What is Rich Dad Poor Dad by Robert T.Kiyosaki all about
Whether you have already read it or you are going to read it, this article will give you a fair enough idea about everything this book has.
Everyone perceives different essence from the same object, which is why this world is working, so arguably, my thoughts can be slightly different from yours. With that said, let's dive deep into it.
The General Setting
This book is considered the starting point of everyone's financial journey. You do any job, in the end, you are going to earn money in your life. That is why I also support that this book should be there in our school's curriculum. Well, I am not the policymaker of my country, so all I can do is encourage people to read it.
In this book, Robert talks about how he became what he is and how everyone should drive their financial life.
Introduction
Here Robert will encourage you for your coming financial journey. He calls his friend's dad, the Rich Dad, and his dad, the Poor dad, to explain his point in his book. Being rich is not bad, as a society thought it is, as long you control money, not vice-versa. He defines the poor as the ones who are not financially educated. You could have million dollars in your bank and still be poor. Because that will not last forever, you should know how to control it and regulate it. Schools never taught us that; all they taught us is how to make money (get a job, man); once you have it from your job, you have no idea what to do with your money.
This book never says that school or education is wrong; Robert encourages higher education, but you must be financially educated. It's like studying hard, getting a job, making some money, and then letting that money work for you. There could be many variations to the above statement, but let's start with the first chapter.
Chapter 1: The Rich don't work for money
Robert was not from a low-income family, but everyone was rich around him, so relatively, he was. He has one friend at school, Mike, whose financial condition was more or less the same as Robert's at that time. Robert's dad was a well-educated man and a teacher. In contrast, Mike's dad doesn't have a decent college degree, but he runs multiple businesses. Mike's dad is the Rich dad in this book.
At the age of 9, two boys asked the Rich dad to teach them how to make money. He gave them a job at one of his restaurants and a salary, but Robert spent all his week's money on comics. After some time, he got angry that he was learning nothing and quit. This is where the Rich dad taught him the introductory lesson, that life will not teach you by words; it teaches you by experience. Some give up, some fight back, and some accept their mistake and learn from them. It's all we are doing right now; we earn some money and spend all on our needs for that month because we have a good month ahead of getting more money. And this goes forever, and you will earn and spend till you get to retire.
One worse scenario is when people can't meet their current requirements, they blame their job and ask for a pay raise. And that never works. It's a temporary solution to a permanent problem. You might change to a high-paying job, but you are you, with the same psychology. Instead, it would help if you understood how money works.
Now, everyone gets an idea that earning and spending is not a good option at all. Note that poor and middle-class people exercise taxes, well I need another article to convince you over this, but this is the truth. Because every government supports investments and businesses, that's why the rich pay less in taxes. But even if you are rich, the problem is not entirely solved. If the poor have the greed for money, the rich have a fear of losing it. And that's how these two emotions control your whole life.
You might stop reading further because that's what most people do when you tell them, 'Hey, lemme give you some financial advice.' They will ignore it. Because everyone fears taking risks, Earning $5000 and spending $5000 is what life to them. But not taking the risk is the most significant risk. You never know when great inflation will be, or an economic crash or something else is coming. Risk is everywhere; you should learn how to manage it and always take a calculative risk that you can afford. Zero risks are the most significant risk.
Chapter 2: Why teach financial literacy?
Here Robert focus on financial literacy and why it's essential for every human being. Many argue that their core job is different, and they don't have time for all this. But in the end, you are going to end up with some cash in your pocket. It's like they teach you civics in your school whether you like it or not as a child because it is necessary to know your rights when living in a society. Similarly, it's essential to have financial knowledge in a community that works on money. Most people think school is the end of education, but it's the beginning; you should keep learning forever. If you stop learning, you are of no good. Your core education will give you money, but financial education will keep you going. As Robert said, a person can be highly educated, professionally successful, and financially illiterate.
Robert gives no accounting course but teaches you to analyze your income, expenses, assets, and Liability. You earn what you earn; you can increase it overnight (your income), you have to pay taxes or your child's fee, things you can't simply avoid (your Expenses). But you can buy or invest in something that will generate some money for you, and it's totally in your hand (your Asset). You can avoid making unnecessary expenditures or buying something that takes your money, and congratulations, it's also in your hands (your Liability). Now the whole financial education to become rich in one line is, buy assets and avoid liabilities. (No one believes it at first, but it is the truth). Then why not everyone around you is rich? Because what is an asset and what is Liability is a million-dollar question. It's time and situation-dependent. One's Asset could be a liability for someone else.
