The book is a brilliant book about how money works. Robert Kiyosaki gives the story of how he had the privilege of learning from two different dads, rich Dad, and poor Dad. He got different perspectives about money from them both but decided instead of rejecting one outrightly; he would compare both teachings from different dads and choose the best.
He learned about how money works from his rich dad and gave lessons on financial education.
This book opens different perspectives on how the rich and poor view and handle money. He shared lessons about money and how it works.
Lesson 1: The rich do not work for money rather, they make money work for them.
The poor and middle class would prefer to spend the best of their lives working for money by taking jobs rather than have money work for them by building a business or investing wisely. Life pushes us in a way or the other, but the wise learn from the lessons and go for what they want. When things are not working as expected, it is life waking us up to learn from the experience. While some learn and move, some would react to their boss, spouse, or job as the cause. You need guts to stop life from pushing you. Taking risks and going for that which you truly desire.
The rich learn how money works to make money tirelessly work for them. True learning takes energy, passion, and a burning desire. Anger is a big part of that formula, for passion is anger and love combined. In money issues, most people allow fear to direct them by playing it safe and settling for less. People exploit themselves because of their fears. Learning how to make money work for you is a lifetime journey. The poor and the middle class always think more money would solve their money problem, which rarely does. It’s their lack of financial education that is the real problem.
Every person has a weak and needy part of their soul that can be bought and also has a part of their soul that is resilient, which can never be bought. Job security is an illusion. Job is a short-term solution to a long-term problem. Fear and greed emotions control people’s lives. First, the fear of being without money motivates us to work hard, and then once we get that paycheck, greed or desire, starts us thinking about all the wonderful things money can buy. It then sets the pattern which is get up, gets to work, pay bills. The principal cause of financial struggle is fear and ignorance.
Learn to use your emotions to think, not think with your emotions. Be truthful about your emotions and use your mind and your emotion to your favour, not against yourself. Instead of working for money, use your brain to think up ways of making money work to escape the trap of always working for money. Use your brain and mind to show you ways you can make money. It shows you opportunities that can solve global problems that would make you financially free. You get to be in control of your money and time.
Lesson two: Invest in being financially literate.
Financial Intelligence solves money problems and produces money. Money without financial intelligence is money soon gone. It’s not how much money you make. It’s how much you keep. Learn and understand how money works. Blame nobody for your money problems.
Financial education entails all that you do with the money once you make it, how to guard your money against loss, and how to make money work hard for you. It is how to manage money and make it work for you. As said before, it is a lifelong process. Nobody knows it all. Gain financial education and always question general beliefs about money if they’re really true before conforming.
Rule #1: You must know the difference between an asset and a liability, and buy assets.
Assets are things that bring in money, while liability removes money from the pocket. Acquire assets if you want to get rich. Concentrate your efforts on buying income-generating assets. Keep liabilities and expenses down so more money goes into assets.
The rich get richer because their assets keep producing income that covers their expenses and they reinvest the remaining into the assets, which continue to grow to produce greater income.
The poor and middle class treat their home as assets. Salary is the only source of income that is spent on expenses and expenses increases as salary increase leading to a rat race.
Invest in assets and bring down your expenses and liability.
Lesson 3: Mind your business.
Your business revolves around increasing your assets, not your income. Invest in the assets you love (because you would take care of what you love) that generate income instead of being focused on working longer to increase your income. Assets include businesses that survive time, bonds, income-generating real estate, royalties, stocks, anything that has value and appreciates. Understand financial terms to better manage your assets and investments. Buy luxuries last, i.e. from the money generated by the assets after sufficiently building the assets.
Lesson 4: History of Taxes And The Power of Corporation
Taxes came to be because of the Robin Hood theory of economics, take from the rich and give to others. Eventually, the government wanted more and started levying taxes on the middle class down to the poor. The result? Everyone started paying taxes. However, the rich created the corporation to limit their risks. The rich use the power of corporations to minimize taxes. It is the knowledge of the legal corporate structure that really gives the rich a vast advantage over the poor and the middle class. A corporation is a file folder with some legal documents in it, sitting in some attorney’s office and registered with a state government agency. Simply put, a registered enterprise. Corporation provides tax advantages and protection against lawsuits. The rich don’t just sit there and voluntarily pay more taxes. Instead, they search for ways to minimize their tax burden. They hire smart attorneys and accountants and persuade politicians to change laws or create legal loopholes.
You need financial education to escape poverty and build sustainable wealth. Knowing how money works won’t allow you to be used by anyone and bring taxes in your favour. Increase your financial IQ.
