Required Reading: 5 Takeaways From Before You Quit Your Job

Robert Kiyosaki has written a lot of books. I lost count somewhere in the teens. But when I saw this one on Amazon, I thought it would be perfect to review for this blog. It is, after all, about Quitting Your Job and what you need to know before doing so. I’ve talked about Kiyosaki in blog posts before, so this was a match made in heaven.

I wasn’t sure what to expect. Kiyosaki can be hit or miss. Some of his books I’ve given up on as they’re regurgitated bits from his other books or from talks he’s done. There was nothing new. (Critics are saying that’s all his new book Fake is: rehash) But I wanted to read this one just for the sake of this blog, so I took it head on. Plus, it would be interesting to see what he said after I’ve already Quit My Job. Would I agree? Did I quit my job the way Robert Kiyosaki says to?

The book can be summarized thusly: If you want to start a business so you can quit your job, you must make sure you have X, Y, and Z. That’s it. The rest is padded by life lessons and anecdotes. I was able to finally quit my job because my business grew to the point where I needed to devote myself to it fully, and didn’t need the day job paycheck to survive. The one thing I noticed was that my business DID have X, Y, and Z and we’re now bigger and doing more business than we ever have.

Point for Robert.

So here’s five takeaways I got from Before You Quit Your Job:

#1. What is an Entrepreneur?

I consider myself and entrepreneur. Not only because I built a business, but because I believe if you’re an independent filmmaker, you’re an entrepreneur. So how does one define the word? It’s tricky, and with the explosion of “start your own business” or “think like a business person” channels on YouTube or accounts on Instagram, the word entrepreneur is being thrown around quite a bit. Seriously, look up entrepreneur on YouTube and look at what you get: talking heads telling you how to build a successful business and quit your job to be an entrepreneur. But can any of them actually define the word?

Kiyosaki gives entrepreneurship the best definition I’ve ever seen (crediting Harvard professor Howard H. Stevenson): “the pursuit of opportunity without regard to resources currently controlled.” This also works flawlessly to describe an independent filmmaker. But that’s what an entrepreneur is — you see an opportunity and try to make it real, cash or resource or skill be damned.

My own personal experience fits right into this. I first identified the opportunity — a ‘Need’ — before I had the means or plan to fill it. But it was identifying it that set me on my path. I Quit My Job (the first time in 2014) setting off to build something to meet that need. Before I knew it, I had three business partners and the foundation for the company was being built. I didn’t have that before I left.

When I made my first film in 2012, it was the same thing. I had a script and a desire to make a movie. I didn’t have the money or the people yet. I had to seek them out. I built a team. We raised funds. I found money by selling stuff I owned or holding out my hat.

If you’re going to Quit Your Job, you’re going to need a business. And to start a business, you need to know just what an entrepreneur is.

#2. The Power of Excuses

Kiyosaki spends a small section confronting excuses. To quote: “Any two-year-old is an expert at making excuses. The reason most people who want to become entrepreneur remain employees is that they have some excuse that keeps them from quitting their job and taking that leap of faith. For many people, the power of their excuse is more powerful than their dreams.”

It happens all the time. Someone I know works a day job but has a dream to do something else. I always get excited hearing about what other people dream to do; I talk it up, start to ask them what their plan is to get there. Like clockwork, the excuses come out. Kiyosaki even lists the most common:

  • “I don’t have any money.”
  • “I can’t quit my job because I have kids to support.”
  • “I don’t have any contacts.”
  • “I’m not smart enough.”
  • “I don’t have the time. I’m too busy.”
  • “It takes too long to build a business.”
  • “I’m afraid. Building a business is too risky for me.”
  • “I’m too old.”

It’s like nails on a chalkboard. Excuses are what cause dreams to die. Imagine the amount of art, ideas, inventions, or technologies that we’ll never see because the person with the idea has an excuse.

Kiyosaki later gives a recap of a sit-down with a woman who was struggling after quitting her job to start a Network Marketing company. She took the leap and started the business. But, after 6 months, things were going terribly. Things were going terribly not just because she didn’t know how to sell but she refused to learn how to. She didn’t want to commit to new behaviors to make the business work. Even worse, she only wanted to work a few hours per week. Her excuses were different than the ones listed above, but they were still excuses: “I don’t want to.” She quit her job to start a business so she could work a lot less and make more money. So she failed at her business.

