Book: Rich Dad Poor Dad.
Author: Robert T Kiyosaki.
Print: 2001
Pages: 240
One-sentence summary:
"The main reason people struggle with financial problems is that they spend so many years in school learning nothing about money and investing. Because of this, people learn to work to make money. But they don't get to work with money or make money with money."
Introduction:
A poor father has a diploma and a graduate, while another rich father is a high school dropout!
When a graduate's father dies, there are still many bills to pay. But another father, despite having little education, becomes one of the richest men on the island of Hawaii and passes on his rich empire, the business, to his son.
One sits idly by saying, "I can't buy or earn it," while the other thinks, "How can I get it?"
Here "poor father", and "Rich father" depends on their thinking power and business knowledge, not on their economic status. Both had money, but the rich dad was the one who took advantage of it!
Also, This book conveys the message, “Get out of the rat race or rat race of doing the same thing 365 days, create better opportunities, learn how to work with money or earn double, and don't be a slave to money.”
Some pearls of wisdom from the book Rich Dad, Poor Dad:
1. You are the reflection of your thoughts.
2. Employment is a temporary solution to a long-term problem.
3. Even if luck comes, the slave remains a slave!
4. Why work for promotion in another company when you can own the company?
5. Found a divided path in the forest, I took the road less traveled, which made all the difference.
Now let's look at individual lessons in the book.
Lesson No. 1: Rich people don't work for money.
Here's how boy Kiyosaki created his first company at the age of 9.
Mike is a childhood friend of the author. Kiyosaki referred to his father as his "rich dad".
At the age of 9, Kiyosaki went to him with his friend Mike to learn how to make money.
Then Mike's father told them to clean one of his shops, "I will not teach with pen, paper, and board, instead I will give practical lessons to both of you." And he fixed a salary of ten cents (American dollars) per week.
After three weeks, Kiyosaki couldn't do it for such a low salary and started thinking about quitting. And told Mike's father about it.
Rich Dad's first lesson about money was this: "Some people quit their jobs because the pay is low, but some think they have the opportunity to learn something new."Then he asked both of them to work for free without any salary. The motive behind this was " to find some other fair way of earning money while working for free". Thus, these friends who were doing unpaid work, one day saw some comic books lying around the shop. This was enough to find a way to earn money. The boys collected the comics that were lying around and opened a small library and set a fee for it. And Mike's sister was assigned to look after this library at a salary of one dollar a week. The business was successful and brought in about $9.50 a week. Thus these friends began his first business.
Lesson No. 2: Why Teach Financial Literacy?
You are never taught to be rich in school. The gap between the rich and the poor is increasing due to such an educational system, not because of a lack of opportunities!
Its primary objective is to teach you to enter this professional environment and make you a better employee. But, not as a good employer. This is the root cause of all differences. Because of this, the knowledge of personal financial management that can generate wealth is not taught in schools.
It is up to you to acquire proper knowledge and take full responsibility for earning assets.
It's not the problem, “How to know how much you are earning?” but knowing how much you save!
The first step out of the rat race:
Understand the difference between an asset and a liability.
An asset provides income to its owner, while a liability creates an expense.
Some examples:
The poor struggle every day to manage their money, the middle class buys liabilities thinking they are assets and only the rich buy real assets to secure their future.
The economic problems of the middle class are permanent and persistent. Their source of income is their salary. And as the salary increases, so does the tax they pay to the government.
Types of Assets:
Why is your home, not your property?
If your house is built on a loan, you will work your whole life to repay the mortgage taken. The maintenance cost of that house is also high. Similarly, you have to pay property tax.
If the real estate market goes down or you buy a house when it is overpriced, you may suffer a loss.
You don't earn a regular monthly income here; You repay your monthly credit to the bank. So the real owner of your house until the loan is paid is the bank! So before taking a home loan you should find enough income for it.
Real Assets:
1. You get monthly rental income from the apartment or room you rent.
2. A business in which you are a shareholder, although you do not control it.
Key steps to getting out of the rat race:
1. Understand the difference between an asset and a liability.
2. Buy fixed income-generating properties.
3. Minimize your debts and expenses.
Lesson number 3: Mind your own business!
Keep the current job, but always think about starting your own business.
Kiyosaki began his career by selling photocopier machines for the Xerox company, and using the proceeds, he invested in real estate.
In just 3 years, his investment returns exceeded his salary! Kiyosaki says that this is the only solution to get out of the rat race.
Don't spend all the income, have a nice portfolio of different assets. After earning enough money, get what you want out of it.