Financial education involves having knowledge and skills in accounting, investing, understanding the market, and law, i.e. the knowledge of how to set up a corporation. Learn about the protection that legal entities provide for businesses and assets.
Lesson 5: Money is invented.
Often it’s not the smart ones that get ahead in the real world but the bold.
We all have tremendous potential and gifts. Yet the one thing that holds all of us back is some self-doubt and lack of self-confidence. Excess fear and self-doubt are the greatest detractors of personal genius. You need boldness, tenacity, and a powerful will to move ahead in life. People need to learn to take risks and be courageous and let their genius convert their fear into power and brilliance. Financial intelligence provides you with vast options to choose from and you can create your own luck. Wealth is in information, the person who has the most timely information owns the wealth. Always seek new knowledge to grow your wealth. The rich have creative financial minds and take calculated risks. Your financial genius requires both technical knowledge and courage. Our mind is the single most powerful asset we all have. The mind recognises and shows us great opportunities that the eyes can’t see. The mind well trained can create enormous wealth. Financial intelligence helps to invent and protect money. Take the time to develop your financial intelligence Harness the power of your brain and the asset column.
To be a great investor, learn how to find opportunities that people missed, raise money and organize smart people to help you. Learn how to manage risks instead of avoiding risks.
Lesson 6: Work to learn, don’t work for money.
The rich possess many skills that help them get rich, and one of them is financial intelligence. Have synergy of skills. Learn and master skills that will help skyrocket your income. Learn a little about a lot was his rich dad’s advice. Work in places where you can learn the skills that can help you get better and improve your financial education. People should seek to work for what they will learn, more than what they will earn. Look for the skills you would want to acquire, then look for a profession or organization that will help improve the skills, work and learn while working. Focus on learning the skills that will help improve the knowledge business process. The reason so many talented people are poor is that they focus on building a better product or service and know little to nothing about business systems.
People don’t make money, not because of what they know, but because of what they do not know.
Embrace lifelong learning because there really are so many things to learn.
The most important specialized skills to learn to get rich is sales and marketing.
Do not specialize too much. Try to learn about things that will help you get rich. Too much specialization keeps you trapped and dependent on that speciality. Communication skills, such as writing, speaking, and negotiating, are crucial to a life of success. Besides being good learners, sellers, and marketers, we need to be excellent teachers and exceptional students. Learn to give and also receive. The more you give, the greater you receive. Main management skills needed for success are:
- Management of cash flow
- Management of systems
- Management of people.
Lesson 7: Learning to overcome obstacles.
The major obstacles that stop people from financial freedom even with enough financial education are fear, cynicism, laziness, bad habits and arrogance.
One difference between the poor and the rich is how they manage fear. There’s this fear with investing money. The rich invest which is multiplied or they learn from the experience. To overcome fear, start early. The reason people are not financially buoyant is that the pain of losing money is far greater than the joy of being rich.
The greatest reason for the lack of financial success was because most people played it too safe. “People are so afraid of losing that they lose”. Failure inspires winners and defeats losers. See failure as an opportunity to grow, learn, and be smart.
Cynicism is filling the mind with doubts and pessimism that we cannot act. Those thoughts could be from outside, which makes us continue to play safely while opportunities pass by.
Cynics do not win, rather they criticise. Winners analyse to see opportunities cynics are missing out on. Unchecked doubts and fear create cynics. To overcome cynicism, always analyse before criticising. Be brave and tenacious.
Most times, we allow laziness to prevent us from achieving those things we desire. We hide under the disguise of being busy, but in the actual sense, we’re avoiding doing those things that matter. People are busy, and stay busy as a way of avoiding something they do not want to face.
A way to overcome laziness is to add a little greed. Think about yourself and the things you want to achieve (opened up the brain and forced it to think and search for answers). Then ask how can you afford those things. The human mind opens you up to different ways you could use to achieve that which you want. A little greed, not too much. “How can I afford it?” opens up possibilities, excitement, and dreams.
Overcoming Bad Habits
Overcome bad habits by developing good money habits. Pay yourself first, before any other person by saving and investing 10% of your income. Paying yourself first helps you think of better ways to raise money to pay other people instead of remaining broke after paying other people. Do not dip into savings, savings are only used to create more money, not to pay bills. One part of financial discipline. Overcoming this habit helps you get stronger financially, mentally and fiscally.
Overcome arrogance by being humble and open to learning and corrections. What you know brings in money, while what you don’t know makes you lose money. If you don’t know something about a subject, consult an expert or get a book on the subject and read.
