Lessons From Rich Dad Poor Dad (Part 1)

Many people work very hard, but they never seem to earn enough. In Rich Dad, Poor Dad, Robert Kiyosaki explains how to escape this “rat race” and achieve financial independence.

Everybody should go to school, get high grades and then get a good job, right? Wrong! Well, at least if financial independence is what you are aiming at. Our education system is the number one cause of why so many people struggle financially. Schools teach people how to work for money, but they do not teach them how money can work for them. This lack of financial skills taught in school means that even highly educated people generally do not know how to handle money. The result is that the majority of people get trapped in work to pay their bills and are chasing paychecks all their life.

This is the sad conclusion Robert Kiyosaki draws in his bestselling book Rich Dad, Poor Dad.  Luckily, he also offers a way out. A way to get ahead. The fundamental trouble with working for money is that a job is a short term solution to a long term problem. People believe that if they get that raise, or get a new job they will finally have enough. However, if you do not know how money works, you can never have enough. Money alone will not solve anything, it will even get most people into more debt. So what is the secret to financial independence? Close the doors..

“Know what an asset is, acquire them and become rich.”

That’s it! Easy, huh? The trouble is that people are not properly taught how to spend their money. Many do not know the difference between an asset, something which puts money in your pocket, and a liability, something which takes money out of your pocket. Kiyosaki’s main point is that the only way to become financially independent is to accumulate income generating assets which can pay for your expenses. However, many people rather buy a new car or an iPad (liabilities) instead of investing that money in stocks or real estate (assets). I recently posted an infographic which shows the difference in returns if you would have bought Apple stocks instead of one of their products.

The fear of straying from the generally accepted life path plays a big role in the financial decision making process. However, if you do not want money to control you like it does most people, then you will have to do things differently from the crowd. Investing legend John Templeton seems to agree on this point.

But you already own income generating assets, because you own a house. The best investment you can make, right? Not really. The book lists several reasons:

  1. Most people work all their lives paying for a home they never own
  2. Despite a tax deduction for interest on mortgage payments, all expenses are paid with after-tax dollars
  3. Property taxes can suddenly be increased without notice
  4. Houses do not always go up in value
  5. Opportunity costs are tremendous, because when all your money is tied up in your house, there will be no money left to invest in income generating assets

Article by Nick Kraakman (https://www.valuespreadsheet.com/value-investing-blog/rich-dad-poor-dad-summary-robert-kiyosaki).

You can get the book here and let your mind be transformed as you will be exposed to some truths you wished you knew years ago. Happy Reading !

THE ROOM IS YOURS !!!

I’ll appreciate your comment on what you think about this article. Should there be any addition, or subtraction ?. Also, let us know if you’ve learnt anything so far. Feel free to add your comment below. Thanks.

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