5 Key Takeaways from "Rich Dad Poor Dad"—A Must-Read Book
Rich Dad Poor Dad is one of the first books I ever read. This small book has taught me more than I ever learned in school or college. It has led me to quit my job and go after things that matter. I have read this book many times and I recommend you to read it if you haven't already.
Robert Kiyosaki, the author of the book, talks about the importance of financial intelligence to become rich. He says you cannot become rich just by getting a job. He points out the importance of learning instead of specializing and says that the rich don't work for money.
Kiyosaki had two dads - a rich dad and a poor dad. He was fortunate enough to learn from both dads. From his rich dad, he learned financial intelligence and how to become wealthy. From his poor dad, he learned what he should avoid in life.
Why You Must Read This Book?
Everybody wants to be rich. If you ask a random person whether he or she wants to become rich, the answer is obviously, "Yes". What most people get wrong is that they think they will become rich by working hard. Hard work is good but you must work hard for the right reasons. If you are working hard for someone else (which is usually the case if you've got a job), then you are only wasting your energy for someone else. Put your hard work into obtaining financial intelligence and you are sure to be rich.
This book will help to identify different ways you can gain financial intelligence. However, don't be under the impression that after reading this book, you will magically become rich. No. You must understand the teachings in the book and use them in your own life. This book will show you the path to riches.
Our society wants us to go to school, get good grades, find a high-paying job, work until we are old, and then retire. It's not that going to school and getting good grades are bad. But you must go to school to learn and not to get a good job. Kiyosaki says that JOB is an acronym for Just Over Broke.
You must read this book if you want to escape the Rat Race and to understand that you don't need to follow what society says. Going to school and getting a job should be a process to learn more. The more you learn, the more you will earn. There are other ways to make money than getting a 9-5 job. These ways will not only make you money but they will make you happier, independent, and free.
Below are some of the important learnings from the book.
1. The Rich Don't Work for Money
Most people work hard just to receive their paychecks at the end of the week or month. They are working for money. Rich people don't do that. Rich people have money working for them. One of the important topics that Kiyosaki addresses in his book is the difference between assets and liabilities. In his words, assets put money into your pocket, and liabilities take money out of your pocket. Rich people invest in income-generating assets. So they have money working for them instead of working for money. Poor people work hard for money and they spend it on expenses instead of assets.
2. Focus on Learning
Rich people spend their time learning. They learn as much as possible. Society tells us to specialize in a profession. But the rich don't do that. Kiyosaki's rich dad told him that we must know a little about a lot. It means you must look to accumulate knowledge instead of accumulating wealth. Spend money on learning, buy books, take courses, attend events that help you learn. Maybe the course is going to cost $100. But the knowledge you receive from it might be able to make you millions in the future, who knows. So, learn as much as you can.
3. Financial Intelligence
You need to be financially literate to become rich. This does not mean you need to be an expert on finance or accounting. You only need some basic financial skills. Financial skills help you manage money. For instance, if you win the lottery and receive $1 Million, how will you choose to utilize the money? Will you spend it, save it, or invest it? How much of it will you have in the next 5 years? Even lottery winners can go broke. That's because they are not financially literate. Kiyosaki says;
Money without financial intelligence is money soon gone. It's not how much money you make, it's how much you keep.
So how do you become financially literate? You need to know only four things - accounting, investing, understanding the markets, and the law. Accounting is the ability to read numbers and understand financial statements and how they work. Investing refers to using the money you have to make more money. Investing can be done in stocks, real estate, bonds, index funds, and so forth. Understanding the markets means knowing about the supply and demand theory. It also includes the basic fundamental and technical workings of the market. Lastly, the law represents an understanding of taxes and legal activities.
4. Invest in Assets
As I said, Kiyosaki talks a lot about assets and liabilities. To become rich, simply invest in assets. Build your asset column and reduce your expenses. That there is the formula to become rich. What are the assets to invest in? Assets include real estate, stocks, bonds, notes, intellectual property, and so forth. Kiyosaki often uses diagrams to explain cashflows. Here is one from his book. The poor spend all their income on expenses. The middle class has liabilities that they cannot avoid and they have further expenses. The rich have assets that generate income. The larger your assets column, the richer you will become.
5. Pay Yourself First
Kiyosaki's rich dad often taught him to pay himself first. What does this mean? It means before you pay taxes or your bills, you must invest in assets. Why? Because assets help you generate more income. But you must also pay the bills. You do it only when you absolutely have to. Rich dad says that when you know that you have bills and taxes to pay, you will be motivated to make more money. In your head, you will be constantly reminded of the payments you have to make. So you will find more ways to make more money.
Find More In the Book
There are obviously a lot of other things that you will find in the book. I've only laid out a few. Once you read the book, you will have a completely different take on money, jobs, learning, and society. I guarantee you that. So, just go on and read the book. It is worth reading multiple times. This book definitely changed my life - my way of thinking, learning, and earning. It will change yours too.
Download the free e-book of Rich Dad Poor Dad here.