Reasons why Rich Dad Poor Dad by Robert Kiyosaki is a must read

Written by Kaitholil Storyboard. Last updated at 2022-07-17 12:38:28

Throughout my life, I've read lots of books. Children's books taught me to read, literary classics made me contemplate what it means to be human, and there are even some trashy novels I couldn't put down. But one book has stood out from the rest: "Rich Dad, Poor Dad" by Robert Kiyosaki. It revolutionized my perspective on money and how our world works. It still remains as one of the best-selling books on personal finance.

Whether you love it or hate it—and some people do not like this book—Robert Kiyosaki at least gives us plenty to think about. Regardless of how you feel about his financial methods (which he readily admits is what worked for him), there are many important things we can learn. 

Many of us were taught that debt is terrible and that having a home is the Holy Grail of life. But things are not as simple as that. Thankfully, Robert Kiyosaki has shown us how to turn this traditional wisdom on its head. Here, I'll walk you through crucial lessons from his book about money and wealth, Rich Dad and Poor Dad.

Poor people make money to spend.

The poor can't save any money. Poor have to spend it. The rich are the ones who are able to put their money to work for them, and they do so by buying assets that will earn income for them over time and build wealth.

The thing about spending is that you can spend on something that depreciates (like cars and clothes) or on items that increase in value (like real estate and stocks). Spending your money on depreciating assets means their value decreases after you buy something. Purchasing an investment doesn't mean just buying stuff—it also means investing in yourself through education and other things to make more money down the road.

Rich people buy assets to make money.

An asset-based investment is when you buy an asset that will make you money.

An excellent example of an asset-based investment is a rental property. The rent from the property will pay for the mortgage and maintenance costs, so you don't have to worry about paying off money each month.

You don't need to be rich to start buying assets, either. If you have ₹25000 in your bank account, consider investing in something like real estate or stocks—it could turn into something huge if done right!

Use the power of leveraged income.

Leverage is using other people's money to make your money work for you. It's like having a rich person lend you their money so that it can earn more than just sitting in your bank account.

"If I have ₹5,000 but use my ₹5,000 to buy something worth ₹50,000," says Kiyosaki in Rich Dad Poor Dad, "I am not really using my money." Instead of using this type of leverage (called "debt"), he recommends following his plan. Try to find ways to build assets that return more than what they cost you and then use those assets as collateral to borrow even more money with which you can invest even more.

For example, some individuals want to buy a house but don't have enough cash right now—and have no credit history. They may be able to get a loan based on their ability to pay back this debt through renting out rooms or apartments within the house itself once it's purchased. Do you see how this works? This is called "equity," which means that instead of paying cash upfront into the deal (debt), they're paying with part ownership over an asset (equity).

Don't work for money.

Work for money is a trap. It's a trap that teaches you to work for the wrong reasons and to expect less from yourself.

Start working for the love of doing things. Start working for experience and skills. Start working for memories.

Embrace risk.

In life, you will be exposed to many risks. As the old saying goes, "There are no free lunches." If you want to have something, then prepare to pay for it.

The author says, "You can choose to work or learn to become rich." He added that there are three ways of becoming rich; one is by working hard, another is by having a lot of knowledge, and the last one is by taking a risk.

It's OK to be selfish with your money (but not with your heart)

Whenever you hear the word "selfish," you might think of someone greedy, evil, and unkind. But this is not the case with rich dads. In fact, the rich dad is a good person because he taught his son to be hardworking and intelligent with money. At the same time, he was also selfish because he did not share his success stories or lessons with him. He did not want to see his son struggle like him, so he kept all the information to himself so that his son could have a better life than him.

So what exactly does it mean when we say being selfish? Being selfish means only looking out for yourself without caring about others around you. It also means focusing solely on your goals without considering how they affect others in society and yourself.

The government is a negative influence, and you need to eliminate it. The government does not have your best interests, so its financial advice and policies can harm your wealth-building efforts.

The rich dad's message was clear. If you want to succeed financially, learn how money works from someone who has made money. They know what they're talking about rather than someone who hasn't made any money and doesn't know what they're doing.

Invest in yourself first.

Invest in yourself. This is the best investment you can make. In fact, the more you invest in yourself, the more money you will be able to earn, and the richer your life will become.

What do we mean by investing in yourself?

Invest in "to use (money or time) with or as if to increase value." So when we say invest in yourself, it means that you are investing time and/or money into something that will help increase your value as a human being. Thus increasing your ability to earn more cash!

Make sacrifices today for tomorrow's gain

Patience is a virtue. It's also a skill that can be learned like any other. For example, suppose you are impatient with your kids and always rush them. In that case, they will become intolerant adults with trouble planning for the future.

