Robert Kiyosaki’s Strategy for Getting Out of Debt

This article is an excerpt from the Shortform book guide to "Rich Dad's Cashflow Quadrant" by Robert T. Kiyosaki. Shortform has the world's best summaries and analyses of books you should be reading.

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Do you want to start investing and building your wealth? Can you invest while still in debt?

According to Robert Kiyosaki, debt is the biggest obstacle to wealth. Very simply, you need money to be able to invest, and if you are in debt, all the money goes to its repayment.

Keep reading to learn about Kiyosaki’s strategy for getting out of debt.

How to Get Out of Debt

If you’re in significant debt, especially with high interest, it makes sense to reduce or pay off all your debt before you start investing. According to Robert Kiyosaki, debt management is an integral financial skill and is an important part of cashflow management. 

Kiyosaki recommends this strategy for getting out of debt: 

1. If you have credit card debt, use only one or two cards and pay off all new charges each month. 

2. Earn an extra $150-$250 per month and use it to pay off one card. (Kiyosaki says if you can’t earn an extra $150 per month, the B and I categories are probably not for you.) Pay the minimum balance on all your other cards. 

(Shortform note: Sethi notes that because your monthly minimum payment is a proportion of the balance, as you pay more and the balance decreases, so does your payment. If you keep making the same flat payment for the duration of your debt, you’ll pay it off faster and save money on interest.) 

3. Once you pay off one card in full, move on to the others. Continue until all cards are paid. 

4. Once all your credit cards are paid off, or if you don’t have credit card debt, use the same strategy with other debt, like your mortgage, car payments, or student loans. 

5. Once you’re sufficiently out of debt, use the money you were putting towards your debt toward your investments. 

If you don’t have debt, just put that extra $150-$250 per month toward your investments. 

Another Strategy for Paying Off Credit Card Debt

Sethi offers an alternative (and more comprehensive) strategy for getting out of debt:

  1. Add up your total debt. Make sure you have a big-picture view of everything you owe.
  2. Note the APR and the minimum payment for each debt. Decide whether to pay the card with the highest APR, which will save you the most money because you’ll save on interest, or the card with the lowest balance, to bolster your confidence by paying off a card quickest. 
  3. Negotiate a better APR. Your credit card company wants to keep your business. Increase your monthly payments by diverting money from another spending category. 
Robert Kiyosaki’s Strategy for Getting Out of Debt

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Darya Sinusoid

Darya’s love for reading started with fantasy novels (The LOTR trilogy is still her all-time-favorite). Growing up, however, she found herself transitioning to non-fiction, psychological, and self-help books. She has a degree in Psychology and a deep passion for the subject. She likes reading research-informed books that distill the workings of the human brain/mind/consciousness and thinking of ways to apply the insights to her own life. Some of her favorites include Thinking, Fast and Slow, How We Decide, and The Wisdom of the Enneagram.

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