SUMMARY
Rich Dead Poor Dad is a must-have financial education course in school. Robert Kiyosaki tells the story he learned from his two fathers and provides valuable lessons for any financial education. The difference between working for money and working for money Why buying a house is not a good idea You will learn how to overcome the mental barriers that keep you from living the financial life you want.
Key Takeaways
(1) FIRST Lesson: The wealthy don't work for wages - "Both the middle class and the poor work for pay. Wealth works for the wealthy.
Everyone is pushed around by life. Some people can learn new skills by being pushed around. Others fight back and attribute their difficulties to others. The first team is successful. Those in the second group don't.
Most people set a price because they are concerned about running out of money. So they agree to a contract, put in a lot of effort, and then become enthused about everything money can buy for them. People continue to live in that pattern without understanding they may have accepted anything less than what they are truly worth.
Those who are under the spell of fear and greed are the ones who drive the Rat Race. They must get up, go to work, and pay their bills out of dread that they won't have enough money. As they are paid more, their desire causes them to spend more, which forces them to continue the cycle of nonstop work. Most people caught in this loop think that having more money will make their fears go away, but this is never the case.
Many wealthy people are more motivated by fear than are those without wealth. They do so out of a fear of losing what they have worked so hard for and the social and other repercussions that might follow. They are motivated by this fear to stay in the Rat Race even after they have enough cash to leave.
Realizing that fear and desire are strong motivators of most human action is the first step in avoiding the traps they create. Although you cannot get rid of these feelings, you may learn to respond to them less strongly. And by doing this, you can prevent them from exerting an excessive amount of influence over your decisions.
When you are no longer driven by the need for a paycheck and the temporary security that goes along with it, you will be able to identify chances that will enable you to make much more money than you could as an employee.
Excellent Quotes:
• "Life drags us all around. While some people give up, others struggle. Few people go on after learning their lesson. They enjoy being pushed around by life.
• "A job is essentially only a temporary fix for a long-term issue."
• "Fear is what keeps most people employed: worry of not being able to pay the rent, fear of getting fired, fear of not having enough money, and dread of having to start over. It is the cost of going to school to learn a trade or profession and then working to make money. Most people become slaves to money, which causes them to lash out at their boss.
(2) SECOND Lesson: Why Teach Financial Literacy? - It doesn't matter how much money you earn. It depends on how much you maintain.
The knowledge you need to make, grow, and keep your money over time is known as financial literacy. You can wind yourself generating a lot of money but still being broke if you lack financial literacy. It can teach you how to manage your money wisely so that it eventually works for you.
Financial education is not well taught in schools. So many people hunt for ways to get rich quick in order to get out of debt after pursuing the American Dream. Their initiatives resemble trying to construct a building on a shaky foundation. You wind up with a highly vulnerable tour rather than the Empire State Building.
Knowing the difference between assets and liabilities is the first finance rule. Your assets are the things you own that provide you money. On the other hand, liabilities deprive you of money. To be wealthy, you must invest in assets rather than obligations.
Despite this, many continue to invest their money in costly cars and other debt-generating assets. Instead, they should aim to gradually acquire additional assets (e.g., real estate, stocks, bonds, IP, and other things that make you money). When you have enough assets, you can support yourself without relying solely on a salary.
Many people pick up the skill of working hard for money, but they seldom master the art of making money work for them. They are stuck in the Rat Race forever without that basis.
For instance, a lot of individuals think their house is an asset. Yet in reality, it is a liability. This is due to the fact that having your money invested in a home prevents you from taking advantage of chances and costs you money in taxes, fees, value loss, and other costs.
Instead of buying a house, it is preferable to first invest in assets that will produce enough income to cover your mortgage. After you have enough assets to pay all of your costs and then some, you can invest the remaining funds in further assets, which will increase your income and allow you to quit your job.
R. Buckminster Fuller stated that "wealth is a person's ability to endure so many number of days forward, or, if I stopped working today, how long could I survive?" as one definition of wealth. To become wealthy, you must first make sure that your income from assets surpasses your outgoings.
Excellent Quotes:
• "Those with wealth acquire assets. The middle class and the poor amass liabilities that they mistake for assets.
• "If you have a tendency to spend everything you earn, more money would probably merely encourage you to spend more."
