Learn the stock market in 7 easy steps. Get spreadsheets & eBook with your free subscription!

Why a Scalable Income is Better Than an Hourly Wage for Wealth Building

I recently went through a very thorough review of The Essays of Warren Buffett and did a total book review and now I am on to my next book, Rich Dad, Poor Dad, and we’re tackling Chapter 1: discussing why scalable income is better than an hourly wage for wealth building.

I cannot speak specifically to this book as I am just now getting started reading it, but if you do any sort of research at all on it then you’re going to see that the book is widely renowned as one of the best investing books out there.  I initially heard about the book from Andrew Sather and he has a fantastic quote about Rich Dad, Poor Dad, saying, “The book might motivate you entrepreneurially, it may help your personal finances, and it will definitely inspire you to take investing seriously and start working towards financial independence.”

Not sure about you but reading that quote alone really motivated me to want to read the book.  I mean, if it has motivated Andrew entrepreneurially, financially and investing wise, then I’d have to hope I’d experience a similar sort of effect, and after all, isn’t that what we’re all after?

So, let’s get to the book (which I might add you can buy a version of this on Amazon for less than $6!)

Fixed Wage vs Scalable Income

The book starts off with Robert Kiyosaki, the author of the book, talking about his childhood and his entryway to money.  One of the things that hit me right off the bat and stayed true through the chapter is that being a “rich dad” or a “poor dad” is a mindset, as Kiyosaki writes in the book, “For example, my poor dad always said, “I’ll never be rich.”

And that prophecy became reality. My rich dad, on the other hand, always referred to himself as rich. He would say things like, “I’m a rich man, and rich people don’t do this.”

The further that you get into Chapter 1, you learn that the “poor dad” is actually Kiyosaki’s paternal father and that the “rich dad” is the father of Mike, one of Kiyosaki’s best friends and a “partner” in their moneymaking journey, as Mike and Kiyosaki were the two kids that went to a school but seemed to be in a much, much different social class than the rest of the students.

To learn how to make money for themselves, they decided to approach Mike’s dad after Poor Dad, Kiyosaki’s father, posed that idea to them.  Mike’s father various companies including warehouses, restaurants, a construction company and a chain or stores.

That Saturday morning, they met with Mike’s dad and he agreed to teach them how to be rich.  He offered to teach them but insisted it would be through experiences and not classroom style like they were used to.  Their first job was to work for Mrs. Martin cleaning and restocking shelves every Saturday for about three hours, making $.10/hour.  Three weeks in and Kiyosaki had had enough! 

He went to Rich dad, frustrated, as he didn’t feel like he was being taught a lesson.  Long story, short, Kiyosaki was now going to work for free for the next few weeks until he could really understand the value of that lesson!  And what was the lesson, you might ask?

Well, it was simple – “The Rich Don’t Work for Money”

So many people will go to college and get an education simply to be told how much they can make, where they can work, the hours that they will work, and the list goes on and on.  The world needs people like Mrs. Martin, working in the store, but if you’re truly looking to obtain financial freedom then you need to find a way to create your own scalable income, so that’s what Kiyosaki and Mike tried to do.

One day Robert noticed that Mrs. Martin was cutting the front page of comic books in half in preparation for the distributor to bring in new books.  Robert decided that he was going to talk to the distributor to see if he could have the books for free since they’re being damaged, and they cost about $.10 each brand new.  The distributor said that he could have them as long as he worked for the store and that he didn’t resell them.  Sound like a dead end?  It wasn’t.

Robert and Mike came up with an ingenious plan – they opened a “library” in Mike’s basement where they would allow kids to come read the books after school, charging them $.10/admission.  While this was the same price as a comic book, the kids could read about 6 books in this time instead of just being able to purchase one, so it truly solved a need for them.

After three months of running this business, Mike and Robert were making about $9.50/week, quite a bit more than their initial wages of $.10/hour or about $.30/week when they were working in the shop at the beginning of this journey.

And that is really the lesson that Rich Dad was trying to get across to both Robert and Mike.  Sure, you can obtain financial independence working an hourly or salary job, but if you really want to become a rich dad, then you need to feed that entrepreneurial spirit and find a way to solve an issue that others have.  If you can do that, your odds of becoming rich will increase significantly.

For me, personally, this chapter had what I refer to as the ‘Shark Tank Effect’ on me.  I love watching Shark Tank, and whenever I do, I always end up missing half of the episode because I start to brainstorm about ways to find a way to solve issues in my life that I generally just overlook instead of trying to create a better, more efficient way.

This is the type of fire that we all need in our lives so that we can become rich dads someday.  In short, be an entrepreneur.  Find a way that you can solve a problem and then solve it! If all that you’re doing is working an hourly wage or a salaried job then you’re already breaking Lesson #1, because don’t forget, “The Rich Don’t Work for Money.”