Blog | Personal Finance

Rich Dad Scam #2: “Get a Good Job”

Lots of people ask, “How can I get a good job?” Few ask, “how can I create good jobs?”

Summary

• Having a “good job” isn’t the way to becoming rich

• Being an employee is actually the least secure position

• Tax laws are in favor of entrepreneurs, and investors - not “good jobs”

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We see scams every day. Sometimes they are easy to see and call out, like spam emails that promise riches in exchange for your bank information. But some scams are a lot harder to spot.

If you’re lucky enough to have learned some financial smarts throughout your life, you’re probably able to spot scams, and know how to not be taken in. Unfortunately, without those financial smarts, it can be very easy to be taken in by scams, especially the scams that the rich use to keep the poor in their place.

Those scams are what we’ll be discussing in a series called Rich Dad Scams. To break away from them, you usually need someone else to warn you that you’re being duped, to tell you that you’re being taken advantage of, and to tell you what you can do about it. The first Rich Dad Scam we uncovered was about Higher Education. Today’s Rich Dad Scam is “Get a good Job.”

“Go to school so you can get a good job!”

Have you ever heard that one before?

The most likely answer is yes. Thousands of times.

When Robert Kiyosaki was young, his poor dad (his natural father) always told him that he needed to go to school so that he could get a good job. To poor dad, getting a good job was the most important thing in life. However, poor dad worked very hard, and still managed to always worry about money; yet, he never got ahead financially.

By most standards, poor dad was successful. He had multiple advanced degrees and he had worked his way up the government job ladder to become the superintendent of the Hawaii school system. He was very proud of the good job he had earned through his hard work.

But, unfortunately, his job was one of the things that actually kept him from succeeding financially. He toiled away working for others, often getting raises only to keep up with the cost of living and paying a high percentage to the government in taxes.

On top of it all, he had no financial education, so he never learned how to invest properly to grow his money beyond his salary. One financial emergency after another would drain his savings and he’d have to start all over again. Later in life, he ran for Lt. Governor and lost. He tried a few business ideas after that and eventually died with very little to his name. In his later years, he never talked about his good job. Instead, he lamented that he didn’t have anything to leave for his kids. Though it didn’t matter to his children, it still weighed heavy on him.

Robert’s rich dad (his best friend’s father), on the other hand, never had a “real” job. As a kid he had to drop out of school to help run his family store. Later he got into real estate investing. He taught Robert along with his own son (Robert’s best friend, Mike), about money through the game of “Monopoly.” The simple formula he taught them for getting rich was, “Four green houses, one red hotel.” Eventually he used this formula to buy his own hotel on the beach. He never had a good job, and yet he was rich and successful.

Rich dad understood that the sentiment, “get a good job,” was a scam. Rather than get a job, he made jobs. Rather than work for someone else, he worked for himself. Rather than pay high taxes, he used the tax code to get rich.

Why “get a good job” is a scam

The reason “get a good job” is a Rich Dad Scam is because being an employee actually makes you poorer, especially if you have a high paying job, because you pay the most in taxes. And guess who isn’t paying a lot of taxes? The owner of the business you work for.

This is because the tax code is built to reward entrepreneurs and investors who create jobs and grow the economy. If you’re a professional investor or a business owner, the majority of your income is passive income, which is the lowest taxed income.

If you’re an employee, your income is earned income, which is the highest taxed income. The scam gets even worse when you look at it long-term. If you do well at your job, if you claw your way up the ladder, what is your reward? A bigger increase in taxes due to moving into a higher income tax bracket. It gets even worse if you work for yourself. You pay the highest taxes in the form of self-employment taxes.

Additionally, investors and business owners have many other tax breaks.

For instance, you can write off expenses related to business and investing. So even basic things most people pay for out of pocket like cell phones, computers, and cars can be written off as a tax break. The most sophisticated investors and business owners can pay almost nothing in taxes, legally.

In fact, President Trump was criticized by Hillary Clinton for paying $0 in taxes during the 2016 election.

The only way to avoid high taxation is to be the owner of a big business or to be an investor, to put your money to work for you. That’s where the rich work and live. The system is set up to benefit the rich so they can keep their money while making sure you keep getting taxed. Some people argue that employers pay taxes too, but really what they are doing is using money that would otherwise pay you to pay their share of the taxes.

When you realize that taxes are a way of keeping you in your place, you can see that this Rich Dad Scam is really just an extension of Rich Dad Scam #1, “Go to a Good School.” It’s in school that you learn to be a good employee, that if you work hard you can succeed. But really, you can’t, not on those terms.

Getting a good job does not mean good security

The idea that a job is an important part of your personal security is a big part of the Rich Dad Scam #2, “Get a good job.” Many people look at investing and entrepreneurship as risky. But the reality is that being an employee is the least secure position to be in.

You only need to look at the state of our economy or turn on the news to see that people are losing their jobs.

Just recently, WeWork cut about 20% of their workforce and 2,4000 people lost their high-paying jobs. The Chairman of the company enjoyed an expensive, Michelin-star rated dinner to celebrate. Clearly, in an economy where people are losing their jobs, the more secure position is to be the owner of the company that is firing people.

What does this illustrate? As an employee you have little to no power. You are at the mercy of your employer. If things go wrong with the company or the economy, you lose your job so the owner can keep the company. There is nothing you can do, and oftentimes very little cushion for the fall.

Change your mindset

Poor dad, just like most people, was conditioned and taught from the day he was born to be an employee. Rich dad broke away from that thinking and was an entrepreneur. He put his money to work. He was on the side of the rich, the side protected by the government. But how do you get there?

The first answer is simple. You do it by increasing your financial education and beginning to think like an entrepreneur instead of an employee. When you do that, you break out of the rat race. You realize that everything you’ve been taught about getting a job and finding success is a lie, and that there is another way— a better way that actually works. And that’s the secret the rich don’t want you to know.