Blog | Commodities, Entrepreneurship

HENRY’s Message

the online game that increases your financial iq - play now

I read The Wall Street Journal the other day and came across a sad but refreshingly blunt editorial entitled, “A Message From ‘Henry’”. It’s written by Mike Donahue, a financial advisor from La Jolla, California. He’s a self-described HENRY—High Earner, Not Rich Yet. I wrote about HENRYs a couple weeks ago on this blog in a post entitled, “Are You Sure You Want to be ‘Rich’?

In his editorial, he gives voice to the frustrations of HENRYs:

“I'm in the 32% federal and 10% state income tax brackets. I pay a 1.2% property tax on very expensive California real estate. I am subject to the Alternative Minimum Tax. I am self-employed and subject to a 15% payroll tax on the first $100,000 in income and an 8.75% state sales tax. If I have a gain from investing, I pay a minimum of 15% federal and 10% state tax but can only write off $3,000 per year if I lose. And now the government wants me to pay more?”

The answer is of course, yes. The government does want him to pay more. In fact, even if they didn’t want him to pay more, they have no choice.

As I wrote about in Conspiracy of the Rich: The 8 New Rules of Money, the only way a government can pay for massive debt is either through inflation or through taxes. Both are wealth stealing forces that destroy the middle class and widen the gap between the ultra rich and the poor.

He goes on to lament: “My patience and pocketbook are reaching the breaking point. I am not for equal outcomes regardless of effort. I'm tired of being the mule. Maybe I will quit and live on the dole for awhile. I probably even have enough health issues to join the one in seven adults categorized as disabled. I've been poor and I'm not afraid to go back.”

No escape

I feel for Mike Donahue. No doubt he is a hard-working man, as he says in the editorial. I’m sure he is kind and generous as well. But he has no escape from taxes. The harder he works, and the more he earns, the more the government takes away.


Because he’s playing by the old rules of money: Go to school, get a good job, work hard, save your money, buy a house, and invest in a diversified portfolio of stocks, bonds, and mutual funds.

And because he’s self-employed as a financial advisor, his income is taxed at the highest rates.

He can complain about taxes, but he can’t escape them—if he continues to play by the old rules.

The escape plan

In order for Mike, and for millions of HENRYs like him, to escape the wealth stealing force of taxes he must start playing by the new rules of money. It’s pointless to fight the system or complain about how it’s unfair. It is unfair, and it will stay that way. The reality is that the Fed has printed more money in the last decade than in all the previous decades combined. Our debts are bigger than they’ve ever been. And the coming wave of retiring baby boomers will not only crash the stock market when they draw off their 401(k)’s but will also overburden the US government, which promised baby boomers Social Security and Medicare benefits it doesn’t have money to pay for.

The answer will be more and more debt. The only way to pay for that debt will be taxes. The system will continue to be “unfair”. The only way to beat the system is to play by the rules of the rich who created it—the new rules of money.

Get on the right side

In my book CASHFLOW Quadrant: Rich Dad’s Guide to Financial Freedom, I talk about the four types of income earners—employeess (E), self-employed (S), big business owners (B), and investors (I). The Es and Ss are on the left side of the CASHFLOW Quadrant, and the Bs and Is are on the right side. Those on the left side pay the most in taxes and are destroyed by inflation, debt, and retirement costs. Those on the right side are able to use taxes, inflation, debt, and retirement to become richer by using their financial intelligence.

For instance, as a real estate investor, I can purchase properties with money from the bank; use my investment properties to create passive income, which is the lowest taxed income; eliminate most if not all my taxes through depreciation and expenses; and, after using my financial intelligence to increase the value of the property by improving the operations, get all my money back tax-free by refinancing the property.

Like Mike, I work hard to find good investments and to build my company. The difference is that I’m not playing by the old rules of money. As a result, I pay little to nothing in taxes and make more money.

The system is stacked in favor of business owners and investors. It doesn’t do any good to complain about it. Sooner or later you have to recognize reality and use it to your advantage. The only way to do that is by increasing your financial intelligence.

I created the Rich Dad Company to help people just like Mike. Our mission is to elevate the financial well being of humanity. I don’t want to see you or anyone else suffer financially because of an unfair system that steals your wealth through taxes, inflation, debt, and retirement costs. I want to see you prosper and escape the rat race. The key is financial education.

If you want to escape the rat race, I encourage you to attend a seminar or read a book, network with like-minded people who want to also escape the rat race, and start playing by the new rules of money.

Don’t expect the government to save you. Save yourself by educating yourself.

Original publish date: June 07, 2010

Recent Posts

The Virtue of High Expenses and Low Income
Personal Finance

The Virtue of High Expenses and Low Income

Ever wondered if money that goes out of your expense column could actually return into your income column?

Read the full post
Understanding the History of Money is The Key to Being Rich
Personal Finance

Understanding the History of Money is The Key to Being Rich

Leveraging information to create knowledge that makes you rich.

Read the full post
Building a Successful Business

Beyond the Idea: Building a Successful Business in Today's Competitive Market

Find your purpose, give it shape through the B-I Triangle, and learn as much as you can along the way. In this way, you can be both successful and happy.

Read the full post