#3. The B-I Triangle

Kiyosaki loves his trademarked shapes and drawings. The CASHFLOW Quadrant is one example. The other is the B-I triangle shown in this book:

The B-I triangle, borrowed from http://www.richdad.com and I make no claim to ownership!

Simply put, for a business to survive and grow, you must have the five components and surround them with your business’s team, leadership, and mission. Kiyosaki gives the example of his early successful business, the surfer wallet company Rippers started in the 1970s. He didn’t have a legal component to his business and Rippers was brought down by competitors.

I look at the B-I triangle and compare to my own business. We cover all five (it helps that one partner is a licensed lawyer!) and we’re still in business five years into it.

I could break down each component, but it would take forever in this post. If you’re interested in reading more, pick up a copy of the book here and dive in. Just know that if you’re looking to build a business to Quit Your Job, it needs to have these bases covered. You’re going to need some sort of legal component (if anything to handle the mountain of paperwork involved with properly filing a business with state and federal governments!); an accountant (‘Cash Flow’) to help with taxes and expenses; marketing and sales (“Communications”) to get the word out about your “Product” (in our case, “service” is our “Product”); lastly, another word for “Systems” is “Network.” You need a network (How are you going to get your product out there? How are you going to get your product made? Packaged? Shipped?)

The other important point here is, if you’re going to grow your business and be successful it takes a team. You cannot try to be proficient in all five components — it won’t work. It’s best to focus or be strong in 1-2 of them and build a team to handle the rest. This is how we did it. I was the Product. One partner was Legal, the other was Systems and Communication. I brought in an accountant to handle Cash Flow. Yes, there are costs to building out the team. But you need to have them or it will all fall apart. If you’re flying solo, you’re going to need to hire a team around you.

One thing Kiyosaki doesn’t mention is that this B-I triangle also denotes the best way to grow. When you have a team in place, you’re not limited by the amount of hours you alone can physically work. A team shares the load, and a team can always be expanded. Think of Apple: Steve Jobs and Steve Wozniak started in a garage. They had a Product (and to some extent Systems). Apple is now huge because it’s not two guys in a garage hand building computers. There’s an entire Legal team. An entire Communications department to handle marketing and sales. Systems is now a network of factories in Asia and Europe building and shipping products.

#4. Working For Free

This section echoes the one with the failing network marketing business woman Kiyosaki met with. It is also one of the most important takeaways from the book. If you are good at your job in sales, that doesn’t mean you’ll have a successful sales business. Becoming successful means “working for free” a lot of the time.

“Working for free” is Kiyosaki’s Rich Dad euphemism for taking the time to practice or learn something without getting paid for it. The examples he uses are doctors (would you want someone who JUST quit their job to become surgeon to operate on you?), professional athletes, and even The Beatles.

“Even The Beatles worked for free before they became world famous and rich. Like the medical doctor or professional, they paid their dues. They did their homework. They did not ask for a guaranteed record contract, a steady paycheck, or medical benefits before they began practicing.”

The point is, you need to learn on your own (without getting paid) to build up your business and make it successful. If you have an idea for a great product, people aren’t going to buy your product if you’ve never made it before. Or tried it. Or even tested to see if it works. Part of the process of building your business is to spend the time learning it before you charge for it.

#5. The Entrepreneurial Process

It’s not as simple as, “I’m starting a business and then quit my job. My business will support me.” I tried it, and it didn’t work. When I quit Apple in 2014 to start my company, I expected enough money to come in early to not have to get a day job again. In six months I was filling out applications. Why? Maybe my goals were unrealistic. Maybe I didn’t appreciate the process enough of building a business. Or maybe I just didn’t know what I was doing yet.

In retrospect, what it really was was it took time. We had our B-I triangle intact. We were in a market space with little-to-no competition. But we had a lot of ground to cover — including failing. As Kiyosaki puts it, “since a new entrepreneur is creating something out of nothing, it is obvious mistakes will be made. In order to succeed, a new entrepreneur needs to be committed to going through these steps as soon as possible.”

  1. Start the business.
  2. Fail and learn.
  3. Find a mentor.
  4. Fail and learn.
  5. Take some classes.
  6. Keep failing and learning.
  7. Stop when successful.
  8. Celebrate.
  9. Count your money, the wins and the losses.
  10. Repeat the process.

I didn’t officially Quit My Job until #8. My business partners and I just hit #9 these past few weeks with the largest contract we’ve ever had. It’s not easy starting a business, and you must appreciate it takes time before you can Quit Your Job permanently. The failures are rough. You’ll want to quit. You’ll question why you’re doing it. But if you keep going, the successes will start to keep up with the failures.

