Timeless lessons from the book “Rich Dad Poor Dad”

Rich Dad Poor Dad” was written by Robert Kiyosaki to share his financial literacy with others. Although this book was published in 1997, its lessons are relevant to this day, which is why this book continues to be sold and read worldwide.

Whom does the author refer to as his “rich dad” and “poor dad” respectively? The poor dad is the author’s biological father who struggled financially all his life in spite of being highly qualified and highly paid. The rich dad, on the other hand, was the father of the author’s friend. The poor dad did not even pass eighth grade, but he owned small grocery shops, restaurants and warehouses and did well financially.

In his childhood, Kiyosaki wanted to learn how to become rich from his biological father. As Kiyosaki’s father was not good at managing his own finances, he told Kiyosaki to learn from someone else- the rich dad. This book is based on financial lessons the author learned from his rich dad.

As a reader, this was my first lesson from this book. We should take financial advice only from people who can manage their own money properly, instead of resorting by default to the people in our vicinity.

Another lesson I learned is that people should be willing to learn about managing their personal finances. It won’t happen magically. We have to work on it.

Now let’s get into the lessons Robert Kiyosaki taught in his book. According to him, the poor and the middle class remain stuck in low-paid jobs due to their fear of poverty and greed for material things. While they remain busy in a relentless rat race, the rich make money work for them.

How can we make money work for us? How can we break free of the rat race and achieve financial freedom? By saving whatever we can and investing in assets. Here, it is important to know the difference between assets and liabilities.

Assets are things which make money for us, whereas liabilities cost us money. If we purchase a home for renting out, it becomes an asset as it will generate rental income for us. If we purchase a home to live in, it becomes a liability as we have to spend money maintaining, repairing and renovating it from time to time. The poor and middle class spend money on liabilities while the rich build their “asset column”.

How can we build an asset column? By investing our savings in one asset initially, then using the gains from that investment to invest in more and more assets until we build a “column” of assets. The asset column should generate enough income for us to live comfortably. This should reduce people’s dependence on 9 to 5 jobs, and help them to break free from the rat race.

Kiyosaki recommends investing in assets like stocks, bonds, real estate, and notes. He also recommends creating additional income streams by producing and selling intellectual property like scripts and music.

Another one of his suggestions for us is to improve our financial IQ by gaining knowledge of accounting, investment, markets and law. This will help us to grasp opportunities to earn/save money when they present themselves. For example, wealthy people open corporations because they know about the tax-related benefits which come with it. The rate of corporate tax is lower than the rate of personal income tax. Moreover, for businesses, many expenses may be deducted before paying taxes. Individuals are not entitled to the same advantage when it comes to paying taxes.

As the definition of wealth changes over time, individuals should adapt by taking advantage of new opportunities.  For example, in the past, land ownership used to be the definition of wealth. During the Industrial Revolution, factories and plants were considered the main source of wealth. Today, those who create and control Information Technology are considered wealthy. So, when the opportunity comes to invest in the next big thing, we should not shy away from it.

Lastly, we should focus on learning diverse skills even if we specialize in a particular skill. For example, a great author should have good marketing skills if he wants to sell his book. When it comes to selecting jobs at a young age, we should focus on jobs which provide more learning opportunities over those which pay well in the short run. Learning a larger number of skills at present opens up more income opportunities in the future.

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