Lesson No. 4: History of Taxes and the Power of Corporations
England introduced an income tax in 1874. It was introduced in America in 1913. This scheme of getting contributions from the wealthy for the development of the country was gradually extended to all classes.
The rich have a great idea to avoid taxes. That is his company. Their company gives them many advantages. Here's how the wealthy owner can save tax. If the owner of the company earns and keeps what they need for expenses and pays taxes later, its employees have to pay taxes as soon as they earn and use the rest later.
Financial IQ:
You must have knowledge of accounting i.e. accounting and auditing. Talk to some experienced investors and gather relevant information. It is also better to listen to seminars on stock markets. Knowledge of the law of market, supply, and demand is essential.
Lesson No. 5: Money was invented by the rich.
The main thing needed for financial freedom is IQ and strong self-confidence! Similarly one needs to make some savings before investing. Time and opportunities should be used wisely.
See an example.
In the early 90s, the city of Phoenix's economy was at its lowest ebb. Homes bought for $100,000 were selling for $75,000. Kiyosaki himself bought it at a public auction for $20,000. When the economy recovered, he sold for $60,000 and made a good profit.
According to Rich Daddy, there are two types of investors.
1. Buyers of “Investment Packages”: Invest easily and clearly when you entrust your money to a real estate developer. They will act on your behalf.
2. Professional Investor: Rich dad encourages this move. You need to invest money without the help of any broker or middleman. The risk is high, but the reward is high.
Skills an investor should have:
1. Spotting an opportunity that no one else has spotted.
2. Raising funds for investment.
3. Working with smart people.
How to spot an opportunity that no one else is spotting?
First, identify the factors that contribute to the growth of the business.
Eg: McDonald's is not so successful because of its burgers. Instead, they used the locations to open a shop. Anyone can make burgers that taste the same. Each of their branches is located in densely populated areas of the city.
Finally, you should learn to take some risks and control your emotions and not worry about failure all the time. Retry is what gives you success, not the desire for instant success.
Lesson No. 6: Work to learn - don't work for money
This lesson goes on to tell the author's life experience. After college, Kiyosaki joined the Marine Corps. Along with running the army, he also learned business knowledge.
He learned to deal with rejection by becoming a top 5 salesman at Xerox. Later he built his own company.
The author also emphasizes mastering the different disciplines involved in managing money and becoming an expert in marketing, management, and communication. He also warned that school rank does not work here.
Rich Dad taught Robert and Mike the above. Mike expanded his father's business. Robert started his own products and business courses.
3 Essential Skills for Management:
Cash flow management, systems management, people management
5 Barriers to Financial Freedom:
1. Fear of failure.
2. Opinions and criticisms of people around you. They mostly don't want your prosperity. (Cynicism)
3. Laziness.
4. Your bad habits increase your expenses and ruin your health.
5. Arrogance about your understanding of money. Sometimes expert help is necessary.
Here are some steps to awaken your financial awareness:
1. Leave reality behind once in a while and have a little crazy dream.
2. Imagine what it would be like if you were financially independent.
3. Test your will every day.
4. Be careful while choosing your friends
5. Learn new lessons about finance every day.
6. When you get money, pay yourself first i.e. put it in savings. Minimize your expenses as much as possible. Invest your savings without wasting them.
7. Be generous with the salary of those who work for you, their hard work is the reason for your success.
8. Act like a venture capitalist. This helps you earn back your capital quickly.
9. Engage in new businesses. If enough income comes in, invest money in new business.
10. Find yourself a mentor.
11. Give a small portion of your earnings to someone else without wanting anything back and you will get back a hundredfold.
12. Action is your forever friend, don't wait to act.
To finalize your action plan and achieve financial freedom:
Frequently evaluate your work, and observe needs and wants. Search for new ideas. Meet the professionals in that field and clear your doubts.
If possible, train someone else about finance yourself, and buy courses, and podcasts available elsewhere.
Offer different offers, meet prospective customers, and gather feedback. Go to the surrounding areas, and observe the advertisements.
Think big, learn from history, and get advice from other great entrepreneurs.
Review:
Rich Dad Poor Dad by Robert Kiyosaki is a great book to get us started on financial management. This book proves that "not everyone is born rich". Similarly earning money does not require a specific occupation; But financial knowledge.
The book preaches that understanding is needed. All in all, this is an inspiring title based on a true story that shows that "hard work combined with luck can make a man reach any height".
In everyone's life, such ventures are more likely to fail than succeed. The author has not given much information about investing here, instead, he has given many statements and examples to encourage the readers. There are some tips on how to achieve financial independence, but nowhere does the author provide practical training. However, I think this is a very readable, beautiful book with simple language.
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