What does it mean to be rich? How can you achieve financial freedom? Stop working for money and make money work for you. We’re reviewing the best 10 ideas from the “Rich Dad Poor Dad” book. It’s not a get-rich-quick scheme. It’s all about investing in your mind. That’s the thing that everyone tries to shortcut.
That’s why many people are broke or poor, because they don’t invest in their mindset and that we’re going to go over it. There’s a thing called financial IQ, and the higher financial IQ is intelligence regarding finances. The more money you will make, have, keep and pass on to people when you leave. So that’s why people like this book, not a get-rich-quick scheme. Let’s dive into it.
10 Lessons From Rich Dad Poor Dad Book
There are two dads there, which goes over Robert’s upbringing in Hawaii. He had his biological father, who was poor and taught him all about money. His rich dad was more of a mentor to him, a self-made entrepreneur.
He was rich and told him the opposite of what his poor dad told him. So we had a choice. Who do I listen to? Of course, the rich dad taught him a lot of things. He later put it in this book.
Here are the top 10 lessons and ideas that help your startup and business. Let’s make them in lists.
1. Models for wealth
The first one is that we have models for wealth. There is a rich dad and a poor dad, and we pick up many things on finances. We believe it from our parents, upbringing, or the people around us. We need to become conscious of that because sometimes, not all the time, we have poor examples of how to use money or invest.
- The most significant point is that money and finances are learned, and financial IQ is learned.
- Learn from models or successful people.
It’s acquired like anything else, and it’s health and wellness. You don’t grow up intuitively knowing what to eat and have to learn it. You have to navigate it. In this modern world, things are different. We got ingredients that weren’t used ten thousand years ago.
Our whole food supply is pretty much different than it was. So you have to learn to navigate that. If you never learn that and rely on other people, what happens if they’re gone? If your mom gave you healthy food growing up, you’re on your own in college. They call that the freshman 15 for a reason.
You have to learn it independently, but you figure it out, or maybe you don’t. Also, you end up with a lot of health problems. So that’s an extreme version. But the same thing applies to finances. We need to learn from models. We need to educate ourselves.
2. Be broke, not poor
The next big idea is a quote. It is saying that you’re broke, not poor. There’s a difference that being broke is temporary. Being poor is eternal. You can apply this book to set it up in the broad picture, but you might not have a lot of money right now.
- You need to get innovative.
- Invest in your financial I.Q., learn how to invest, use money, and become wealthy.
Poor is saying, I’m not the kind of person who can ever have the house, the money, the car, the whatever broke. Robert says that we essentially have two choices in life.
- The first one is working hard, saving part of our paycheck, paying taxes, and then getting taxed even more on what we save and withdraw from.
- The second option is to invest in our financial I.Q., learn how to invest, use money, become wealthy, and do it that way.
So the flipped phrase here is that the poor and the middle-class work for money. The rich have money to work for them. The book’s premise is getting your mindset switched from income to wealth that you need to go to your job and make money.
That way versus investing as wealth and using your assets to generate your wealth. How you get these assets will dive into that briefly.
3. Financial freedom
How do you become financially free? The last quote from Robert Kiyosaki says Wealth is a person’s ability to survive so many days. So, how long could you survive if you stopped going to the job? If you want financial freedom, you need to have assets. You don’t have to work for the rest of your life if you stopped today and work out a fund.
- For financial freedom: Create online courses and businesses to create passive income to utilize 24 hours a day.
- Reserve money for the future and make yourself independent.
Robert Kiyosaki said that even though his father was a Ph.D., he didn’t have money by month-end. On the other hand, the rich dad in the book, who was not even a high school graduate, focused on acquiring assets and retaining all info. Assume that you earn 1 lakh, save only 5%, and keep it in the savings account.
In contrast, your friend earns 50000, saves 20-30%, and uses it to acquire assets. So he has a higher potential of making more wealth than you. You have to focus on saving and acquiring assets.
4. Financial I.Q.
There’s no class traditionally that’ll teach you to be rich and the financial I.Q. If you want to be rich, do you want to be wealthy or have influence? That’s what money is. You need to take it upon yourself to learn and invest in it. That’s what financial IQ is all about. It’s comprised of four things. Robert says that these are the four things you need to study to become fine to raise your financial IQ.
- The first one is accounting for the ability to read and understand financial statements, income outcomes, taxes, etc.
- The second is investing. So the science of making money on money, creativity, creativity, and strategy and formulas is combined.
- The third point is understanding markets, the science of supply and demand. So science is supply and demand investing there.
- The fourth one is law, understanding taxes, and avoiding lawsuits because those are both ways you can lose money taken from your nest egg.
So understanding a little bit and all of those will help you avoid things that take your money away. We’ve all heard stories of athletes, professional athletes who get a lot of money, and on paper, they’re rich. But what happens when you follow up with them? Five years down the road, they sold the house. They’re bankrupt.
So basically, throwing money isn’t going to fix the problem. Even if you have money, it will be gone if you don’t know what to do with it. If you have the financial IQ to know what to do with that money now, you can hang on to it, keep it, and stay wealthy for longer.
