Unfair Advantage Keeping definitions simple for two young boys, his son and me, rich dadâ€™s definition of an asset is: Assets put money in your pocket, and liabilities take money from your pocket. I came under massive professional attack from so-called highly educated financial experts for this overly simple definition. Yet, when you see the world from the viewpoint of an investor and the tax department, you will see the wisdom in the definitionâ€™s simplicity. If you save money in a bank and invest in a traditional retirement plan, much of your cash will still flow to the tax department. Your tax dollars are passive income for the government. Why not invest in what the government wants you to invest in, and have the government send money to you? To me, that is the smart thing to do. Kim and I take this to extremes. Since we have excess cash flow, we are always investing, but not in savings, stocks, bonds, mutual funds, or traditional retirement plans. To us, it does not make sense to receive money from the government, and then give it back to the government. Kim and I do not save money. Since governments of the world are printing trillions of counterfeit dollars, why save dollars? Rather than save money, we save gold and silver inside a self-directed Roth IRA plan because the capital gains from the price of gold and silver going up grows tax-free. In the following chapter, you will find out how we get the money to invest with. For now, just know that we do not save money for two reasons. Reason number one is, with governments printing money, the value of money has been falling for years. This is also known as inflation. Reason number two is that the interest on savings is taxed at ordinary-income rates.
by Rich Dad, Robert Kiyosaki