Rich buy assets, and poor accept Liability. Now you must be wondering this is all because the poor don't have the financial knowledge and the rich have (or they have the knowledge, that's why they are rich). But that is not entirely true; you could be financially educated but mistakenly invested in a liability. Well, there is nothing to be ashamed of; everyone does that at some point in time, but what's more important is to learn from them and not repeat them. The end of the story is that the rich buy assets, not liabilities, so the rich become richer, and the poor become poorer.
You must have heard when someone won a million-dollar lottery or a jackpot, and then when you see them after five years, they will be all the same, no difference. Having money or getting it is not the solution; making money work for you is the solution. That's why financial literacy is the best investment you can make in your lifetime.
Chapter 3: Mind your Bussiness
In this small talk, Robert tries to tell people that they should mind their own business. Once Robert asked a person, 'In which business are you in?', he replied, 'I am in the banking business.' Robert asked further, 'Is this bank yours?'. The person surprisingly laughed and replied, 'No, I just work there.'
Your profession and your business are two different things. The man who owns that company has his profession and business same. But when you are working for him, you are taking care of his business, making him rich. Similarly, when you get a loan from a bank, you pay monthly installments, you are working for the bank. For your whole life, you will mind someone else's business. But what you should do is keep your professional work on and then mind your own business. That business for Rober was real-estates, but that could be anything for you; find what you love and make it your business (and no one is saying to quit your profession). And remember, that business should be your Asset; otherwise, there is no point, right?
Chapter 4: The history of taxes and the power of corporations
Remember we discussed in the 1st chapter that the rich is the one who pays less in taxes. Here Robert explains how Rich dad did it. Well, governments introduced taxes to give money from the rich to the poor. But it never worked out that way unless our government tried to be Robin Hood. According to the rules, the poor have the least tax because they don't earn much. And government encourages business people and investors by some initiatives because business people will create jobs, and an investor will directly or indirectly support the economy. By this time, you must have got it, right? It is the middle-class or, to be precise, upper-middle-class who are taxed the most; the government is a Robin Hood between the middle-class and the poor.
This might seems unfair at first, but it's not. Taxes are the same for everyone; if a middle-class person invests in an asset and not a liability, he too can enjoy this power that the rich enjoy. So how to go for it? Well, Robert told four steps to go for it:-
1)Accounting (it is nothing but the financial literacy we discussed earlier, and you need not do a course to understand that)
2) Investing (it's money-making money, with strategies and formulas)
3) Understanding the market (it's related to investment, you need to understand the situation in the market right now and where I should invest, etc.)
4) The law (it's important because it will keep you away from all the unfair things that you could do by mistake, and it also helps you understand how you are taxed so that you can save as much as you can).
So don't be scared at this point; once you start seriously, it all becomes straightforward. And in Robert's terms, Rich does: (Earning money -> Spending it -> Paying taxes) and Poor do: (Earning money ->Paying tax -> Spending it). That is why they are rich.
Chapter 5: The Rich Invent Money
Here first, Robert focus on that financial knowledge alone is not essential; you must be bold enough to act upon it. Courage makes a difference between the winners and losers, which applies to any field of life. You might see an opportunity from your financial knowledge. Still, your courage will hold you back, and you are no different from a guy with no financial knowledge.
Opportunities are everywhere; when one thing stops working, you can take your chance on another one. Robert introduced his amazing Cashflow game, available on his website. But some hate it simply because their old ideas don't match the game; they refuse to accept that they are wrong. In real life, you will gain and lose, but what you should focus on is your mind. As Robert said, investment in mind is the most excellent investment you can make in your lifetime. Money is not real (it loses value); your knowledge is. It will be there forever to give you ideas and opportunities to generate more money.
In real life, you will either be taking advice from some finance professional or doing it yourself. If you wanted to be the second one, learn to see the opportunities that everyone else misses, raise money, and organize and hire people more intelligent than you.
Chapter 6: Work to learn- Don't work for money
This is my favorite chapter because it teaches how you should interpret your life and job. Give a young man a handsome salary, and he will work for you, did I forget to mention the work? No, they don't care much about the work. And this is the real problem.
Robert usually suggests people learn new skills at each point of their life, but people don't feel comfortable enough. After college, Robert quit his first job because he wanted to learn leadership; then left to learn sales and management when he felt sufficiently confident. It would be best to try a little of many things instead of everything of a particular item.
Many would say this is not always practical, and I agree. Still, while doing your standard job, you can practice learning additional skills. In today's world, it's a lot easier with everything available on the internet.
