunities, secure funding, and collaborate with experts, individual investors gain a greater ability to position themselves in discovering wealth-building prospects that might otherwise go unnoticed.
Through the lens of Robin Hood—a story in which the main character takes from the rich and gives to the poor—Kiyosaki explains that the government actually takes from the middle class on behalf of the poor, as the rich have the knowledge and skills to avoid significant taxation. He explains that rich dad believed Robin Hood was a “crook” and that the government are “thieves,” which not only sets up his arguments regarding taxation but also serves to reinforce the contrast between his two father figures: His own father, at this time, worked for the government and believed the rich were “greedy.” Challenging the moral of a familiar childhood fable is a rhetorical strategy that again juxtaposes traditional financial understanding with Kiyosaki’s unconventional advice and beliefs.
Another key rhetorical strategy Kiyosaki uses in these chapters is the presentation of a stark contrast between business owners and employees in terms of taxation. This argument segues into his explanation of how business owners utilize corporate structures like C corps, S corps, or LLCs to leverage the tax code to their advantage. They earn income, spend it on expenses, and then pay taxes on what remains. In contrast, employees are taxed upfront on their income, reducing the amount they have available to cover their expenses. His comparison illustrates the power of knowledge and highlights the importance of learning about legal and tax strategies to minimize financial burdens.
Thematically, the core message in Chapter 4 is to motivate readers to expand their financial intelligence beyond the basics of earning and saving, highlighting The Power of Learning and Mentorship, specifically in the context of understanding legal and tax advantages in building wealth. Furthermore, Kiyosaki emphasizes the protective shield that corporate structures provide against lawsuits. He explains how wealthy individuals often shield their assets by controlling them through corporations, making it challenging for potential litigants to access their personal wealth. By grasping these nuances, Kiyosaki argues, people can make informed decisions, optimize their financial situations, and work toward achieving long-term financial security and success.
Kiyosaki further reinforces the theme of the power of learning as he introduces the concept of “inventing money,” which involves identifying opportunities that others might overlook due to their lack of skills, knowledge, resources, or connections. The implication of this concept is that the rich are not “greedy,” as his own father believed, but opportune. This reframing serves as an invitation for readers to become proactive learners and investors.
From a rhetorical standpoint, the strategy employed in this chapter again invokes contrast, as he presents readers with a clear distinction between the two types of investors. By highlighting the capabilities and skills of professional investors, Kiyosaki motivates readers to take a more hands-on approach to their finances, as he emphasizes that prime investment opportunities exist everywhere, but they often remain hidden to those who lack financial education and the ability to recognize them.
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