Rich Dad Poor Dad is one of the first books I read about Personal Finance and the way wealth is created. If you are new to the world of finance you can start with this book. It teaches about all the basics of money as well as some life lessons which will be helpful in your life, some of the lines are literally stuck in my head, One of them is thinking and controlling your emotions not the other way around which is taking decisions emotionally (which by the way a lot of us do)
This book is written as a story from Robert’s perspective, So you won’t get bored. It will answer a lot of the financial dilemmas you may be having.
What If someday you decide to stop working, consider how much you can live on from your immediate savings. I merely asked you to define wealth, as income is not wealth.
Well here’s a man named Robert T. Kiyosaki, an American entrepreneur, businessman, writer, motivational speaker, and financial analyst who has gained prominence in recent years and has a net worth of $80 million. Do you want to learn something new? He was not born in an affluent household; in fact, his family was typical like most working people; they lacked financial education and frequently struggled with money.
So, how did Robert get so wealthy today? Take a look at what he says in one of his finest books, Rich Dad, Poor Dad.
In April 1947, Robert T. Kiyosaki was born in Hawaii. Little Robert was 9 years old when he started attending the same public school that the wealthy people in town sent their children to; there were many children whose parents were bankers, company owners, and physicians. Robert realized that the rich kids would distance themselves from him since his family couldn’t buy the most up-to-date bicycle collection and other things for him. So one day, Robert questioned his father, who had a Ph.D. and had graduated from numerous institutions with honors, why they can’t afford them.
His true father is the one he refers to as “poor dad.” He wasn’t poor, but he was making good money, and even in the end, this man’s financial life took a turn for the worst. Now, young Robert had a buddy named Mike, and Mike’s father, whom he referred to as Rich Dad, began teaching his son and Robert how to become wealthy. Rich dad wasn’t very wealthy at the time, but he quickly rose to become one of Hawaii’s wealthiest men.
So, what did Rich Dad think? Robert explains in his book.
Rich dad ingrained several key strategic ideas in their children’s minds. I explain some of the Rich Dad Poor Dad teachings,
The most important lesson is to understand the difference between assets and liabilities. Once you understand that then the path of becoming wealthy becomes much easier. You will get a sense of clarity when dealing with your finances.
You must acquire assets. If you want to be wealthy, this is all you need to know. See, the rich gain assets, whilst the poor and middle classes acquire liabilities, which they sometimes mistake for assets. The most common source of financial difficulty is a lack of understanding of the distinction between an asset and a liability. An asset is something that helps you to earn money. Liability is something that drains your bank account.
For example, consider a typical person’s cash flow pattern. They spend their money as soon as they get paid, even before they receive it(By using Credit cards). In other words, they continue to spend money on things that never bring in money (Liabilities). Let us examine the cash flow pattern of the wealthy. Rich individuals primarily invest in income-generating assets, such as businesses, stocks, bonds, mutual funds, income-generating real estate, royalties, notes, and anything else that generates money on a monthly basis. They also favor passive income over active revenue. By the way, active income is money that you get by working, whereas passive income is money that you make without having to work.
As previously said, poor dad was generating a modest amount of money from his profession, but his expenditures always seemed to outweigh his earnings, never enabling him to invest in an asset. As a result, his debts, such as mortgages and credit card debt, increased over time. and this is the fault of having expenses and liabilities is less than assets
And this is what suddenly landed poor dad in debt. Which his son has to bear after his death. Rich dad’s personal cash flow, on the other hand, reflects a life committed to investing and reducing debts, thus he had income that is more than costs since his assets were bigger than his liabilities. And his son inherited the assets.
This is essentially why the wealthy continue to amass wealth. Their assets provide more than enough revenue to meet their costs, with the remaining funds reinvested in the asset column. The assets column continues to expand, and therefore their income does as well. You can see that both fathers worked extremely hard, yet they had opposing attitudes and ways of thinking.
- “Study hard so you can find a decent firm to work for,” one father advises. The other father advises, “Study hard so you can locate a firm to purchase.”
- One father added, “The reason I am not wealthy is because of you kids.” whereas the other stated, “The reason I must be wealthy is that I have you, children.”
- One person stated, “When it comes to money, play it safe and avoid danger.” One said, “Learn to Manage Risk,” the other replied, “I can’t afford that,” and the other said, “How can I afford that?”
Can you differentiate which father is a rich dad and which dad is poor? The One or the Other?
Despite the fact that both men had high regard for education and learning. They differed in financial mindset, and what they did was crucial to learning. Robert learned from his wealthy father that the reality about the ordinary public is that their lives are ruled by two emotions: fear and greed. This keeps people in a cycle of getting up, going to work, and paying debts.
Fear has been this trap of working, earning money working, and hoping that the fear of not having money will go away. Instead of confronting the fear, we react emotionally rather than rationally. The other motion, which I dubbed Greed, is also the second reason why people labor for a living. They want the money that they believe can bring happiness. However, the happiness that money gives is often temporary, and soon this more money for more joy will bring displeasure.
You can see how the same fear and desire motivates a lot of individuals to go to school in order to improve their chances of landing a high-paying job. But don’t be discouraged; education and employment are more essential, but they won’t help you deal with your anxiety. To overcome that fear, you must learn the power of money and stop being scared of it. Unfortunately, most schools do not teach this, and until you learn it for yourself, you will become a slave to money. Money illiteracy may generate so much greed and worry that it might lead you to life’s most dangerous trap of always working.
Rich dad said you must always learn to use your emotions to think, and never think with your emotions. Emotional thinking examples include: I need to get another job, I deserve a raise, and I want my job because it is secure. Rather than questioning what are you missing in life for this pursuit of money or maybe if money didn’t matter what would I do to enjoy my life?
This is our reality; for the majority of people, your profession is your source of money. To the wealthy, your most valuable asset is your money. Use this lesson in your daily life. If I asked you to define riches, how long would you be able to live if you stop your current job? So that one day you no longer work for money; rather, money works for you.
The goal of making money should always be to live a life more comfortable but don’t get lost in the process of making money so as to forget living your life and enjoying it.