If you’re going to Quit Your Job by building a business, you will not be able to quit your job right away. It took five years of working at it until I was able to finally quit. And even then, I wasn’t really prepared to quit. But my business reached a new peak that required my full time and that told me it was truly time to Quit My Job.

I Attended a Modest, Billion Dollar Party

Not the actual party

Over the weekend I had the pleasure to attend an interesting party. I was invited by one of my favorite clients to a quaint house warming party. My client has been in real estate for decades and built up a solid business of rental properties. I thought it would be a great opportunity to socialize with my client outside the job, and just make an appearance.

Now, reading the title you’re probably assuming the party itself cost a billion dollars. It was a mild manner affair, catered of course, but when the other guests began to show up it turned into something I’ve never seen before. The combined net worth of all the guests was in the billions. I was rubbing shoulders with a class I’d never been exposed to before. I took it all in.

When you think of a party of combined billionaires, what do you think of? Maybe what comes to mind is gold jewelry, Crystal poured by the gallon, and whatever else is found in high-budget rap videos. Or maybe your mind is drawn to the more conspiratorial, the secret society of the rich direction, imagining some Eyes Wide Shut affair with masks, cloaks, and ritualistic sex?

The truth is much less extravagant. To me, it looked like most people had just stepped off their yacht. It was shorts and polos for as far as the eyes could see. Some women wore dresses and I only saw one man in a suit. Wearing ‘business casual’ I felt overdressed. The wealth was only obvious in the cars people arrived in; the owner’s driveway contained a BMW, Lexus, and Maserati alone. The house was a thing of beauty — recently remodeled and completely overhauled. But for the most part, the wealthy themselves did not flaunt. No extravagant jewelry, no big watches, no trophy wives. There was no snapping of selfies or showing off.

I was immediately reminded of Stanley and Danko’s The Millionaire Next Door. If you’re not familiar, the authors surveyed hundreds of millionaires across the United States, looking for common statistics among the wealthy. What they found was that almost unanimously do millionaires live modest lives, shopping off brand or generic for most things, buying used cars, and not living extravagant lives.

The other noticeable thing? Most were older.

Why does this matter? It reinforces the idea that to become truly wealthy, billionaire level wealthy, it takes a lifetime of financial discipline. Have you ever seen the ‘hockey stick’ graph of Warren Buffet’s wealth? He didn’t cross $1 billion dollars until he was 56 years old. Unless you invent Facebook or design the Model T, it takes time to be a billionaire.

My mind wandered some more at the party: The extravagant parties (and lifestyles) are usually attributed to entertainment moguls, professional athletes, and…lottery winners. What do all three of those have in common? High bankruptcy rates. Rapper 50 Cent went from a $155 million valuation in 2015 to bankruptcy in 2016, $23 million in debt. MC Hammer went from earning nearly $33 million per year in 1991 to $13 million in debt just 5 years later. Johnny Depp is the latest celebrity struggling with debt and lost fortune. Nicholas Cage had serious financial problems, even blowing a $150 million fortune. According to a 2009 Sports Illustrated article, 78% of NFL players are either bankrupt or under “financial stress” just two years after leaving the league and 60% of NBA players go bankrupt within 5 years of leaving the sport.

And then there are the lottery winners.

According to several studies, 70% of all lottery winners go broke and file for bankruptcy. Here’s another staggering statistic: 90% of surveyed lottery winners believe the money will be gone completely by the family’s third generation. One last one: 44% of all lottery winners spend the entirety of their winnings within 5 years.

What I was seeing at this party was the key to wealth: financial literacy. These were people that built and owned businesses, that invested in real estate, that probably had pretty thick stock and bond portfolios. These were people who made sure that dollars incoming remained much higher than dollars outgoing. Are you paying attention? Because this is the secret to being wealthy.

As Roberty Kiyosaki likes to say, “The poor stay poor.” What he means by this is the mentality doesn’t change, even after winning the lottery or landing the big sports contract. Without financial literacy (with which comes discipline), that multimillionaire still has the mentality of poor person — so they spend on liabilities instead of acquiring assets. They live lavishly, enjoying their new found freedoms with being able to buy whatever they want. Nicholas Cage bought an island. MC Hammer bought a $30 million house. Famous lottery winner Michael Carroll smoked $2,000 worth of crack every day and ultimately ended up in prison at one point. The rich buy assets. Real estate. Businesses. Stocks. They put their money to work to make more money.