10 Ways to Unlock Your Financial Genius
#1. Find a reason greater than reality: the power of spirit. Have a deep-seated emotional reason. This is very important.
I’ve learned that, without a powerful reason or purpose, anything in life is hard.
#2. Make daily choices: the power of choice.
Financially, with every dollar we get in our hands, we hold the power to choose our future: to be rich, poor, or middle class. Choose to be rich and invest in learning and growing the quality of your mind. Be humble and learn to see things from other people’s perspectives. A truly intelligent person welcomes new ideas, for new ideas can add to the synergy of other accumulated ideas. Listen more than you talk and always invest in learning and education (mind) before investment and assets acquisition.
#3. Choose friends carefully: the power of association. Have friends that can teach you financial principles. Learn from different people and see their perspectives. Have friends that give timely information and opportunities.
#4. Master a formula and then learn a new one: the power of learning quickly.
Be careful what you learn, because your mind is so powerful that you become what you put in your head. In today’s fast world, it’s not about what you know, it’s about how fast you learn.
Not so much what you know anymore that counts, because often what you know is old. It is how fast you learn.
This skill is priceless in finding faster formulas and principles that work.
#5. Pay yourself first: the power of self-discipline. Personal self-discipline is the number-one delineating factor between the rich, the poor, and the middle class. Always pay yourself first by prioritizing saving and investing at least 10% of your income before any other thing.
To successfully pay yourself first, keep the following in mind.
- Don’t get into large debt positions that you have to pay for. Keep your expenses low. Build up assets first.
- When you come up short, let the pressure build and don’t dip into your savings or investments. Use the pressure to inspire your financial genius to come up with new ways of making more money and then pay your bills. You will have increased your ability to make more money and your financial intelligence.
#6. Pay your brokers well: the power of expert advice. Pay your professionals who help you in handling your money well. Invest in the best brokers, for they provide timely information that helps your money grow. A good broker should provide you with information, as well as take the time to educate you. Find brokers who have your best interest at heart. Reward brokers well and they’ll reciprocate. The actual skill is to manage and reward the people who are smarter than you in some technical area.
#7. Be an Indian giver: the power of getting something for nothing.
Before investing, the sophisticated investor’s first question is: “How fast do I get my money back?” They also want to know what they get for free.
Wise investors must look at more than ROI. They look at the assets they get for free once they get their money back. That is financial intelligence.
#8. Use assets to buy luxuries: the power of focus. Never borrow to fuel your luxuries instead, invest in your assets to produce more cash flow that buys your luxuries. One unpleasant habit we need to avoid is focusing on borrowing money to get the things we want instead of focusing on creating money. Train yourself and those you love to be masters of money by increasing your financial intelligence.
#9. Choose heroes: the power of myth. Copying or imitating heroes is true power learning. Look for heroes that you admire what they do and read about and learn about how they do things. But heroes do more than simply inspire us. Heroes make things look easy. Making it look easy convinces us to want to be just like them. By having heroes, we tap into a tremendous source of raw genius.
#10. Teach and you shall receive: the power of giving. Whenever you feel short or in need of something, give what you want first and it will come back in buckets.
Law of reciprocity: Give and you shall receive.
Most rich people are rich because they’ve solved problems that other people have provided for them with what they want. If you want to learn about money, teach it to someone else. A torrent of new ideas and finer distinctions will come in. Be generous with what you do.
👉Stop doing what you’re doing: re-evaluate yourself and stop doing things that don’t bring results. Look for better ways of doing things.
👉 Look for new ideas. Read and attend seminars to get ideas and implement.
👉Find someone who has done what you want to do and learn from them.
👉 Take classes, read and attend seminars
👉Make lots of offers.
👉Jog, walk or drive a certain area once a month for 10 minutes to get the best real estate investments.
👉Shop for bargains in all markets. You make profits by buying, not selling.
👉Look for people who want to buy first. Then look for someone who wants to sell. Most people look for what they can afford, so they look too small. They buy only a piece of the pie, so they end up paying more for less.
👉 Think big
👉Action always beats inaction.
👉 Learn from history
Education and wisdom about money are important. Start early. Buy a book. Go to a seminar. Practice. Start small.
3 Types of Income
Earned income, passive income and portfolio. Ordinary earned income is money you work for. Passive and portfolio income is money working for you. Rich dad used to say, the key to becoming wealthy is the ability to convert earned income into passive income or portfolio income as quickly as possible. Taxes are highest on earned income.
Here are the important lessons from Rich Dad Poor Dad. It is now left for you to take action. To your continued growth. Don’t forget to subscribe to my email so you don’t miss another superb book article from me. Thanks for reading.