On the other hand, if you are patient with your kids and let them grow at their own pace, they will become productive adults because they know how to plan things like retirement and savings. They also won't feel too rushed or stressed out by life because they know how to relax whenever necessary!

Your home is a liability, not an asset.

One of the most essential lessons from Rich Dad Poor Dad is that your home is a liability, not an asset. This can be difficult to accept if you've bought into the Indian Dream of home ownership. But if you have an asset mindset and make suitable investments with your money, this will change everything for you!

Why? Because your home is not producing any income for you (aside from some tax breaks), it doesn't count as an asset! It may be hard to imagine selling your house when everything around us seems like such a good investment. Especially since banks keep offering even more loans than ever before. Remember: what looks like a better deal isn't always true!

Good debt buys you income-producing assets.

In Rich Dad Poor Dad, Robert Kiyosaki explains how to get out of the rat race and build wealth. One of the main points he makes is that good debt is debt that buys you income-producing assets, and bad debt is anything else.

Bad debt is any debt that doesn't produce cash flow and takes payments out of your pocket. This includes a car loan, a house mortgage, and credit cards with high-interest rates. — anything where your monthly payment isn't going toward something that either appreciates in value or produces income for you.

If you can't buy an asset in cash, you can't afford it.

The lesson here is that if you can't afford to buy something in cash, you probably shouldn't be buying it.

If you borrow money to buy something, your life will be ruled by debt. Debtors are controlled by creditors they owe money to.

If you are spending more than what you earn, your only option is either credit or selling assets (the latter being a much better choice).

If there is no plan for paying off the debt or investment within three years, stop what you're doing and figure out how this purchase could be helpful instead of just adding it to your current situation without thinking about how it affects everything else around it.

Mindset matters most.

To be successful, you need to change your mindset. It won't make a difference if you're unwilling to do that, no matter how much money or time you throw at the problem. That's why I'm going to teach you three types of mindsets that can help you become wealthy:

The first mindset is called the "Income Mindset." This is where people see income as secondary and wealth as primary. They focus on creating assets instead of making money from their investments.

The second mindset is called the "Assets Mindset." This is where people make money off their purchases instead of investing in them with an eye toward long-term value creation.

The third mindset is called the "Employee Mindset." This involves accepting a job of someone else who then controls your life. They dictate what kind of person you are allowed to be without concern for your well-being or happiness!

The tax collector and the banker are best friends—don't be the third wheel.

The book "Rich Dad Poor Dad" tells you that there are two kinds of taxes: Income and sales tax. This is a mistake because it ignores that interest is also a tax, and it holds even if you don't pay income or sales taxes.

The author says that taxes are the price you pay to live in a civilized society—and he's right! But he doesn't mention that interest is also a tax on the money! Interest is paid when you borrow money from someone else. In other words, it's the price we pay for borrowing someone else's time and/or capital resources instead of using our own. We should call interest "rent" or "leasehold fees" instead because that's all. Rent (or lease) goes back into society through consumption (buying goods) instead of investment (investing in stocks).

Focus on increasing your income through "good debt" only

The main lesson is that you should focus on increasing your income through "good debt" only. This means investing in assets and opportunities, such as owning a business or property, that have the potential to produce passive income. It also means getting out of debt by using some of your money to pay off bad debts before using it for good ones.

The second most important lesson is having a good mindset about money. This means being responsible for your finances. Taking care of business, paying bills on time, having a plan for saving and spending, avoiding impulse buys, and being a good steward of what you own are all part of being responsible. 

Summary

You can learn a lot from this book. The most important lesson was realizing the importance of compound interest and how it works in real life. This shows that if you put your money into stocks, it will grow over time faster than if you just leave it sitting in a bank account.

You can apply these lessons to your life by thinking about how they affect your life and then making changes accordingly. So that they work better for you instead of against you (like when asking for raises). Or maybe even just learning more about what is happening: why do mortgages make sense? What is compounding interest? Why does saving early matter? How does investing affect my financial situation later down the line? We could probably benefit from answering these questions before making big moves or investments!

The idea of a little bit more monthly money and less financial stress sounds good. But most people don't realize they could be doing it by making a few simple changes in their lives, like the ones we've outlined above. So many Americans struggle to make ends meet and are searching for ways to get out of debt—but they often don't know where to start. That's why Rich Dad Poor Dad is such an essential read: it gives you clear, actionable steps toward financial freedom (and yes, there will be some work involved). With Kiyosaki's advice as to your guide, we wish you good luck and hope this article has been helpful!

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