Thursday, July 18, 2019

Rich Dad Poor Dad - Robert T. Kiyosaki

I read this book many years ago but it did not make sense then - not enough to take any action on. I read it again (thanks to the Book Exchange Program at our colony) and I find a lot of good information that people can use to become financially literate. Robert T. Kiyosaki is a bestselling author, is rich and has also developed games like CASHFLOW which teach financial literacy. If you do not go into depression after reading the book over lost chances, you can do something yet.

The title comes from the lessons he learns from his own educated dad (poor dad) and his friend Mike's rich dad who is busy making millions. First up he debunks the idea that a job will make you rich (today it does actually, if you're in the top league). He says that jobholders work for someone else and just make enough to cover their expenses. His advice appears to be to own the business than work for the business.

First up he says the rich do not work for money - their money works for them. He says one reason why most people cannot think beyond jobs is that they are driven by two major emotions - fear and desire. He describes emotions as energy in motion.

The major lessons from the book. Get financially literate. Know the difference between assets and liabilities - assets are those that put money in the pocket, liabilities are those that take money out of the pocket. If you invest in assets you could finally end up at a stage when your assets do all the work of earning money for you over your living expenses and you can retire. On the other hand if you invest in liabilities that only eat up the money, you will end up with nothing.

He makes a simple observation - the rich buy assets, the poor only have expenses and the middle class buys liabilities they think are assets. Real assets fall into these categories
- businesses that do not require his presence, stocks, bonds, mutual funds, income-generating real estate, notes, royalties from IP and anything that has value, produces income or appreciates and has a ready market.

He sees a house as a liability because you end up paying a lifelong mortgage on it - it does not earn for you.

There is a chapter on corporations which he says as fiction and how the rich profit from them. Corporations spend first and then pay taxes while employees pay tax first and then spend. Clearly he says - get into business if you wish to make money.

Kiyosaki says work to learn, not work for money.  Learn how to sell, how to pitch. It's not about talent - it's he ability to sell what you have. To succeed he says one must know the management of cash flow, management of systems (self and time with family) and management of people. One must know the basics of accounting, investing, understanding markets and law.

Clearly the obstacles for one to become rich and stay rich are - fear (of failure mostly, so they do not take a risk), bad habits, arrogance (which he says is ego+ignorance), cynicism and laziness.

To get started he gives 10 steps.
1. Get a big purpose, bigger than reality. A purpose is a combination of 'wants' and 'don't wants'
2. Use the power of choice daily - decide, invest in education
3. Choose friends carefully, learn from everyone, the successful ones and the not so successful ones
4. Master a formula and then learn a new one
5. Pay yourself first (this is the best one for me). If there is a shortfall he says don't get into large debt positions, keep expenses low, build assets first, don't dip into your savings, find new ways to make money
6. Pay your brokers well
7. Be an 'Indian' giver (whatever you invest, look to get the original back as soon as possible)
8. Assets buy luxuries
9. Have a hero
10. Teach and you shall receive.

The easiest thing to do in this list is no 5, pay yourself first.

There is a fear of money that appears to rule the planet. If one can get over the fear, one can get comfortable with money. One must first examine the relationship one has with money and sort it out. Once it is clear, all else will fall in place.

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