Finance Hacks from the Bestselling Book “Rich Dad Poor Dad”
The simple way to riches and financial satisfaction
Storming through the library to find a Chinese grammar book, I ended up picking one of the best reads of my life. Rich Dad, Poor Dad by Robert Kiyosaki is a New York Times bestseller that teaches the importance of financial schooling on a real scale. The book beautifully represents financial principles with the author’s own story as an example, making it easy to understand the lessons.
After reading his book, I became interested in knowing more about personal financing and Robert Kiyosaki’s insights on the topic. I found his Youtube channel, The Rich Dad Channel which has more interesting content. His Tedx Talk on “Why the rich are getting richer” was very insightful and educational.
Robert Kiyosaki, an American investor, businessman, author, motivational speaker, and financial commentator, became well known for his valuable insights on personal finance management. Unlike others in the field, Robert wasn’t raised in a wealthy background. His family was like most people who were educated but didn’t have the best financial education, and oftentimes struggled with money. So then, how did Robert become rich?
At nine years of age, Robert was attending the same public school where the rich people - doctors, business owners, and bankers - sent their children. Roberts saw that the rich kids would separate themselves from him because his family wasn’t able to afford the newest collections of toys and bikes like them.
One day, Robert asked his father, who attended multiple universities, earned excellent degrees and had a PhD, “Dad, can you tell me how to get rich?” Unfortunately, his dad didn’t know the right answer because he was not rich himself so he responded with, “Well, use your head son. Stay in school, get good grades, so you could find a safe and secure job.”
Robert’s real dad, who will be referred to as ‘Poor Dad’, made a lot of money but, in the end, his financial life took a turn for the worst. The real dad started from riches and school degrees but ended up struggling with finances and left debts and unpaid bills for his family after his unfortunate passing.
Robert considers his friend, Mike’s father as his second dad. When asked the same question about how to get rich, Mike’s father asked the young Robert and Mike to work for 10 cents an hour. Young Robert wanted to learn to make money but didn’t want to suffer by working for a low wage. So he confronted him and said he wasn’t learning anything meaningful. He wanted to be taught in the conventional lecture style. Mike’s father’s response to this was, “That’s how they teach you in school. But that is not how life teaches you.”
Mike’s father, who would be referred to as ‘Rich Dad,’started mentoring Robert and his son Mike about how to become rich at a young age. At that point in time, rich dad was considered academically poor as he hadn’t graduated from college.
Rich dad taught Robert to have a strong financial foundation with many important principles. To start, the first lesson Mike’s dad taught was the necessity to know the difference between an asset and a liability.
The two dads gave Robert, the two perspectives — the rich people’s perspective, and the poor or middle-class people’s perspective - to making wealth and having assets and liabilities.
The Lessons in “Rich Dad, Poor Dad”
Lesson 1 : The rich don’t work for money- The poor and the middle-class work for money whereas the rich have money work for them.
Lesson 2 : Why teach financial literacy? Having financial management skills is as important as gaining scholastic skills. It is simply because we need to know how to regulate the money that we work hard for.
Lesson 3 : Mind your own business- There is a difference between profession and business. “Profession” builds your income but “Business” builds your asset.
Lesson 4 : The history of taxes and the power of corporations- Taxes emerged from the Robin Hood theory of economics; take from the rich and give it to the poor. But soon the middle and the poor class had to manage the growing appetite of the government. The rich found an escape while the poor, ever entangled in the web of endless tax payments.
Lesson 5 : The rich invent money- The rich patches opportunities together, creating investments and in return, money.
Lesson 6 : Work to learn- Working to learn is inspired by passion whereas working for money is inspired by fear.
Big Ideas from “Rich Dad, Poor Dad
- Times changed, the meaning of wealth changed but our way of educating children stayed the same.
- Money is power but what is more powerful is “Financial education”, the knowledge of the regulation of money.
- The middle and poor class work for money because they are driven by ignorance (opportunities)and fear. The rich make the money work for them because they are driven by opportunities and greed.
- The foundation of wealth is the difference between assets and liabilities. The more one focuses on income and expenditure, the more they lose the focus.
“Assets put money in your pocket. Liabilities take money out of your pocket.”
5. With just education, you say, “I need a raise” but with financial literacy you say, “I need another asset”.
6. Real asset categories are-
a. Business that doesn't require constant presence
b. Stocks and Bonds
c. Mutual Funds
d. Income-generating real estate
e. Royalties form intellectual properties
f. Notes (IOUs)
7. The rich and the middle-poor classes have completely different resources.
8. Financial IQ is just as important as any other skills. They are made up of four broad areas. Accounting, investing, understanding markets, and the law regulating it.
The essence of this book is beyond these few points. This book is filled with inspirational quotes on life, examples from real life scenarios and questions showing how our educational style is beyond old school. I can hands on say, it's one of the best books on personal finance basics. It teaches the importance of having proper financial literacy. I started by borrowing the book from the library, but it is now part of my bookshelf, and will forever be a book I refer to.
