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- “The Real Truth Your Financial Statement Tells You — Kiyosaki’s Way”
“The Real Truth Your Financial Statement Tells You — Kiyosaki’s Way”
Timeless Success Secrets
December 30, 2025
Most people think they’re doing fine financially because they earn money. But the truth is — it’s not about how much you earn. It’s about where your money goes after you earn it.
Your financial statement is the mirror of your money habits — and it never lies.
The Hidden Message in Your Financial Statement
Robert Kiyosaki simplifies what schools and accountants often complicate.
He says: “Don’t just look at numbers — follow the money.”
Traditional financial statements tell you what you have.
Kiyosaki’s version tells you why you’re either getting richer or poorer.
It all comes down to one question:
Is money flowing into your pocket or out of it?
When you understand this, your financial statement becomes your personal roadmap — showing exactly which habits, assets, or debts are making you rich or keeping you broke.
In Rich Dad Poor Dad, Robert Kiyosaki explains that the ability to understand a financial statement is the core skill behind financial literacy and wealth creation. He describes it as a personal financial “report card” because it objectively reflects your financial behavior and decisions, no matter what you believe or claim. This is why learning to read a financial statement is essential.
This is the basic Financial statement:
Note that this is not a traditional financial statement. It is the exact financial statement that Rich Dad used to teach Robert Kiyosaki.
A complete financial statement is made up of two parts: the income statement and the balance sheet. Together, they reveal the full and honest picture of what is happening financially.
For Robert Kiyosaki, a financial statement is not a complicated accounting record. Rather, it is a clear and effective tool that reveals the reality of your financial situation and forms the basis of true financial education.
His financial statement is split into two main parts and four categories:
Income Statement:
Income: Money coming in.
Expenses: Money going out.
Balance Sheet:
Assets: Things that put money ‘in‘ your pocket.
Liabilities: Things that take money ‘out‘ of your pocket.
The key to his entire philosophy lies in how these four parts interact, which is defined by cash flow. The relationship between the two statements (the Income statement and Balance sheet) is very crucial to understand.
According to Kiyosaki, this financial statement uniquely demonstrates how money really flows. For instance, a primary residence—commonly labeled an “asset”—is classified as a “liability” in his model because it consistently costs money through mortgage payments, taxes, and maintenance. It visually shows whether someone is trapped in the “Rat Race” or progressing toward financial independence.
The arrow in the diagram illustrates the house functioning as a liability by pointing to the income statement. This approach differs from traditional accounting, which does not use the income statement to decide whether something is an asset or a liability.
The Traditional Accounting method says:
Asset: An Asset is something that you won. For example, your house.
Liability: A liability is something that you owe. For example, the mortgage payment on your house.
Kiyosaki ignores traditional definitions. His definitions are based purely on the direction of cash flow.
Asset: "Puts money IN your pocket."
Liability: "Takes money OUT of your pocket."
By this definition:
Your job is not an asset. It creates income, but you don't own it.
Your primary home is a liability because it takes money out of your pocket every month for the mortgage, taxes, insurance, and upkeep.
A rental property that generates more in rent than its mortgage and expenses is an asset.
A car you own is a liability because it costs you money in payments, gas, and insurance.
The Cashflow Pattern of an “Asset“:
Keep in mind that assets are things that generate cash flow into your pocket. Properties that consistently produce income are assets, but once they begin to require ongoing out-of-pocket payments, they become liabilities.
For example, you bought a house where you have to pay $1,000 (mortgage and other expenses) for the house expense. If the rental income you receive is $1,500 each month, then the net rental income is $500.
Rental income - Expenses = Net rental income (Net rental income is what you have left after everything is paid).
$1,500 - $1,000 = $500.
As you have an income, it is an asset.
Real-life examples of Assets:
(Cash Flow is Positive)
Example 1: A Rental Property
You buy a small condo to rent out.
Income: (Rent from tenant) ......................... +$1,200 / month
Expenses: (Mortgage + Taxes + Insurance) ... -$950 / month
Expenses: (Repairs + Vacancy Fund) .......... -$100 / month
Total Monthly Cash Flow: +$150
Inspired by Robert Kiyosaki
Conclusion: Because this house puts $150 in your pocket every month, it is an asset.
Example 2: Dividend-Paying Stocks
You buy $10,000 worth of stock in a large, stable company (like a utility or bank).
Income: (Quarterly Dividend Payment) ........... +$120 / quarter
Expenses: (Fees to hold the stock) ................ -$0 / quarter
Total Quarterly Cash Flow: +$120
Inspired by Robert Kiyosaki
Conclusion: Because these stocks pay you money just for owning them, they are an asset.
Example 3: A Vending Machine
You buy a vending machine and place it in a local office.
Income: (Total sales) ........................................ +$600 / month
Expenses: (Cost of snacks, drinks) .............. -$200 / month
Expenses: (Location fee + Maintenance) ........ -$50 / month
Total Monthly Cash Flow: +$350
Inspired by Robert Kiyosaki
Conclusion: Because this simple business generates positive income without you having to be there, it is an asset.
