6 Lessons to Financial Independence from “RICH DAD POOR DAD” | “Rich Dad Poor Dad” Review

Robert T Kiyosaki has shown the world what actual education is, in the real world. The book dictates its learnings through an engaging story of two men who influenced him greatly in his life. He denotes these men his two fathers, one his real father (poor dad) and the other his best friend’s father (rich dad). This book focuses on financial literacy, financial independence, and building wealth through investing that today’s education system lacks.

Today’s youth should go ahead with their lives and most importantly their finances. This book didn’t take me a lot of time to rate it as the must-read book for all of us and learn from its lessons on finance and get out of this so-called “Rat Race” and attain financial independence.

Target Audience of this book

This book is for the youth who are going to enter the earning space or are already earning. We all have heard this advice from our parents in our childhood, `Go to school, get good grades and look for a safe secure job’. What if I say, following this advice most employees work from January to mid-May for the government just to cover their taxes. That is, they are paying more than their fair share of taxes over a lifetime, with little or no promise of a pension. Shocked? This book has the answer to increase your monthly earnings and your lifetime learnings.

The Learnings

It all starts with the mindset where there are several differences in both rich dad and poor dad. The poor dad usually said “I can’t afford it” whereas the rich dad said, “How can I afford it?”.

One dad recommended, “Study hard so you can find a good company to work for.” The other recommended, “Study hard so you can find a good company to buy”.

The difference between the two statements is that in poor dad’s statement the subconscious mind is asked to accept the situation. Whereas the rich dad’s statement pressurizes the subconscious mind to bring in ideas about how it can be afforded. Accepting incapability is a sign of mental laziness.

Rich dad provides us six lessons that are most important for our financial independence: –

• The rich don’t work for money.
• Why Teach Financial literacy?
• Mind your own business.
• The History of taxes and the power of corporations.
• The rich invent money.
• Work to Learn Don’t work for Money.

Below is a list of all the lessons that we will cover. A click on any of these links will take us to that specific section.

• THE RICH DON’T WORK FOR MONEY
• WHY TEACH FINANCIAL LITERACY
• MIND YOUR OWN BUSINESS
• THE HISTORY OF TAXES AND THE POWER OF CORPORATIONS
• THE RICH INVENT MONEY
• WORK TO LEARN DON’T WORK FOR MONEY
• BARRIERS IN ATTAINING FINANCIAL INDEPENDENCE
• GETTING STARTED
• CONCLUSION

THE RICH DON’T WORK FOR MONEY

“Rat Race” is a trap. It consists of emotions of fear and greed. The trap of get up, go to work, pay bills…. First, the fear of being without money motivates us to work hard, and then once we get that money, fear is taken over by greed or desire of getting all the things that money can buy and finally we get into this trap.

We need to get out of this trap and begin to use these emotions in our favor rather than against us. This can be done by choosing what we think and not going along with the emotions and asking ourselves “Is there anything I am missing here?”. This sole question can break the emotional barrier and lets us think more clearly in the path of financial independence.

WHY TEACH FINANCIAL LITERACY

What is missing in our education system is that it makes us able to earn but doesn’t teaches us about what to do with that earning.

“If you want to attain financial independence, you need to be financially literate”. It becomes more important now to know the difference between assets and liabilities. Assets are those entities that generate income and liabilities take that income out from our pocket. The reason the rich become richer because they acquire assets and middle-class people acquire liabilities.

We should concentrate our efforts on only buying income-generating assets. That’s the best way to get started on a path to attain financial independence. Upon doing that, our asset column will grow. Focus on keeping liabilities and expenses down. This will make more money available to continue pouring into the asset column.

Financial literacy will teach us how to have our increased efforts benefit us and our family directly. It can take us to a stage where we will be not dependent on our monthly wages since our income from assets will be sufficient. That is the moment when we can call ourselves a financially independent person.

MIND YOUR OWN BUSINESS

The author focusses on this phrase since we, due to financial illiteracy fall in this damaging trap. The trap of a lifestyle of owning things that increases debts. It’s important to mind our own business and understand what is better for ourselves in terms of finance.

It’s not about avoiding luxuries, but that should be done once the cash flow from the asset column is generated. If it is bought in this way, the luxury will give more peace to possess. Rich people buy luxuries at the last, whereas middle-class people buy it at the very first. By this, they look rich but in reality, they just get deeper into the well of debt.

THE HISTORY OF TAXES AND THE POWER OF CORPORATIONS

Introduction of taxes was to punish the rich by taking money from them and distribute it to the poor. But every time it is implied, the rich didn’t simply relax, but they reacted and found out legal ways to reduce taxes. It’s about playing the game more smartly and the riches biggest secret to it is making corporations.

As per the author’s quote “Be smart and you won’t be pushed around as much.” He knew the law because he was a law-abiding citizen. He knew the law because it was expensive to not know the law. “If you know you’re right, you’re not afraid of fighting back.”

We come to know the four broad areas of expertise that the Financial IQ is made up of :-

• Accounting or Financial literacy – The more money you acquire the more accuracy is required otherwise all will be lost.
• Investing – The science of money making money. Involves strategies and formulas
• Understanding markets and marketing – The science of supply and demand and the art of selling.
• Law –  This is a critical step. The rich always hire smart attorneys and lawyers who will provide them the knowledge that is useful before investment.

THE RICH INVENT MONEY

Fear or lack of courage is the difference between success and failure. As in the real world, it’s not the smart that gets ahead but the courageous or bold get ahead. If fear is stronger than the genius will get suppressed.

The land was wealth 300 years ago. So the person who owned the land owned the wealth. Then, it was factories and production. The industrialist owned the wealth. Today, it is information. And the person who has the most information owns the wealth. The new wealth cannot be contained by boundaries. The changes will be faster and more dramatic.

