Five things I’ve learned from reading Rich Dad Poor Dad by Robert Kiyosaki
Reading Rich Dad Poor Dad has changed my life and has essentially kick-started my efforts towards building a foundation in financial education. Before reading this book I was on auto-pilot with my finances, simply saving what I can into retirement and enduring the rat race like everyone else. This book helped me change my mindset to focus on how to make money work for me instead of me working for money. To not simply do the things the majority does but to be the minority and learn to look for opportunities and act upon them.
This book provides a high level strategic foundation to encourage readers to keep learning more about their financial education. It does not provide tactical level insight on every financial situation, which isn’t the goal of the book. I’ve summarized a few topics from the book that have changed my perspective on my finances and hope it can help others to realize their path to financial education.
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Assets vs Liabilities
Assets put money in your pocket while liabilities take money out. Assets can be considered rental property income, dividend stocks, interest from your savings account/Certificate of Deposits. These are all items where an asset you own is generating money for you right now, not tomorrow but today.
A liability is something that will cost you money and will not generate income for you. These are most likely your car, your boat, and especially the house you live in. These are all liabilities that will cost you and not give you any money until you sell it, at which point it may not net you the amount you paid for it.
Know the difference between an asset and a liability and keep working to expand your assets column and limit your liability column at all costs. Work to grow your assets earlier in life so you can take advantage of that income in the future to support your lifestyle. Don’t ever expect to rely on your own income from your job to support you, keep diversifying your income streams.
Mind your own business, not your company’s
What business are you in? Do you have your own business you are working towards? Or are you simply using the majority of your time to mind your company’s business. Your company’s business is not your own, focus on making your own business. Whether that is buying rental properties, starting your own drop shipping store, to selling affiliate products via social media, figure out how you will start your own business and invest time understanding it.
The company only cares about how it’s own business will succeed, it is not looking out for your welfare. Don’t expect to put all your eggs in one basket and work for one company, working in a niche role that will not be marketable elsewhere. Instead learn what you can wherever you work and build up your transferable soft skills, which are much more valuable to you and to those you come into contact with.
Working harder is not smarter
Working more as an employee will make the business, government, and bankers rich. More work productivity means more wealth for the business owner. Larger income means higher income tax. Larger income also enables the purchase of bigger more expensive items, which may be taken as a loan making the banks rich.
Working more as an employee will make the business, government, and bankers rich, they will all enjoy a healthy cut from your income in some cases before you even pay yourself.
The sooner you realize the disadvantages of staying as an employee the better. Invest more of your time and energy to get out of the rat race and get multiple streams of income. Be smarter with how you are investing your time and energy and don’t keep trading your valuable time for money. Obtain investments that get you money without you having to do any work for it (real estate income, dividend stocks, etc…)
Opportunities are everywhere, make sure you are ready
Always be ready to take advantage of opportunities when they are available. Make sure you have time available to learn about these financial opportunities (read books, learn the new tax laws, do budgets and accounting) and sufficient cash to use towards investments. Opportunities will not stay so for long and you must be in a position to take advantage of them.
This means don’t be stuck in a job that requires every hour of your day. Preferably have a job that is flexible with work from home and the freedom for you to complete your tasks within the time you allot. The sooner you finish your job tasking the sooner you have time to devote back to you and your family.
This also means do not be in bondage to debt. Debt is a ball and chain that prevents you from taking chances. Instead of investing in buying some dividend stocks that are on sale, since you have debt you are forced to spend some of your money towards paying it down. The more debt you have (expensive luxury cars, nice vacations, big houses) the less you can be flexible to spend your hard earned money to work for you.
Instead you are literally working for money because you need it to pay for your expensive liabilities.
Always pay yourself first, then pay your expenses
This doesn’t mean to ignore your bills but simply means paying yourself is more important than paying your bills. This does not mean paying yourself to buy that new phone or going to town every night. Paying yourself is the act of using some of the money you’ve earned and investing it towards assets. Those assets are yours and will keep making money for you, regardless of whether you are still employed or get fired. Get into the mindset of prioritizing to pay yourself first.
This creates a good habit to keep investing and forces you to think of how you can pay/limit your expenses going forward. You may begin to think how come your expenses are so high and the difficulties of paying them off after you’ve paid yourself and all the other expenses.
I hope the above summaries are helpful and can start you on your own financial education. Feel free to comment on what you’ve learned since reading Rich Dad Poor Dad.