Page 80 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

When you look back at history, it is easy to see the rules of money changing
in the U.S. and the world. You already know why saving money is for the

financially naïve. This change took place in 1971.
In 1943, the U.S. government, desperate for money to fight World War
II, passed a law that allowed the government to take money out of workers’
paychecks, before the worker got paid. In other words, the government got

paid before the worker got paid. Today in America, if you have a job, you
have no protection against taxes. You do not need a CPA because a CPA can
do little to protect your money. But if you own a business or are an investor,
there are many loopholes in the government net you can swim through. I

will go into some of those loopholes in a later chapter.
As you know, in 1974, workers needed to become investors, saving for
their retirement. This gave rise to the 401(k). The problem with a 401(k) is
that the government plugged this loophole for workers too. Let me explain.

When a person works for money, his or her income is taxed as earned
income, the most highly taxed income. When a worker withdraws money
from his or her 401(k) plan, that income comes out as, you guessed it,
earned income. Guess what interest from savings is taxed at? Once again:

earned income.
This means a person who works hard, saves money, gets out of debt, and
saves for retirement in a 401(k) plan is working for the most highly taxed
income—earned income. This is not financially intelligent. People

following these rules are having their pockets picked clean by predators
standing behind them, and demonstrate a low financial intelligence because
they give away a large percentage of their income.
A financially intelligent person does not want a big paycheck. A

financially educated person would rather be paid royalties or dividends
because taxes are lower on these types of income. A knowledgeable
investor at least knows enough to invest for portfolio or passive income.
It is important to note that tax laws are different for different people.

Make sure to seek the advice of qualified tax attorneys and tax accountants
before making financial decisions.
In 1913, the Federal Reserve Bank of the United States was formed. This
date is possibly the most important date in U.S. history, when the rules of

global money really began to change. This is the date people who work for