• "The financial story depicts a picture of hard labour to get ahead in 80 percent of most families. They spend their lives purchasing liabilities rather than assets, thus this effort is useless.
(3) THIRD Lesson : Take care of your own affairs - "The poor concentrate on their income lines, while the rich concentrate on their asset columns."
Most people dedicate their entire life to working for others. Their employer, the government through taxes, and the banks through their mortgages can all be included here. The majority of people continue to be caught in the cycle of working for others to enrich them at their expense.
It's not necessary to launch your own business in order to end this cycle. In reality, all you need to do is concentrate on increasing your assets rather than solely depending on your income. Due to the fact that they lack assets that can work for them, many people live paycheck to paycheck and are never able to escape the Rat Race.
Because the items you use to calculate your net worth are frequently not as valuable as you believe they are or, if they have appreciated in value, will result in taxes on the gain when you sell them, net worth is a poor indicator of your financial situation.
The smartest thing you can do when you're young is to keep your liabilities low and begin using your excess income from work to develop a strong foundation of assets. There are several forms of common assets, including:
• A company that doesn't need you there. You could own a company that is operated or managed by someone else. It's a job, not a business, if you have to be there.
Stocks
• Bonds
• Income-generating real estate
• Notes (IOUs)
• Royalties from intellectual property such as music, scripts, and patents
• Anything else with worth, income potential, or appreciation and a market that is ready for it.
It's crucial to concentrate on gaining things you adore. Real estate and startups are loved by some people while being feared or burdened by others. Investing in things that are compatible with income-generation methods that are effective for you is an essential component of your asset acquisition strategy.
Excellent Quotes:
• "Never let a dollar leave it after it enters. Consider it like this: Each money that enters your asset column becomes an employee of your company. The fact that money may last for generations and works around-the-clock is one of its best qualities.
• "Those who work for someone else their entire life frequently experience financial difficulties as a direct result. Many workers will simply have nothing to show for their labour at the end of the day.
• "A key distinction is that whereas the wealthy tend to purchase luxury items last, the poor and middle class typically do so early."
(4) FOURTH Lesson: The Authority of Companies and the History of Taxation - The key secret of the wealthy, according to "my rich dad," was how he used firms to play the game smartly.
Contrary to popular belief, the middle class and upper middle class frequently pay the majority of taxes, not the rich or the poor. While taxes were first primarily levied on the wealthy, as the government grew and needed more funding, it became necessary to broaden the tax base. As a result, those at the bottom and middle rungs of the socioeconomic ladder had to bear a greater weight from income tax.
Corporations have been the main vehicle used by the wealthy to evade taxes. A lower income tax rate for businesses than for individuals benefits them, and many of their expenses can be covered by pre-tax funds.
Although tax law has attempted to develop new ways to tax the wealthy, they frequently find new loopholes to exploit. One tax rule, for instance, permits you to postpone paying taxes on real estate that is exchanged for a more expensive piece of real estate and sold for a capital gain. You won't have to pay taxes until you sell if you keep trading up in real estate. That's just one example of how smart people who understand taxes are able to keep more of their money than those who are unaware of the rules.
Because of this, knowledgeable tax experts are frequently worthwhile investing in. They stop you from giving the government more money than is necessary.
The more opportunities you'll find to stretch your dollars, the better your financial Intelligence. Some crucial components of financial IQ include:
• Accounting: the ability to interpret financial statements and comprehend a company's strengths and limitations.
• Investing: Recognizing techniques and financial models.
• Market understanding: being aware of supply, demand, and market dynamics.
• Legal literacy: understanding tax benefits and protections
Having a corporation is the best illustration of applying financial intelligence. By understanding how to use legal entities, you can pay for costs before you've been taxed on your paycheck, so reducing both your tax liability and your expense liability.
Excellent Quotes:
• "The rich don't simply acquiesce when people try to punish them. They respond. They have the resources, authority, and motivation to bring about change. They don't just stand around and pay additional taxes on their own volition.
• "If you work for pay, you give your boss authority. If money is beneficial to you, you retain and exercise control over it.
Workers work, pay taxes, and then struggle to make ends meet. A firm makes money, spends it all, and is then taxed on the remaining amount. The wealthy use it as one of the biggest legal tax loopholes.
(5) FIFTH Lesson: The Wealthy Create Money - "In the actual world, bravery frequently triumphs over intelligence."
