Notes from 'Rich Dad Poor Dad'
The rich buy assets. The poor only have expenses. The middle class buy liabilities they think are assets.
Preface
Robert Kiyosaki had two fathers: a rich one and a poor one. One was highly educated with a Ph.D. and so intelligent he completed his undergraduate degree in only two years. The other father didn’t even finish the eighth grade. While both men worked hard, were successful, and earned a lot of money, there was always one who struggled with money. And the other dad, well, he became one of the richest people in Hawaii.
Rich Dad Poor Dad is Robert Kiyosaki’s best-selling book about the difference in mindset between the poor, middle class, and rich.
Summary
Here is a summary from Tess:
Make Money Work for You
The middle class and the poor work for money. Instead the rich make the money work for them.
- Asset = puts money in your pocket (Generate money)
- Liability = takes money out of your pocket (Cost you money)
Pay Yourself First
To pay yourself first means allocating your money to the assets column, before paying your monthly expenses and bills.
Business vs Job
Keep your daytime job but start buying real assets:
- Businesses that do not require your presence
- Invest in stocks, bonds, real estate
The Most Important Asset
Your mind is your greatest asset, so be careful what you put into it.
Actively seek out ways to grow your knowledge about money and managing your finances. Increase your financial literacy.
As Warren Buffett said, “The most important investment you can make is in yourself.”
What is Your Reason?
Underlying everything that we do, there is a fundamental need we are trying to fulfill.
As with anything in life, you don’t have a strong enough “why” it makes the process difficult when you are faced with setbacks.
Your reason or purpose is usually a mix of “wants” and “don’t wants”.
- “I don’t want to work my entire life and be stuck in the rat race.”
- “I don’t want to live paycheck to paycheck.”
- “I want control over my time and my life. I want to make money work for me so I can be free and travel the world with my loved ones.”
- “I want control over my time and my life.”
Dig deeper and ask yourself these questions.
- “What does being financially free means to me?”
- “Why is it so important for me to gain financial independence?”
Your purpose lies somewhere in these answers.
5 Key Takeaways
To recap, here are the five key main points:
- Make money work for you by Investing
- Always Pay Yourself First
- Know the difference between your Business and your Job
- Your Mind is the Most Important Asset
- Find your reason for financial independence
Among all these 5 takeaways, the last one is the most important.
Find your personal reason and understand why it is important for you to “gain financial freedom”. If you gain clarity on your why, you’ll naturally get to the how. Your journey starts with this step.
Thinking
“The rich buy assets. The poor only have expenses. The middle class buy liabilities they think are assets.”
“The rich don’t work for money. They make money work for them.”
These two statements were enlightening to me. And the phrase “Rat Race” made me realize the reality of my current situation.
With this book, I have started to learn about finance and try to get out of the “Rat Race” dilemma.