Being wealthy is a mindset. And all of these khaki shorts, gray-haired party goers had that mindset. I regret not wandering about more, asking what people did. I would have loved to get a sampling of where their wealth came from. I guarantee you that none of them were lottery winners.

If you want to quit your job and become wealthy, you cannot do it without financial literacy. I wasn’t born into wealth. When it comes to knowing money, the public school system failed me — it fails everyone. Schools do not teach financial literacy. There’s no classroom discussion on debt or taxes or passive income. I plan on writing a post dedicated solely to financial literacy and failure of such in the education system; but for now know that the path to true wealth lies in knowledge.

I leave you with a few tips should you ever find yourself in a billion-dollar party:

  1. Dress the opposite of how you think you should dress. Head to a department store and pick up an outfit in the Ralph Lauren/Polo section. Shorts and a polo shirt.
  2. Unless you drive a luxury vehicle, park a block away.
  3. ‘Catered’ does not mean hors d’oeuvres, caviar, and champaign. It means cold beer, margaritas, and steam trays.
  4. Bring a gift, or at least, a bottle of wine.
  5. Don’t be the first one there or the last one to leave

Required Reading: 5 Takeaways From Cashflow Quadrant

“The only difference between a rich person and a poor person is what they do in their spare time.”

Robert Kiyosaki

One of the segments I want to do with this blog I’m called “Required Reading,” which essentially is a combination book review and recommendation. I’ll write a post on a particularly educational or useful book and break down the top 5 takeaways.

If you’re reading this blog, you’re probably familiar with the name Robert Kiyosaki. He burst on the scene in 1997 with Rich Dad Poor Dad and has built an empire around financial literacy and education. Cashflow Quadrant was the follow up in 2000 to the hugely successful 1997 book and the Kiyosaki book that had the biggest impact on me.

I usually recommend this book very early to people who want to change their financial lives. It’s not a how-to book. It’s not a “baby step” book that tells you what to do. It’s a book that rewires your brain and changes how you think about money, jobs, and wealth. Kiyosaki breaks it down in very simple terms, exposing the reality behind things we take for granted, such as being an employee and the tax system. Cashflow Quadrant is very much required reading for anyone looking to break out of the rat race. Below are my top 5 takeaways from the book (but you should really read the whole thing):

#1. As an Employee, The System is Against You

The said ‘quadrant’ of the title is made up of four types of income: “E” (Employee), “S” (Specialist or Self-Employed), “B” (Business Owner), and “I” (Investor). The vast majority of people are “Es” and are also the most disadvantaged of the four. As an employee, taxes (income, social security, medicare, etc) are taken from you before you get any money. You pay taxes and get what’s left. As an “S” or “B” you have tax advantages, such as deductions and depreciation. These lower the amount that’s taxable; you spend money and pay taxes on what’s left. To make matters worse, “Es” are also taxed at the highest rates!

“Your boss cannot make you rich,” Kiyosaki writes. “The reality is, your boss’s job is not to make you rich. Your boss’s job is to make sure you get your paycheck.” Which is then taxed. If you remain an employee, you’re working hard for taxes and what’s left. Being an employee also usually takes away a lot of your time. You’re at the whim of a manager or company — you must adhere to their schedule and demands. If you’re unwise about your money skills and budgeting, “then all the money in the world cannot save you…if you budget your money wisely, and learn about either the “B” or “I” quadrant, then you are on your own path to great personal fortune, and, most importantly, freedom.”

What’s even more messed up is the fact that The System only gives tax breaks for “Es” if you go further into debt. Think about it: as a business owner, your expenses and the “cost of doing business” are deductible from your income, reducing what you pay taxes on; as an “E” the only tax breaks you get are from taking on debt like a home mortgage or student loans. These two (usually large) loans have tax deductible interest. But you have to go into big time debt just to get the deduction. Simply put, you want to get out of the “E” quadrant as fast as possible.

#2. In Debt vs Indebted

“The more people you are indebted to, the poorer you are. And the more people you have indebted to you, the wealthier you are. That is the game.”

This one is brilliantly simple. If you owe a bank a mortgage, another bank credit card debt, another institution student loan debt, your parents $100 you borrowed, you are in debt to someone else. Your earned money is taken away by these debts. However, if someone owes you, you earn money by these debts. As a property renter or bond buyer or lending via a Peer-to-Peer lending service, people are indebted to you. “We are all in debt to someone else,” says Kiyosaki. “The problems occur when the debt gets out of balance.”