A lot of us can probably make a better and cheap hamburger than McDonald's. Still, you can't beat them simply because they know the business. That's why you should focus on a little of many things. You should learn the management of Cash, systems, and People. Skills like communication, sales, negotiation, etc. People consider them waste, but Robert spent a lot of time and money on learning them, and that is not waste; that's an investment, a great one.
Well, you can't be good at everything; that's why you should focus on the importance of a teacher in life. Teachers are the ones who give most to society, the knowledge which is the most important thing. Robert learns from both his dads that you should give back to society from which you have earned so much. Either in the form of money, knowledge, or anything, but giving back is the quality that everyone should have.
Chapter 7: Overcoming Obstacles
Here Robert talks about five things that keep you poor, even if you have financial knowledge, and how you can overcome them.
Fear: Everyone has that; it's all about how you manage. You should know what is your risk capacity and adjust your risk. Playing safe with money is not always the best option. There are more poor than rich, and that's straightforward proof; most of them play safe and stay where they are. It's okay to lose; everyone does that. But your victory should be big enough to hide your losses. And that's how the rich overcome their fear.
Cynicism: You might be looking forward to investments in your life, but go outside and talk with ten random guys. I bet the majority will say it's not safe; there are other options too. That's what keeps them poor, self-doubt, other people's opinions. Losers criticize and Winners Analyze. It would be best if you analyzed situations instead of directly criticizing them.
Laziness: This is why most people ignore good advice. "I am too busy," "I have some other works," are going to be with you forever and will affect your financial journey, your relationships, your office environment, your friend circle, and what not? So what Robert suggests is to change your psychology from "I can't get it" to "How can I get it?". And then your brain will start giving you ideas, and this is how you overcome your laziness and fill yourself with motivation.
Bad Habits: Poors have the habit of paying themself last. They got a salary, they pay expenses, and the leftover is what they have. And what the rich do is get a paycheck, pay themself first, and then pay for the expenses. This will always keep you motivated and give you ideas about what you can do to pay for expenses quickly.
Arrogance: No one is born with perfect knowledge. We must listen to everyone else when we make a mistake and accept that and learn from it. Being arrogant is never going to help you in the long run. You should be humble to everyone around you and learn from them.
Chapter 8: Getting Started
If you have made it this far, you are severe enough for your financial journey. Here are some of the final steps I am going to left you with.
Reason: There are going to be many ups and downs, and there is no free lunch. So better clear your mind on why you wanted to be rich, so when you feel like giving up, something will be there to keep going.
Choice: You face options daily. Small decisions or big decisions, whatever it is, are going to shape your life. Rich chose one way and poor one way. It would be best if you understood which one is right for you. That's why Robert urges young people to invest in their education more.
Association: Your association always affects you, so better choose a good one. Robert asked to not listen to the poor and make rich friends (by now, you must have understood that poor and rich are not money discriminated terms, they are thinking and psychology based). Even if you have a poor friend who gives you advice, listen and use your knowledge to figure out its correctness.
Learn: Learn but with safety. The crowd will only teach you what they know, get educated to get a job and work hard to pay your bills. And by now, you know why you should avoid those things.
Pay Yourself First: As we have already discussed, paying yourself is the quality only the rich have. But required great discipline, someday you might end up having no money in the end for your expenses. So do it, but with good management and field.
Pay Well: Robert always pays his financial advisers well. They are the ones who will make you rich. Paying them well is not a loss at all. It's an investment. A good adviser will not only give you advice but also teach you, and that's the best investment.
Giving Back: You should always give back. Being greedy with what you are earning is not a good thing. No accounting course will teach you that, but you should always give back to the society you belong to. And giving back makes no one poor.
Asset for Luxuries: Robert guides how you should buy luxuries. Loans are the worst idea. You should invest in an asset, and that, finally, that Asset will help you with your dream car or dream house. And this is the path everyone should follow.
Choose Heros: Having a hero in your brain, your ideal, will inspire you. It's not a childish thing. Having the good qualities of someone (your hero) will help you a lot. So chose your hero, your ideal.
Teach: Robert believes that knowledge is never meant to be kept a secret. It is to be spread. Teach, and you will learn more. Just like you are learning from someone, someone will learn from you.
The End
Congratulations! You made it till here. You are now different than most of the crowd. But just being different will give you nothing.
Rich Dad Poor Dad has millions of copies sold. But do millions of them become Rich? Obviously NO.
Knowledge and planning of your dreams are there, but one thing is missing. Action, you have to implement what you have learned to be successful. Otherwise, there is no point in having all this knowledge in your head.
Goodbye to you all, for now. I hope you become something good in your life and give back. Thanks ❤.
