I just came back from my vacation from Mexico and had the chance to read the so-called book Rich Dad Poor Dad, one of the most popular books in the personal finance sector; the book is about two dads (one being the biological father of the author and the other being the author's best friend's father) who embark in their journey with money. The author explains how he learned finance from both of his two fathers and how he applied their teachings in his life.
If you are new in the financial world and looking for a guide, this book sets the foundation of the DOs and DONTs for financial success.
Tip #1 - The rich don't work for money; they have money working for them.
The main difference between the rich and the poor people is that the poor work all their lives to increase their paycheque while the rich have money working for them. The rich invest in assets that increase in value; assets that produce passive income like stocks and bonds, or assets that bring in fixed income recurringly like real estate. The rich are not actively working to increase their cash flow, but rather smartly investing in appreciating assets while the poor are always looking to increase their paycheque by working longer hours or by taking higher pay salary with no consideration of investing in income-producing assets. So if you want to get rich, have money working for you.
Tip #2 - Your home is not an asset
Middle-class people work all their life to save up to buy real estate properties that they never end up owning. According to Kiyosaki, owning a home is not an investment as we have monthly mortgage expenses which decrease our earnings. Anything that increases our expenses is not an asset. Indeed, in his book, the author goes on explaning the difference between assets and liabilities. Assets are what you own and liabilities are what you owe to others. Assets put money in your pocket while liabilities take money out of your pocket. The biggest mistake that people commit is not knowing the difference between assets and liabilities.
Rich people buy assets while poor people buy liabilities thinking they are assets.
So here is the suggestion - instead of buying a house, invest in real estate properties that generate recurring monthly income like a duplex, commercial buildings, etc which can be used to reduce your monthly expenses.
"The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth." – Robert Kiyosaki
Tip #3 - Do not work for the government, bank, or employer. Be your OWN BOSS
The harsh reality is you work for three entities: government, bank, and employer. You are working for only one entity, but for three! In our daily job, we work for our employer to deliver services that make all the stakeholders happy. The money that we earn goes first to the government through taxes, and the rest goes to the bank if we have a mortgage to pay. So what's really left at the end? We work to feed others and to make them rich. We are all slaves of this reality.
According to Robert Kiyosaki, instead of being an employee, you should be your OWN employer.
Tip #4 - Buy assets that do not require your presence:
If you want to be rich, buy assets such as stocks, income-producing real estate, bonds, notes, and royalties. If you want to be rich, your focus shouldn't be on increasing your paycheck, but rather on buying assets that appreciate in value and that do not require your effort and supervision.
Tip #5 - Work to Learn
We are always enticed to take a job because either it has a fancy title or because we are being offered a big fat cheque, but no one ever takes into account the learning part. According to Robert, you should say YES to a job only if there is a learning process and a steep learning curve because it will only keep you fulfilled and satisfied. You will feel like going to work and be stimulated by the learning process. Choosing a job that offers $100k, but then it is dull and mundane will produce no rewards.
Tip #6 - Do not let your fears drive your investment decisions
Humans are driven by fear and greed. Emotions and biases are always part of our decisions. Think about when the markets are volatile, investors panic and sell everything. The same happens when we are looking for a job. We always want more because we are scared of the unexpected and we have no liquid cash in hand. We are always chasing for more at the cost of sacrificing other things in life like personal time, family time, etc. For instance, when we look for a job, our first concern is getting the highest salary possible. In those situations, try to separate your biases and emotions and make decisions objectively with the big picture in mind. In this way, we will avoid making wrong decisions based on our feelings.
Tip #7 - Educate Yourself
"There is gold everywhere'' - this is the core message of Robert Kiyosaki. Invest your time in building knowledge through podcasts, seminars, and courses. The more you know the better it will be for you to make a decision. The goal is to know a little bit of everything so you can definitely identify opportunities that others do not see.
Building financial wealth doesn't have to be hard. When we think of money, we are often fearful, anxious, and confused about what money management entails. It is all about education and following simple steps as Robert Kiyosaki explains in his book.
So if you are ready to embark on your money journey, I definitely encourage you to pick Rich Dad and Poor Dad.