“The world simply takes from the poor, the weak, the financially uninformed. If you have too much debt, the world takes everything you have…your time, your work, your home, your life, your confidence, and then they take your dignity, if you let them. I did not make up this game, I do not make the rules, but I do know the game…”

#3. Mind Your Own Business

Kiyosaki shatters “Industrial Age” adages and beliefs against the rock of reality that is the 21st century. “Go to school and get good grades, so you can find a safe, secure job with good pay and excellent benefits,” he points to as out-of-date advice. “Work hard so you can buy the home of your dreams. After all, your home is an assent and is your most important investment.” “Having a large mortgage is good because the government gives you a tax deduction for your interest payments.” “Buy now, pay later.”

As Kiyosaki points out, people who “blindly follow” the advice above often end up as employees (“making their bosses and owners rich”), debtors (“making banks and money lenders rich”), taxpayers (“making the government rich”), and consumers (“making many other businesses rich”) The people following this advice are making everyone else rich but themselves! “They work all their lives minding everyone else’s.”

To break out of this, you must move into the “B” and “I” quadrants. Move from the employee to the employer. How do you do this? Start a business. Offer a product or service. To enter the “I” quadrant as an investor, learn about finance and investing. Buy stocks or bonds that generate income. Or buy an existing franchise! Don’t work at McDonald’s, own one. It may seem like a leap, but as Kiyosaki will repeat over and over, it’s about financial education. Don’t grow other people’s businesses, grow your own.

#4. Assets and Liabilities

Find any YouTube interview with Kiyosaki (or read any of his books) and I guarantee you will hear him mention these two things. “An asset,” he likes to say, “puts money into my pocket. A liability takes money out of my pocket.” He punctuates this always by stating “your home is NOT an asset!” The mindset is that buying a home with a large mortgage is an asset — this is archaic thinking — because the mortgage interest is tax deductible. But you still have the monthly mortgage payment. And property taxes. And Private Mortgage Insurance (PMI) if you put down under 20%. Plus you have renovations and repairs. But a home becomes an asset when your rent it. The rent brings in monthly income. The repairs and renovations become tax deductible as business expenses.

Thinking more about these two things really changed my focus on spending money. When I spend money now, I think “is it an asset or a liability?” “Will it make my money or cost me money?” I get excited when I buy a new stock or more shares of a stock I already own. They’re going to go to work for me and make money. I had to buy a new car not long ago and groaned about the new liability — but if I use it to Uber or Amazon Flex, now it’s an asset because it puts money in my pocket. The gas I use and tires I purchase are now business expenses.

Assets and liabilities are as core to wealth as supply and demand.

#5. Other People’s Time and Money

“OPT” and “OPM” as Kiyosaki calls them are “found on the right side of the quadrant.” A “B” Business Owner and “I” investor become wealthy using other people’s time and money. It sounds sinister, but think it through. If you’re an employee, you have a job because someone built a business around an idea or product. Your paycheck is the direct result of someone else’s time and money. Put yourself on the other side of the equation: by putting in the time and money to start a business, you begin to earn back both at the expense of someone else’s who works for you.

The “I” quadrant is the most unique. In the “I”, Kiyosaki says “money works for you.” This is why I love investing so much. If I buy shares of Coca-Cola, the company is doing the work for me. The stock may increase in value, making me money. Then, every quarter, they pay me money in the form of a dividend. I don’t work for Coca-Cola. I don’t attend any meetings or drive anywhere. I don’t even get a paycheck from them. I get increased asset (there’s that word again!) value and a dividend. Best of all, I still have all of my time to dedicate to something else (or nothing, if I chose).

Kiyosaki: “A few years ago, I read this article that said most rich people received 70% of their income from investments, or the “I” quadrant, and less than 30% from wages, or the “E” quadrant. And if they were an “E”, chances were that they were employees of their own corporation.”

I have barely scratched the surface of Cashflow Quadrant with this post. It was one of the earliest books I read when I wanted to change my thinking on finances and wealth and it had one of the greatest impacts. It pulled back the curtain. It shook me out of a sleepwalking daze of going to work day in and day out, collecting a paycheck that was heavily taxed and withheld. It put me on the path to financial freedom. I cannot recommend it enough! To help you on your own personal wealth journey, I added a link to buy a copy below by clicking on the cover or here.