We often blame technology or the economy for our failure in the job field. But we forget that the actual fault lies within us. Old ideas are the biggest liability in this scenario. It is a liability simply because they fail to realize that while that way of doing something was an asset yesterday, yesterday is gone.

WORK TO LEARN DON’T WORK FOR MONEY

This generation prioritizes variation in skillset. The main skill is knowing a little about many things. Mastering only one skill can put us in a vulnerable state where any crisis in that particular industry can lead us to a state of lack of career opportunities.

We should look down the road at what skills we want to acquire. Especially before choosing a specific profession and getting trapped in the “Rat Race.”  

Every one of us has got a unique talent but we are just one skill away from acquiring great wealth. That is the skill of sales and marketing. Every product is not of supreme quality but it’s the marketing strategies by which the product gets sold. This skill needs to be learned as this can make a huge impact in making us rich.

Barriers in attaining Financial independence

There are five main reasons why financially literate people may still not develop abundant asset columns. They are FEAR, CYNICISM, LAZINESS, BAD HABITS, ARROGANCE.

• FEAR – We all have a fear of losing money. But it’s not fear which is the problem. It’s how we handle failure that makes the difference. The primary difference between a rich and a poor person is how they handle that fear. As the saying goes “For winners, losing inspires them. For losers, losing defeats them”.

• CYNICISM – All of us have doubts and with that doubt, we start to play the WHAT IF? game. “What if the economy crashes?” Or “What if I lose my money?”. As the rich dad says “Cynics criticize, and winners analyze”. Start analyzing the possibilities and risks and then act accordingly. Rather than listening to people or cynics who themselves don’t do anything except advising.

• LAZINESS – Busy people are the new lazy people. Because they are busy doing all the things except doing things that would make them rich. Every one of us needs to sit back and ask, “How can I benefit from it?”. This question might sound a bit greedy but greed to a certain level is important for growth. Without this little greed, progress is not made. Our world progresses because of greed or the desire for a better life.

• HABIT – Being in the Rat Race, we have inculcated a habit of paying to the government and creditors first and then pay ourselves with whatever is left. The rich dad considers this to be a bad habit. He advises us to pay ourselves first and then to others. As if we do that, the pressure to pay others later will force us to think to find other income options and that would bring us out of the Rat Race.

• ARROGANCE – Arrogance is ego plus ignorance. When we are arrogant, we believe that whatever we don’t know is not important. Thus, it becomes important to educate ourselves by an expert in whatever we don’t know rather than being arrogant.

GETTING STARTED

We are all Financial genius. But this genius lies asleep and needs to be awakened. Rich dad offers us 10 steps to awaken this genius: –

• We Need a Reason greater than reality to attain financial independence. Make a list of what we “don’t want” in the future for they create what we actually “want”.

• Choose Daily – The choice of what we do with our time, our money, and what we put in our heads. This is the power of choice that we all have and above all, we should choose to be rich every day.

• Choose friends carefully – The power of association. Listen to people who have big desires from their life. They are the ones who will take you in the path of financial independence. But never listen to frightened people or the cynics.

• Master a Formula and then Learn a new one – Keep learning new lessons as in today’s fast-changing world, it’s not so much what you know anymore that counts, because often what you know is old. It is how fast you learn. That skill is priceless.

• Pay Yourself First – The power of self-discipline. The people who want to attain financial independence should have this power otherwise it will be an impossible dream to achieve.

• Pay your Brokers well – The power of advice. Information is wealth in today’s time. Make sure you are taking information from good advisers even if they charge high.

• Be an Indian Giver –   This is the power of getting something for nothing. Investors must look at more than Return on Investment (ROI). It’s the assets we get for free after we get our money back.

• Assets Buy Luxuries – The power of focus. Too often today, we focus on borrowing money to get the things we want instead of focusing on creating money. One is easier in the short term, but harder in the long term.

• The Need for Heroes – Heroes do more than simply inspire us. Heroes make things look easy. It’s the making that looks easy that convinces us to want to be just like them. “If they can do it, so can I.”

• Teach and you will Receive – It is one single idea. Whenever you feel “short” or in “need of” something, give what you want first and it will come back in buckets. That is true for money, a smile, love, friendship. As rich dad says “There are powers in this world that are much smarter than we are. You can get there on your own, but it’s easier with the help of those powers. All you need to be is generous with what you have, and the powers will be generous with you.”

CONCLUSION

Now as we conclude we should discuss some “To-Dos” that we can take away from this book in order to achieve financial independence:-

• Concentrate on taking actions more, rather than waiting for something to happen.

• Don’t hesitate to invest in anything that can make progress in our goals.

• Don’t listen to people who have not done anything except giving advice.

• We must go to the market and talk to people, make offers, negotiate, reject and accept. By this way only we can build assets. Don’t think about what will be the correct offer at once because no one can predict that.

• Small thinkers don’t get big breaks. If you want to get richer, think bigger first.

• We should try to focus our lives on mainly two words “done” and “do”. These words signify a proactive nature and this nature will take us to the wealth that we desire.

• We have been gifted by two great gifts: our mind and our time. It is up to us what we do with it. With each paycheck that enters our hand, we solely have the power to determine our destiny. Spend it foolishly, we choose to be poor. Spend it on liabilities, we join the middle class. Invest it in our mind and learn how to acquire assets and we will be choosing wealth as our goal. The choice is in our hands. Every day with every penny, we decide to be rich, poor, or middle class.

Now, in the end, I would like to know from you about this post. Was this helpful? If so, please do share it with your friends and relatives. This small step can bring a lot of difference in your life and your belongings and frankly me too.