I’m sure most of you might have heard of the book ‘Rich Dad Poor Dad’ by Robert T. Kiyosaki. However, for those who haven’t, I would like to describe it in short as “A book which will make you THINK Rich”.
Have you ever looked at a guy with a Mercedes and wondered out loud: “OMG! How can this person be so rich to afford that?!” Well, this book answers this question with the utmost ease and clarity.
First published in the year 1997, it has earned its name as ‘The number 1 best personal finance book of all time’. It is indeed a book which will not necessarily make you thrifty, but will most definitely help curb the shopaholic in you! If you are potentially addicted to shopping and wasteful spending but at the same time have a desperate need to save up for the future, then this book is just for you!
What I like the most about this book is its simplicity. The story-like feel that this book gave me is what made me enjoy it the most. After reading this book, I actually came to realize that seemingly hard topics like Finance and Accounts can be easily understood by the lessons taught in this book, even by a layman who has never stepped into Business School!
Lesson learned: You don’t really have to be a business student to understand Finance!
As Robert says:
“The main reason people struggle financially is because they have spent years in school but learned nothing about money. The result is that people learn to work for money…but never learn to have money work for them.”
Here, I will be listing out the 10 tips from the book which will help boost your Financial Knowledge:-
- Understanding the difference between an ‘Asset’ and a ‘Liability’
- Developing a ‘Financial IQ’ or a ‘Financial Mindset ‘
- Understanding the difference between ‘Profession’ and ‘Business’
- Letting go of the ‘Robin Hood Theory of Economics’
- Following your passion and ‘Working to Learn’ instead of ‘Working to Earn’
- Facing ‘Procrastination’ and the fear of becoming Poor
- Having an Optimistic outlook towards Life
- Learning to Associate with the ‘Right People’
- Keeping ‘Low-key’ and not getting caught up in the ‘Rat Race’
- Sharing your Knowledge and not keeping it to yourself
Listed down below are brief summaries and the lessons learned from each of these 10 tips:-
Understanding the difference between an ‘Asset’ and a ‘Liability’
In simple terms an ‘Asset’ can fill your wallet whereas a ‘Liability’ can slowly or sometimes drastically empty your wallet. An average individual may fall into a so called ‘Family cycle’ wherein they decide to settle down, buy a house, a car, clothes and other essentials which isn’t really a bad thing. Buying a house is in fact an Asset. However, an asset in itself might end up as a liability, if not looked into carefully. Owning a house may incur a property tax which is a major liability.
After a year or two the couple bears a child. Expenses increase and they find themselves clutching a credit card, soon after which credit card bills start piling up. Even before they know it, they have cleared up the credit card bills but mortgaged their house instead! Such instances often incur huge losses which are undoubtedly irreversible. From a Poor Dad’s perspective, a house might be an asset, but from a Rich Dad’s perspective, a house might be an asset only if it was invested upon much earlier in life.
Lesson Learned: ‘Avoid credit cards’ and ‘Invest early’ for your Asset to remain an Asset and not become a liability
Developing a ‘Financial IQ’ or a ‘Financial Mindset’
Being Homo sapiens, ‘Mind’ is the greatest asset we all have. So, ‘Think’ before investing. Take risks and don’t miss out on opportunities. However, make sure that these risks are taken up at the ‘right’ time. In other words, don’t let these risks put you in the palms of a major liability.
As cleverly put forth by Robert:
“Often in the real world, it’s not the smart who get ahead, but the bold”
For example, a ‘smart’ individual may save up a few bucks per month and become a multimillionaire within a span of 40 years, even without making any active investments. However, his ‘not so smart’ but ‘bold’ counterpart may become a multibillionaire in the exact same span of 40 years, only because he never missed out on a single opportunity that came his way! Poor Dad might decide to stick to his comfort zone while Rich Dad may invest his time and energy into stepping out of his comfort zone.
Lesson Learned: Invest your time wisely, harness the power of your mind and make a conscious effort to step out of the loophole.
Courtesy: startup.com & Dribble
Most people confuse their profession to be their business. A child goes to school, college and gets a degree in order to develop his/her scholastic skills so that he/she can later go on to become a doctor, engineer, mechanic and so on. For example, an engineer working in a hi-tech MNC may consider his profession to be his business. So when asked: “What is your business?” he may reply by saying “I’m an Engineer and I work here”. This however, is his ‘Profession’ and not his ‘Business’. However, people who do understand the difference between these terms may think that you cannot do a ‘Business’ if you are part of a ‘Profession’.
As Robert Kiyosaki puts it:
“Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities”
What is the first thing which comes to your mind when you think of ‘McDonald’s’? Almost everyone might say: “It is a fast food company which sells us the yummiest burgers and nuggets”. Well, that’s just one way of putting it. In fact McDonald’s happens to be the largest single owner of real estate in the world! In this case, we can say that selling burgers is McDonald’s profession but real estate happens to be their business. In other words, a person who went on to buy a McDonald’s franchise was also buying their real estate under their brand name.
Lesson Learned: Redefine your mindset and take responsibility. Don’t let your stressful daytime job keep you from buying assets.
Letting go of the ‘Robin Hood Theory of Economics’
Since a very long time, Robin Hood and his merry men have been overly romanticized as great men who stole from the rich and gave to the poor. The most common mindset of society is to assume that the rich are crooks who get away with money while the poor and middle class are the ones do all the dirty work. Well, it is in fact this mindset which prevents them from becoming rich in the first place!