5. Four rules
The next lesson is E.B.S.I. These are the four things that we can beat in life. This stands for: Employee, Business owner, Self-employed, and Investor. These are the four possible paths for us. We can be a mix of all four.
- Employees have jobs to generate money.
- A business owner gets people to work to generate cash.
- Self-employed is an owner job. You’re still trading your time for money.
- You own investments, and your money works for you.
Robert says that we should be in the business owner or the Investors class if we want to become wealthy. So finding ways to invest in, like the stock market or index funds, finding ways to be a business owner, maybe buy an existing business. How do you do that?
It is saving up enough money to get a down payment on that. For the most part, it focuses on being a business owner or an investor. So, that will get you on the path to becoming wealthy.
6. Grow assets
The next step is the difference between assets and liabilities. How to get rich slowly but surely? What an asset is, acquire them to become rich. So for most people, their profession is their income. Assets are things that are going to make money when we sleep over the long term, like stocks, bonds, mutual funds, and income-generating real estate royalties.
Robert says the key to becoming wealthy again is accumulating these assets and appreciating them over time to the point where you can use them to buy other assets. That’s the theory behind the one percent. You’ve heard of the one percent.
Maybe you’re in the one percent, and it’s globally the one percent. But the reason that one percent, 99% of the population controls the wealth or whatever it goes is because their assets are so massive that they make money on money. They have the financial IQ to do so.
- Start small, and then it gets bigger and bigger and compounds itself.
- Create a balance between assets and liabilities.
Einstein said that the eighth wonder of the world is the power of compounding. So to wrap that up, assets, huge, the big idea of this book, frame your minds into how I accumulate assets.
7. Minimize liabilities
A liability is something that takes money out of your pocket. So he says reducing liabilities and keeping your expenses low are the two best ways to become wealthy.
- So accumulate assets, keep expenses low and minimize liabilities.
- Grow your income, not your lifestyle.
Maybe instead of that, raise going towards more money, more problems, getting a bigger house, a bigger car whatever, maybe investing that raise of an extra 5000 dollars a year.
Clark learned to live on seventy-five percent of whatever you make and that the other twenty-five percent will invest. That’s been a huge difference. Moving on to the power of compounding, why does the one percent get richer by compounding. We touched on that when we’re talking about assets.
Supposedly investors have portfolios worth 100 thousand dollars each. Both use compounding to grow their portfolios six percent per year. Let’s see what a difference 20 years can make. At the end of 20 years, the 100,000 principles would have grown to 3,20,713 dollars.
Now, let’s consider how much the other investor would have earned. The additional 20 years of compounding resulted in the principal growing to 10,28571 dollars. That’s more than three times the return of the other investor.
8. Pay yourself first
The next big tip in this book of rich dad, poor dad is to pay yourself first. So it says each month when you get your paycheck, before you do anything, pay yourself first before you even pay bills.
- Create an assets fund and deposit a certain amount of money every month.
- Reduce your extra expenses and save them.
Let’s say you get a check for 500 bucks. Set aside a certain amount towards your financial independence asset fund. So, let’s do a thousand dollars. Nice even round number if we lived on 75 percent of our paycheck.
So seven hundred and fifty goes to everything else. Two hundred and fifty go to assets and keep doing that over the long term. If we think about it, it’s not about our money. It’s about the money we keep.
How much money do we make at the end of the year if we’re making a hundred thousand dollars but spending all a hundred thousand? Not that much. But if we’re making even ten thousand dollars and save 10 percent of it at the end of the year.
We’re making more than the guy who made one hundred thousand dollars because we saved a thousand. The earlier we do it, the better off we will be. Robert takes it to the extreme and says, pay yourself first.
9. Take risks
In middle-class families, kids are told that they cannot afford this. It leads them to believe that a lot is out of their reach. On the other hand, rich kids are taught how to afford something if they want something. So if you say that you cannot afford something, you kill all its opportunities and stop thinking about it. If you start thinking about how to afford it, your mind automatically creates opportunities for yourself and wealth.
- Success is not possible without taking risks.
- Take risks wisely and discuss with experts before taking any action.
Robert Kiyosaki said that you should learn to live with risks. Because if you want to create wealth, you must take calculated risks. As you start accumulating wealth, you will learn how to manage risks. The middle-class fears are taking risks because they can’t bear the loss. The rich are not scared of making mistakes. Instead, they learn and do not repeat the mistake.
10. Getting started
We can’t do anything until we start raising it and educating ourselves about good financial decisions. No, to every day is a choice. Are you going to be poor or broke? Every dollar is plus one or minus one. So are you moving towards financial freedom or away from financial freedom? Every choice we make, and every dollar we spend is a choice. So always framing that when we make purchases.
- Learn to live on. Seventy-five percent of your paycheck went over that.
- Pay yourself first whenever that five choose your friends carefully who you hang around.
The average of the top five people you hang around most. If your top five friends spend everything they make and are broke, you might be the sixth. But if you hang around people investing, talking about these ideas, whether in person or online, you surround yourself with that as much as possible.
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Author: Robert Kiyosaki
Average Customer Review: (4.7 out of 5, on Amazon)
Category: Business, Finance, Start-up, Self-Improvement, Communication, Management, Leadership, Motivation, Sales
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