Robert T. Kiyosaki’s ‘Rich Dad Poor Dad’ was published in 1997. Robert Kiyosaki is well known for public speaking and his financial knowledge. Rich Dad Poor Dad is among the most popular and successful book series in the world. It has sold 27 million copies all over the globe and has been translated into 51 different languages. The popularity of the book suggests that it must be quite interesting.
What is the book all about?
The subtitle of the book is: what the rich teach their children about money. The book is exactly all about this. It has been divided into 6 lessons about money that we need to learn in order to become rich. Read Journal Review – Rich Dad Poor Dad Review to know more about the truth of this book by Robert T. Kiyosaki.
The book starts with the insights of Kiyosaki’s childhood when he and his best friend, Mike, wanted to learn how to become rich. Kiyosaki observed the differences between his rich dad (Mike’s dad) and his poor dad (his own dad).
Poor Dad who is Kiyosaki’s biological father had a Ph.D. but was struggling financially. He believes in pursuing a formal education, getting into a high paying company and working until retirement. In his view money is the root cause of all the problems.
Rich Dad who is his best friend’s father believes in attaining financial literacy through experience and self-learning. He was a college dropout and dishonors the need for formal education and believes in a non-linear, smart and efficient way to make money. He says that the school doesn’t teach or train us on the topic of managing money to improve our lives.
If you spend just 30 minutes per day reviewing your finances and invest in becoming more financially literate, you can improve your condition whatsoever it may be. In rich dad’s view money is a tool that magnifies who you are. It helps you buy back time and improve your life.
Kiyosaki’s rich dad taught him the six lessons about money with the help of an exciting story. The book tells you how to become rich by using passive income instead of working 9 to 5. It talks about how to start investing.
Few Noteworthy Points:
The book states about the never-ending greed of humans. As our income increases, we start spending more. This leads to lifestyle inflation and we end up without any assets.
According to rich dad, you end up
1) off-setting income with expenses (especially the poor) or
2) build up your liabilities (the middle class increases their debt to buy things which make them happy). It’s a vicious paycheck to paycheck cycle which never ends and we want more and more. And people don’t understand that they can’t sustain this inflated lifestyle if they’re working hard and not smart for money. They are trapped in the ‘rat race’.
Your home is not an asset but a liability
The book has redefined the term ‘asset’. An asset is something that generates income and cash flow. So your house can’t be considered an asset if it carries a mortgage and doesn’t generate any income. Similar is the case with your financed vehicle. You’re borrowing only to consume.
1). For rich, assets are their income and for others, their profession is.
2). First generate enough cash flow from your assets to cover your expenses, and then spend money. Spend on luxuries at last, not first.
3). Reinvest excess cash flow into other assets.
4). Aim for more assets and not more income.
5). Cut down your expenses and reduce your liabilities.
6). Create a corporation to protect assets and reduce tax expenses.
7). If you invest in increasing knowledge, it will pay the best interest. Try to learn about accounting, investing, markets, law, sales, marketing, leadership, and writing, speaking, and negotiating.
8). Work to learn and don’t just work to earn.
9). First, learn about investing only then buy investments.
10). You are what you study so choose your study materials very carefully. Follow people who are the best in their field.
11). If you want to win you should be ready to lose. Playing not to lose money means you will never be able to make money.
12). Failures are the inspiration for winners and defeat for losers. If something didn’t go the way you planned, try a different approach and move on.
13). Control your emotions. Don’t let fear and other’s opinion dictate your actions.
14). Sellers mostly ask too much. It’s rare that asking price will be lower than the worth of something.
15). Keep people smarter than you and pay them well.
16). First, pay yourself and then take care of your bills. Each month invest a certain amount into income generating assets. The crux is that if you feel pressure you’ll probably look for new sources of income.
17). The purpose of earning more passive income should be clear in your mind.
18). Listen more talk less. Ask questions and absorb new ideas.
19). Don’t follow the crowd and don’t try to time the market. Profits are when you buy not sell.
The book doesn’t show a clear path towards the end goal and misses the practical steps. The last chapter gives a few steps to follow but they aren’t clear. Despite that, it is one of the best books to read if you want to be rich. The approach is simple with a pleasant story which helps you think like a rich person.