Infinite Banking

In Robert Kiyosaki’s book, Rich Dad, Poor Dad he talks about how rich people put their money to work while poor people work for their money. His definition of rich and poor are not predicated on income or material possessions, but on how you view money.

A household making a six-figure income living in a spectacular house and driving BMWs may be defined as poor by Kiyosaki’s definition while a household making the same income living in an average house and driving Honda Civics but investing their discretionary income would be defined as rich. Why? Because the household spending every dollar they earn on possessions and experiences is caught in a perpetual cycle where they must trade their time for money. The household focused on prudent investing is putting their money to work. Over time, the money at work will allow the second household to spend their time however they want while their invested money provides them with the lifestyle they want to live (within reason, of course).

Putting your money to work on your behalf is one of the foundational concepts of building wealth. Save your money, buy a rental property, and now your money that was sitting in the bank not making you anything is now generating 10% annually.

The concept of infinite banking takes this concept even further.