I just finished reading Robert Kiyosaki’s book, Rich Dad’s Increase Your Financial I.Q.: Get Smarter with Your Money and the one major takeaway is that too many people never realize their true financial potential because the get in their own way! Many people focus on earning more money when they should be focuses their time and energy on learning and increasing their money I.Q..
* Note: Kiyosaki discusses 5 aspects of Financial I.Q. in his book, but I’m just going to focus on this one, general concept here.
The learning discussed in the book is not a formal education. In fact, that’s one of the mistakes that many people make – amassing huge amounts of debt going to college in the hopes of “finding a good job” and their place on the financial treadmill, only for some it’s more like a hamster wheel.
So what does “focus on learning” mean if not the traditional, middle class mantra “go to college to get a good job”?
It means taking risks and chances while you’re young, and always learning from your mistakes as well as your successes. People come into money all the time, sometimes mass amounts of it only to lose it all later. Think of lottery winners, famous athletes and performing artists. Suddenly rich, then suddenly broke. Why? Because they didn’t increase their 2nd financial I.Q. after mastering the 1st. They simply did what they loved doing and fell into their riches, but never learned how to manage and protect their wealth.
The first two financial I.Q.’s in the book are :
- earning more money.
- learning how to protect that money.
In the example of the star athlete or lottery winner, they mastered I.Q. #1 but failed horribly at I.Q. #2 – protecting their money.
Protection can mean many different things, and is usually referred to as “security” by many people. They may want to be secure in the knowledge that their savings are safe from loss, or maybe they want to protect their savings and assets from legal action. Whatever meaning you take, once you’ve earned it you must get educated on how to keep it or risk losing it all.
But even losing it all isn’t the end.
There are many well known moguls, like Donald Trump, who have built vast financial empires and lost it all only to come roaring back again. Why? Because they learned from their experience and were not afraid to fail.
” Those who cannot remember the past are condemned to repeat it.”
-George Santayana
If you do not learn from your mistakes, you will keep making them and make little or no progress in life.
I’ve always thought it’s important to learn from your own mistakes, but it’s also important to learn from other people’s mistakes as well.
Here are a few resources to help boost your financial I.Q.:
- Tips to avoid losing money to these common investing mistakes .
- Educate yourself at tax time to avoid common tax mistakes and save more money.
- Get educated on credit cards so you can know how bad credit mistakes can be and avoid even basic credit card mistakes that cost thousands.
- And if nothing else, learn from other people and avoid even basic money mistakes whenever you can.
I find that Kiyosaki can at times exasperate me. As I recall, one of his standards of financial IQ is being able to borrow a million dollars.
I’ve taken many financial literacy tests over the years and have always scored very high, but I’ve never earned as much as $20,000 in any year, so I resent his notion that I don’t have financial IQ.
@Terry: I have to agree. I don’t think having huge debt makes you financially smart.
But I don’t think Joe necessarily is promoting that point of view, just pointing out that we don’t do ourselves any good when we do things like blindly throw money into a 401k.
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I am in no way promoting the idea that borrowing blindly makes you smart. I think the takeaway point here is to educate yourself about finance so that when you have to borrow money (as most people do for a mortgage..) be as educated and savvy about as you can.
Also, being able to borrow a million dollars does say something about your financial status…. actually borrowing a million when you can do with a fraction of that amount says something too – that you’re not as savvy as you might think! (IMHO)
That’s true, Joe. You have to be pretty darn responsible with money for a bank to lend you a million. A point I hadn’t considered; although I still don’t like being in debt just on principle.
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I’m right there with you on being in debt Emily! I always strive to be the kind of person banks fawn over, but I hate to take them up on their offers.
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