My 5 Biggest Takeaways From Rich Dad, Poor Dad.

A classic eye-opener that changed everything I thought I knew about money.

Robert Kiyosaki's book Rich Dad & Poor Dad has changed many views on money and finance. It is the first classic book I read about money and finance and I am glad that I did so at an early age. It was an eye-opening read that inspired me to start acquiring financial literacy for my own financial circumstances. Every chapter was full of wisdom and I am sure reading it yourself will confirm that.

Here are my 5 biggest lessons taken from the book.

1 ) Master the power of fear and greed

He stated that our life is controlled by only two emotions: FEAR and GREED. Fear of not getting enough money to pay the bills and greed/desire of spending on things we want. And if these two emotions are left unchecked, it will lead us to the trap of constantly chasing paycheque, pay raise, and job security without realizing that all these are simply carrots dangled right in front of our noses. We will never get enough and tomorrow will always be like yesterday. Work and bills. It is what Robert describes as The Rat Race trap. It is also our fear and ignorance that makes us shift the blame for our situation to the government, the economy, the company, and the boss. The only responsible for your financial struggle is no one but you alone.

2) Financial education is more powerful than money

Robert believes that more money doesn’t mean anything without financial education to manage and keep it. What keeps money is not a job but deep financial education. To be financially educated, you need to master these:

Accounting The ability to read and understand what the numbers tell you.

Investing The science of money making money.

Markets The science of supply and demand

Tax laws The ability to understand your rights and fight back in your favor.

3) Build, and focus on assets, not liabilities and income

One of the biggest lessons to be learned from the book is the ability to differentiate between an asset and a liability. Robert’s explanation of these two is so simple. An asset puts money in your pocket. A liability takes money from your pocket. Based on this simple view, he argued that buying a house to live on or a car to drive cannot be considered an asset because you have to keep spending money on them without getting a penny in return.

Rich people acquire assets. The poor and the middle class acquire liabilities that they think are assets.

The critical lesson here is: Understand the difference between an asset and a liability and once you do so, buy assets and keep liabilities low. That’s it!

The reason you should not only focus on income is that an increase in cash will only result in an increase in spending. No matter how much money you make, you can always find things to spend it on faster than it took to make it. You better focus your energy on building your asset side with income-producing assets and keep the liabilities and expenses low. Assets can be:

• Stocks
• Bonds
• Real estates
• Royalties
• Anything that produces income or appreciates in value ( gold, bitcoin etc…)

For more reasons why you should not only focus on cash read my article about inflation here.

4) Learn to manage risks not avoid them

People who avoid failure also avoid success

For most people, in Robert’s view, the pain of losing money is way more significant than the joy of making money and this is what leads us in thinking that we are playing it safe but in reality, we just avoid opportunities altogether. It is just like riding a bike, falling is part of the learning process. When it comes to money, there is no safety heaven, and if your main objective is avoiding risks rather than learning how to manage them, the best bet for your money then is under your mattress, and to make matters worse, money is not even safe under a mattress thanks to inflation. There are always “WHAT IFs ?” “What if the economy just crashed after I invested?” “What if things don’t go as planned?” These types of questions are worth asking but are not an excuse for not learning and trying.

School has conditioned us to avoid mistakes and punishes students for making them. In the real world, I’ve learned that mistakes if acknowledged and evaluated and used as a tool to make better decisions in the future are invaluable. A little fear can be a healthy thing, but we shouldn't live in fear of making mistakes. Mistakes are good things if we find the lesson in every failure.

Trying to avoid failure is a wrong move because it is what inspires winners and defeated losers.

5) Pay attention to your associations

You’re the average of the five people you spend the most time with. — Jim Rohn

This lesson not only applies to money but generally to all aspects of life. There is no doubt that our surroundings have a massive impact on our thinking and decision-making. As an old saying goes. Tell me who your friends are, and I will tell you who you are. Spend time with friends who have information on where the money is being made and avoid those who only talk but do no action. That is what financial intelligence is

Final words

Rich Dad & Poor Dad is a book I always recommend to those who are young and new to money and investing because of its simplicity. It is a good point to start and the principles taught in it too, are worth storing in the back of your head.

I am not in any shape form a financial adviser and none of this is financial advice. It is only for educational purposes.

Thanks for Reading!