Financial savvy takes information, but it also demands the guts to take risks and avoid "playing it safe" in risky situations. The people who are prepared to take risks are the ones who recognise chances and seize them as opposed to watching from the sidelines and speculating on how things may have turned out.
Holding onto the way "things used to be" is one issue that prevents people from achieving their financial goals. In a world that is changing quickly, if you grow used to things and don't find a method to adapt, you'll probably fall behind.
You'll learn more once you develop the practise of seizing opportunities, and luck will finally work in your favour. It's crucial to understand that money is not your most precious possession, even if you learn the game and master it. It's crucial to properly train and care for your intellect.
Markets fluctuate, and opportunities appear and disappear. The key is to be able to recognise trends as they emerge, possess the knowledge necessary to assess them, and advance with concepts that have a high chance of success and little danger of failure. You will succeed if you can do that well.
You won't always succeed with money, and that's a lesson worth learning. You'll both make losing and winning investments. The trick is to keep improving over time and to not blame oneself for failures.
Investors can be divided into two groups: those who generate investments and those who purchase packaged assets from a retail location. You need three skills to be the second type of investor:
• The capacity to identify opportunities that others have overlooked;
• The capacity to raise money;
• The capacity to recruit and manage intelligent individuals;
Excellent Quotes:
• "Some people's biggest liability is their old views. They are ignorant of the fact that while an idea or method of doing something was an asset yesterday, yesterday has passed, making it a liability.
• "I don't take the opportunity if it's too complicated and I don't understand the investment. You only need basic maths and common sense to succeed financially.
• If you know what you're doing, it's not gambling. If you're just investing money in a deal and hoping for the best, that's gambling.
(6) SIXTH Lesson: Don't work for money; rather, work to learn - "To my educated father, having a stable job was vital. For my wealthy father, education was important."
Many people miss out on opportunities and money because they specialise too much and neglect to pick up additional skills. Most people just concentrate on working hard, but that's sometimes insufficient. Even if you produce a fantastic book and are a wonderful writer, you may not achieve best-selling status. But, your chances of producing a best-seller may significantly increase if you develop strong selling and marketing skills. Many people lack the motivation and enthusiasm to learn the one talent that will advance them.
A job might be viewed as an opportunity for learning, to put it another way. While earning money at a job is great, developing new talents will help you accumulate experience that will be beneficial in the long run. So, it could be beneficial to check out a variety of employment while you're still young.
A secure career with decent salary and perks in the short run is significantly less important than a position where you learn new things quickly. Often, it is preferable to gain new talents while earning slightly less money.
Three management competencies are essential for success:
1. Controlling cash flow
2. System management
3. People management
The sales and marketing specialties are the most important. When you speak, write, and negotiate well, you can profit from having good communication skills in various areas of your life. Many people are hesitant to communicate because they fear being disregarded.
Excellent Quotes:
• Living is similar to working out in the gym. The hardest thing is deciding to leave. It's simple once you get past that.
• "There are many talented, uneducated people in the world. They are frequently underprivileged, have financial difficulties, or make less money than they are capable of, not because of what they know but rather because of what they do not know.
• "I advise young people to seek employment because they will learn more from it than they will from it financially."
(7) SEVENTH Lesson: Overcoming Challenges - "How a person handles fear is the main difference between a rich person and a poor person."
Financially aware people may still not have a healthy cash flow for the following top 5 reasons:
1. Fear
2. Cynicism
3. Laziness
4. Poor habits
5. Arrogance
Defeating Fear
Everybody is concerned about losing money. Rich people and poor people are distinguished by their responses to fear. The key thing is to keep playing and learn from your mistakes when you inevitably lose money. Learn to be inspired by your shortcomings rather than feeling depressed about them. Determine how you can later use the challenge to your advantage. When the optimum strategy is to play to win, the majority of players end up playing to avoid losing. Having a safe, balanced portfolio won't help you win large.
Getting Over Cynicism
Doubt, whether it is our own or the doubts of those in our lives, frequently prevents us from taking action. But, the best possibilities are frequently discovered when everyone is afraid—including you—but you muster the bravery to take action anyhow. You start to notice more opportunities and are less likely to be swayed by other cynical people who can make you make poor decisions when you learn to overcome doubt.