The biggest secret of the rich is their ability to form corporations. You may think of a corporation as a multistory glass building with over a million workers. However, it just happens to be a folder containing legal documents and a bunch of paper work carefully tucked away in the cupboard of an almirah. It may be surprising to know that those who run ‘Corporations’ incur a relatively lower income tax rate as compared individuals working for ‘Privately run’ or ‘Government run’ organizations.
Lesson Learned: Think out of the box. Financial knowledge is never something you learn at school. It is something which you need to learn yourself!
Following your passion and ‘Working to Learn’ instead of ‘Working to Earn’
Firstly, the secret to a happy and successful life comes from choosing a stream of study which resonates with your passion and sets both your heart and soul on fire! As the saying goes: “Passion fuels Purpose”. Finding your true passion is, in fact the most important ingredient of success. It is understood that it is virtually impossible for an individual to be 100% efficient at a job which he/she isn’t genuinely passionate about. Second on line is a burning desire to keep learning more and more. Knowledge is after all limitless. Finally, it is important to step outside the boundaries and explore a path which is unexplored by many.
As Robert Kiyosaki says:
“’You want to know a little about a lot’ was Rich Dad’s suggestion”
It hard to imagine that most people consider a well paying job with a high job security, opportunities for promotion and a comfortable number of days off to make them rich in the long run. This is obviously a misconception which most people fail to understand. For example, a ‘Talented Mechanic’ without an engineering degree could be earning much less when compared to an ‘Educated’ but ‘Not so Talented Mechanical Engineer’. This obviously doesn’t mean that the mechanic is not smart enough. It just means that: “He/She is just one skill away from great wealth”.
Lesson Learned: Have a deep craving and a yearning to learn more than what you already know. Set aside your ego and start learning the small things. Small things lead to big things and these things could eventually propel you forward into the vast universe of Success.
Facing ‘Procrastination’ and the fear of becoming Poor
Procrastination (a.k.a Laziness) is an omnipresent attitude which exists in the life of both the rich and the poor. No matter how diligent a person might seem, he/she is not perfect. However, the degree of procrastination may vary from person to person. It is recognized to be more of a behavioral problem which arises from the individual thinking that he/she is not good enough. Hence, arises the fear of losing power, position and possession. This makes both ‘Procrastination’ and ‘the fear of becoming Poor’ more or less interrelated.
Robert’s wonderful line says it all:
“For most people, the reason they don’t win financially is because the pain of losing money is far greater than the joy of being rich”
This is one of the main reasons why lottery winners who manage to win a million pounds in a single day are unhappy despite their fortune. Some may end up spending the entire amount in a few weeks whereas others may become excessively thrifty over the fear of losing it all. And with such attitude, it may seem highly unlikely for either of them to remain rich for long. Even the rich tend to lose money. But they continue to remain rich only be learning lessons from their loss rather than falling into a full swing cycle of depression!
Lesson Learned: The best cure for laziness is greed. So will yourself to get up and do things that matter. Let your failure be your inspiration such that you transform your loss into a win. Keep your head up and stop mourning!
Having an Optimistic outlook towards Life
One of my favorite parts from the book is when Rich dad says “How can I afford it?” instead of saying “I can’t afford it”. Being an optimist is one of the major secrets of becoming not only ‘Rich’ and ‘Successful’ but also ‘Strong’ and ‘Happy’.
Here is my favorite quote from Robert:
“Rich dad believed that the words “I can’t afford it” shut down your brain.” How can I afford it?” opens up possibilities, excitement, and dreams.”
Lesson Learned: An optimistic “I can” attitude is all you need to fulfill your dreams.
Learning to Associate with the ‘Right People’
The type of friends you make is also a contributing factor towards shaping your future. As the saying goes: ‘Birds of a feather flock together’. It isn’t common though to run into people who share the same mindset as us. We may also have certain friends or acquaintances that may care for us but may not necessarily share the same level of Financial IQ as we do. However, that doesn’t mean we should start hating them!
Here is another great quote from Robert:
“Don’t listen to poor or frightened people. I have such friends, and while I love them dearly, they are the Chicken Littles of Life. To them, when it comes to money, especially investments, it’s always, “The sky is falling!” They can always tell you why something won’t work. The problem is that people listen to them. But people who blindly accept doom-and-gloom information are also Chicken Littles.”
Lesson Learned: Keep your mind open and refuse to get distracted by bad habits. It is always advisable to pick up the good qualities from people and learn from the bad.
Keeping ‘Low-key’ and not getting caught up in the ‘Rat Race’
Post getting rich, most people start turning into self obsessed, arrogant snobs who think of themselves as the ultimate ‘know it all’. ‘Arrogance’ coupled with ‘Narcissism’ acts as venom for the rich and pulls them down as quickly as they were pulled up. As a result of their partial knowledge, they may end up giving wrong advices to people who actually rely on them. ‘Rat Race’ signifies competition. While it is great to be ambitious, it is rather advisable to compete with oneself rather than competing with another.
Lesson Learned: Learn to be a simple individual with a humble heart. Step out of the bustle of competition and try educating yourself when you realize you are ignorant at something. Have gratitude!
Sharing your Knowledge and not keeping it to yourself
Last but not the least, it is important to share your Financial Knowledge with your peers, friends and even family! After all ‘Sharing is Caring’! You may have a ‘Rich Dad’ or a ‘Poor Dad’. But it is ultimately up to you to decide whose footsteps you want to follow.
As Rich Dad says:
“Believe in the principle of reciprocity, because when you fall short or in need of something, give what you want first and it will come back in buckets. This is true for money, a smile, love or friendship”
And we have finally reached the end! The book however, has a lot more to offer.
Here is the Amazon link to the book: