Book Summary: Rich Dad, Poor Dad

At the core of anything anybody does in their life, is their thinking process. How one chooses to condense their thoughts and emotions into perception is what guides most of one’s money-making decisions. Some say money is the root of all evil, some hold the school of thought that money is power; the lack of it is what causes contention.

In this ambit, there is no right or wrong view. But it is important to open our minds to different alternatives; so that we can make choices for ourselves. Even if it is the one less taken.

Rise above the rat race

In Rich Dad, Poor Dad, Robert Kiyosaki gives his insights on making that choice. According to him, those who perceive money as a means to an end will get stuck in the ‘rat-race’ and are likely to become the poor dad a.k.a those who get by. But those who focus on creating money are likely to become the rich dad a.k.a those who⁷ become rich. He outlines 6 lessons one must follow to increase their chances of becoming the rich dad.

Many people never become rich. That is because all their lives they slog for a job so that they might save enough one day. They chase the elusive stream of money, rather than making the stream flow through their backyard. As soon as one can remove the mentality of ‘working for money’ they become the masters of their fate.

Working for money makes sense. Because the alternative is being unable to fulfil needs, being open to ridicule and having lesser opportunities. We work for money so that we can get that car, that house or that vacation. While it makes sense it mostly stems from fear and desire. Even people who don’t care for the money put in 80 hour weeks and work overtime. In some cases, it’s just like a carrot in front of a donkey to keep it going.

Override fear and desire with truth and logic. “Use your emotions to think, don't think with your emotions”. Pause and exercise your brain to make choices. Don’t let life push you around.

Understand the power of assets

A layman thinks that the more they work, the more they can earn. The more they earn, the richer they’ll become. But a financially literate person will inherently know that it’s not feasible. The more you earn, the more you give away in taxes and maintenance. What is added to your pocket will get subtracted easily. This is why understanding financial literacy is so important.

Understanding the basic difference between assets and liabilities makes all the difference. Anything that adds to your pockets be it now or in the future is an Asset. Anything which takes from your pocket is a liability. A house might seem to you like an asset, but as you get embroiled in property tax, mortgage and maintenance it’s persona as liability will emerge.

The pattern of cash flow is more important than the amount of cash you receive. This also applies to the work you put in or investments in any shape, form or virtue. You may pull off 50-hour weeks but what path is that input taking to give you what amount of outputs?

The rich will buy assets, the poor will struggle with expenses and the middle-class will buy assets that are actually liabilities. Where do you belong?

There is a big difference between one’s profession and one’s business. If you own a fast-food chain, your business may not be in the burgers but in the real estate spots where you open your outlets. If you’re a banker your business is not the bank, it’s just your workplace. What is your business?

Work for yourself first. If you don’t, you will end up working mostly for either a company, a bank or the government. Understand the core of your ‘business’. I.e. what you give and take from life. Do your daily job, work for someone else but make sure to make your money work for you. Maximise your assets to pay for more assets.

Analyse. Adapt. Overcome.

“Tax the rich” is a slogan which has persisted through time. So why is there still such a disparity between the haves and have-nots? The rich always find a way, they’re always insecure about their wealth. Always be en-guard.

Financial literacy comes with the understanding of Accounting, Investing, Markets and the Law. One doesn’t need to dive at the deep end to understand the simple transitions from balance sheets to an income statement. Or the common sense of supply and demand.

The thing is that money is not absolute. If it was gold once, then it is crypto now. The rich create new forms of money and understand the many implications of Game theory to get it right!

Don’t depend on paychecks, promotions and bonuses to create your wealth. Use your money to create more money. This is much easier said than done because making the first step requires one to be bold.

To go against the orthodox stream of progress, one becomes vulnerable to ridicule and uncertainty. This is where financial intelligence kicks in. It teaches you how to continuously and calmly evaluate uncertainty. Embrace the change, earn from it.

And finally, know a little about everything instead of specialising in one thing for a particular industry. No learning is ever wasted, especially in this age of information and massive flux. Cross-functionality is key.

Overcoming fear, cynicism, laziness, bad habits and arrogance. Don’t convince yourself that you cannot afford instead ask yourself- “How do I afford this?”

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