Overcoming Apathy
Being too busy to take care of things in your life is a classic example of laziness. You tell yourself that you can't do something while you're in this mindset. You could say, for instance, "I can't afford that." That might be the case, but if you question, "How can I afford it?" you might be able to discover a solution. Better inquiries enable you to rethink the issue and uncover details that you might not have otherwise noticed. And that's how advancement takes place.
Eliminating Bad Habits
Successful people frequently have healthy routines. Developing excellent habits frequently means making a sacrifice, but if doing so helps you achieve your goals, it will be worthwhile in the long run.
Overcoming Arrogance
One of the major components to maintaining and increasing your riches is remaining modest when you don't know something and refraining from believing that you are infallible. Overconfidence makes it simple to lose money.
Excellent Quotes:
• "The pain of losing money is significantly greater than the delight of becoming rich for most individuals, which is why they don't win financially."
• "Leaving the rat race is actually quite simple. Although it doesn't require much education, the majority of individuals are crippled by those doubts.
• "I've never encountered a golfer who hasn't dropped a ball. I've never met somebody who has experienced love and never experienced heartbreak. Also, I've never known a wealthy person who has never lost money.
(8) EIGHTH Lesson: Getting Started - "Gold can be found everywhere. Most people lack the training to recognise it.
It takes trial and error to figure out how to make money, leave the Rat Race, and achieve financial success, but with enough effort you'll find your way. To get started, follow these 10 steps:
1. Look for a motive larger than reality, such as the force of spirit. Many people aspire to financial freedom but are unwilling to put in the effort necessary to get it. To ensure that you are capable of the task, you need a primary motivator. One strategy is to make a list of the things you don't want (for instance, "I don't want a job") and use that list as motivation to achieve financial independence. then make a list of what you do desire (e.g., to travel anywhere in the world anytime you want). These emotional motivations may inspire you to complete the task.
2. Use the power of choice every day. You make decisions every day that will either take you in the direction you want to go or away from it. For instance, you can decide to believe that money is bad and avoid knowing about it, or you can decide to learn about it and see money as a tool to help you live the life you want. It's conceivable that one group will perform better than the other. To choose to learn is the best option.
3. Choose your friends wisely: the influence of association. Your buddies can teach you a lot about right and wrong behaviour. It's crucial to gain knowledge from friends, but you should also think for yourself and avoid being a sheep. When everyone arrives, good deals are rarely found. Avoid attempting to time the market. Have people who can point out chances to you before they are fully exploited.
4. The power of learning quickly: master a formula before learning a new one. The typical pattern that most people follow is work, earn, pay the bills, invest in mutual funds, and then return to work. There are numerous formulations that might be more effective for you than this one. Your greatest asset is your capacity for learning.
5. Self-power: discipline's Pay yourself first. Discover how to muster the courage to carry out necessary tasks even when they are challenging.
Pay your brokers well: The influence of wise counsel. Don't try to get counsel for less. Excellent counsel is invaluable and frequently justifies the cost.
The power of receiving something for nothing: be an Indian giver. Look for investing options that have a quick return.
8. Focus on using assets to pay for pleasures. Instead of exchanging your assets for liabilities, use the revenue from your assets to purchase the things you want.
9. Pick heroes: the mythic influence. You may be more of what you want to be by being inspired by heroes. Choose your heroes carefully.
10. Teach and you shall receive: giving has power. Try giving first whenever you're lacking something, whether it's money, love, companionship, etc. You will frequently get something in return. Long-term benefits come from being kind to both yourself and other people.
Excellent Quotes:
• It's easy to change your money-making formula if you're bored with what you're doing or aren't producing enough, according to this wise man.
• "The hard road frequently turns easy, and the easy road frequently changes."
• "Everyone of us knows individuals who have advanced degrees or who think they are intelligent, but whose balance sheet presents a different picture."
(9) NINTH Lesson: Certain Tasks - Also, you might think about performing the following:
• Put an end to what you're doing. Consider taking a pause to evaluate what is and isn't working for you.
• Seek for fresh concepts. Explore the world, read literature, and look for new chances.
• Track down someone who has accomplished your goal. Obtain their suggestions.
• Learn. Attend classes, read, and converse with others.
• Search for discounts.
• Think broadly.
• Learn from history past.
• Taking action always trumps waiting. Act if you are unsure.
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