The Cashflow Pattern of a Liability:
Inspired by Robert Kiyosaki
Liabilities, by definition, remove money from your pocket. For example, a business that fails to generate profit and requires you to personally cover employee wages is a liability. Only when a business covers its expenses and provides profit does it qualify as an asset—meaning not all businesses are automatically assets.
Let’s take the example of the house again.
If the Expense of the house is $1,000, the Rental income is $900, you will have a net rental income of $900-$1,000 = -$100. Here, you donot have any income, and to cover the expenses, you have to put money ($100) from your own pocket to pay for the expenses and you donot have any income. That is why it is a liability.
Real-life examples of Liabilities:
(Cash Flow is Negative)
Example 1: Your Own House (The one you live in)
This is Kiyosaki's most famous example. You buy a home to live in.
Income: (From the house) ............................. $0 / month
Expenses: (Mortgage payment) ...................... -$1,500 / month
Expenses: (Property Taxes + Insurance) ........ -$400 / month
Expenses: (Utilities + Upkeep) ......................... -$300 / month
Total Monthly Cash Flow: -$2,200
Inspired by Robert Kiyosaki
Conclusion: Because your primary home takes $2,200 out of your pocket every month, it is a liability. (Note: This is strictly by Kiyosaki's cash flow definition, not a traditional accounting one.)
Example 2: A Car on Loan
You buy a new car for your personal use.
Income: (From the car) ................................... $0 / month
Expenses: (Car payment) .................................. -$450 / month
Expenses: (Insurance + Gas + Maintenance) ... -$250 / month
Total Monthly Cash Flow: -$700
Inspired by Robert Kiyosaki
Conclusion: The car is a liability because it costs you $700 every month.
Example 3: Credit Card Debt
You have a remaining balance on your credit card from past purchases.
Income: ............................................................. $0 / month
Expenses: (Minimum Payment + Interest) ..... -$120 / month
Total Monthly Cash Flow: -$120
Inspired by Robert Kiyosaki
Conclusion: This is a pure liability that drains your income.
The key insight is that the same item can be either one.
A house you rent out for a profit is an Asset.
A house you live in is a Liability.
Key: The direction the cash flows tells you the entire picture, whether it is an Asset or a Liability. If the arrow flows from Assets to Income, then it is an asset.
Whereas if the arrow flows from liabilities to Expenses, then it will be a liability.
He believes most people face financial difficulties because they were never taught how to read a financial statement. As a result, they lack financial literacy and often confuse liabilities for assets, which keeps them stuck in debt.
🏁 Conclusion:
Your financial statement is not just a report — it’s your financial X-ray.
It reveals the truth about your wealth, your spending, and your mindset.
If most of your money flows into liabilities (cars, homes, loans), your statement tells a story of dependence.
If your income flows into assets (investments, businesses, rentals), your statement tells a story of freedom.
💡 The challenge isn’t to make more money — it’s to change the direction of your cash flow.
Key Lessons:
Cash Flow Defines Wealth:
Being “rich” is about the flow, not the total. If money moves toward you, you’re building assets. If it constantly leaves you, you’re building liabilities.Redefine “Assets” and “Liabilities”:
Don’t use the accountant’s version — use Kiyosaki’s. Ask, “Does this put money in my pocket?”Your Home Isn’t Always an Asset:
Unless it generates income, it drains money monthly — making it a liability in disguise.A True Asset Works for You:
Rental property, dividend stocks, or businesses that earn even when you don’t — those are assets in Kiyosaki’s world.Track, Don’t Guess:
The financially free know their numbers. You can’t control what you don’t measure.
⚠️ Disclaimer:
This content is for educational purposes only. It is not financial advice or a substitute for professional consultation. Every financial decision should be based on your personal circumstances and professional guidance.
💬 Action Guide:
Take a blank sheet.
Draw two columns: Assets and Liabilities.
List everything you own and owe.
Then, for each item, ask:
“Does this put money IN my pocket or take it OUT?”
You’ll instantly see whether your financial statement is helping you grow — or keeping you stuck. (In this manner, you will have applied what you have learnt.)
The Rich constantly educate themselves on matters of money.
📚 Book (Rich Dad’s Guide to Investing):
In Rich Dad’s Guide to Investing, Robert Kiyosaki explains why so many hard-working people still struggle financially — they never learn the difference between assets and liabilities.
This book doesn’t teach you how to get rich overnight — it teaches you how to think like the rich every day.
If you’ve ever felt stuck in the cycle of “earn → spend → repeat,” this is the book that shows you how to break free.
Bonus:
What the bankers donot tell you:
Click here to download.
To read more on:
How to Identify a Defined Benefit vs. Defined Contribution Pension Plan (Beginners’ Guide):
Teach Kids to Think Like Entrepreneurs, Not Employees:
Why Most People Struggle Financially:
The Secret Advantage of the Rich: Changing the Tax Game:
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