Unfair Advantage – Book Summary

In Unfair Advantage Robert Kiyosaki has tackled 5 types of unfair advantages in an expatiating manner that we can use to achieve financial success.

In Unfair Advantage Robert Kiyosaki like many of his book, the author talks about 4 Cash flow quadrants. They consist of the following;

1. E Quadrant is for employee
2. S Quadrant is for self-employed/small business owner
3. B Quadrant is a business owner (They have others working for them, over 500 employees)
4. Quadrant I is for Investor, have their and other people money working for them

Unfair advantage No.1: Knowledge

If you have the wisdom to understand inflation, you won’t try to save or try to get out of debt or never live below your means, on the contrary, you will use debt to gain assets that will generate cash flow that will eventually use to build more wealth.

We are in the Information Age and the key to the world is education, tragically this education is not taught in schools, the current curriculum of the normal school is still stuck in the Industrial Age. They teach academic and professional education but in Information Age, they must include financial education. Traditional education prepares you for E & S quadrants, while financially intelligent people learn how to operate in B&I, where they earn most and pay very little tax. 

Financial education teaches you 3 forms of income;

1. Ordinary
2. Portfolio and 
3. Passive 

Financially smart people know how to convert those incomes to one where they pay minimum tax (i.e. cash flow/passive income). The financial crisis will only go away when schools inform students about the truth behind jobs, work, taxes, and investing.

Rethink, if you are going back to school to become an employee (i.e. Quadrant E) you will lose a big chunk of your salary to tax.

By knowledge one should know that there is no good or bad investment, they are only bad investors, ergo one should not ask if an investment is good or not, but rather if one is a good investor or not. 

In Unfair Advantage Robert Kiyosaki says these are some of the advice he will never follow;

• Pay off your debts
• Have a budget and save in 401(k) – you get taxed at a higher rate because you won’t have your business deductions, your home mortgage deduction, and deductions for your dependents
• Save – the dollar is losing value every day through inflation and money you save is taxed at an ordinary tax rate. 
• Live modesty
• Work longer; retire later

He termed the above obsolete and only sound good to the financially illiterate people.

If you are in Quadrant B&I (Business Owner and Investor) you’re supposed to marry someone in the same quadrant, and not someone in Quadrant E&S (Employee and Self-employed/ small business owner)

Knowledge, that real-life financial education is what makes you rich, not money. This is such a great advantage.

You must strive to invest for cash flow and not for capital gain. When you buy and sell assets just because it has appreciated that is investing for capital gains which is a wrong strategy and is taxed. You need to invest for cash flow. Capital gain is also called portfolio income in the investment world, while cash flow is passive income.

Importantly buy assets that give you income (cash flow). Cash flow comes from passive income. 

Remember asset is that which puts money into your pocket and liability takes money out of your pocket. When people send you money that is a sign of true financial education, and the antithesis is true. 

When you focus on buying an asset that is the sure path to being financially independent, not focusing on pay raise.