‘I can’t afford it’, shutdowns your brain. ‘How can I afford it?’ Opens up possibilities, excitement, and dreams.
– Robert T. Kiyosaki in his book Rich Dad Poor Dad explains how majority of people are life-long stuck into financial traps, he also explains impressive ways to come out of it.
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There are many such eye opening lines in the book. Once you start reading, your perspective towards finance, money making and investment will start taking another turn. You will start setting up your financial priorities right, to gain financial independence.
I realized that every time I read this book, I learn something new. Financial education is something that our education system has not given the priority in course curriculum. Situation of financial education is worst in our country and that’s why many people suffer from financial crisis. And the main reason behind that is the choices people made when they had money and were financial incapable.
Introduction to the Book and the author –
Neither the book Rich Dad Poor Dad , nor the author Robert Kiyosaki require no introduction, still for those who recently developed reading habits, this is the best-selling book on personal finance for more than two decades. It will always be relevant in understanding how money, finance and corporate world works. Everyone should read and recommend this to all family and friends.
Robert is the author of 19 books, including international blockbuster Rich Dad Poor Dad. He also has co-authored a book called Midas Touch with Donald Trump.
In this book, author uses reference to two of his dads, one his actual dad whom he refers as Poor Dad, who is very well read but struggling with money for his entire life. The other dad is his best friend’s dad whom he refers as Rich Dad who is not highly educated but financially independent and smart enough to build a massive empire of wealth. While growing, author received advice from both of his dads and took conscious decision to listen to his rich dad’s advice about money. Without any further due here are the things i learned from the book
#1. There is difference between being poor and being broke. Broke is temporary. Poor is eternal.
In the very beginning of this book, author explains how the mindset of how you deal with situations can change your life drastically. It is very much important to understand how money works and then you would have control over finance. “you should not work for money rather Money should work for you”. read along to understand more. If you develop the financial IQ by understanding how money works and applu those skills in life then it is not impossible to be financially free.
#2. The Poor and the middle class work for money. The rich have money work for them-
All of us have gotten equal amount of time however how we utilize those time decides our fate. Life pushes all of us around. Some people give up and others fight. Some learn the lesson and move on, most of them quit and very few likes to fight back. If you have no guts, you will give up every time when life pushes you. You will live all your life playing it safe, and you will die a boring old man. It’s not like you did not want to win but for you – fear of losing was greater than the excitement to win.
#3. People lives forever controlled by two emotions: fear and greed
One of the great learning is, how our mind is controlled by two emotions- fear and greed.
First, the fear of being without money motivates us to work hard. Greed or desire starts to buy all the wonderful things that can be bought using the paycheck. It creates the pattern which is known as “rat race”. The pattern of getup, go to work, pay bills. Getting more money does not make you out of this trap instead, it encourage you to increase your spendings. Avoiding the trap is most important than being rich, because being rich only does not solve the problem.
#4. Avoidance of money is just as psychotic as being attached to money
You can hear people saying that they are not interested in money, yet they’ll work at a job for hours. It is important to understand that avoidance of money is equally problamatic as being attached to money. You can’t pay your bills and survival will be harder. At the same time, when you are attached to money a lot without learning to handle fear and greed, you’ll end up being highly paid slave.
#5. Learn to use your emotions to think, not think with your emotions
Financial struggle and poverty is not cused due to the economy or the government or the rich but is fear and ignorance. It’s self-inflicted fear and ignorance that keep people trapped. Our education system does its best job in inciting those fear into us, so that we play safe, follow a well-defined path to be a rat to the race. it is important to inculcate discipline on how to use our emotions to take financial decision without fear and ignorance.
#6. A job is only a short term solution to a long term problem
Most of us think about only our short term problem which is paying the bills. It’s the money that control our lives or should we say its fear and ignorance that control us. Money is really made up, it is only because of the illusion of confidence and ignorance of the masses that this house of cards stand.
We work harder day by day thinking that reaching higher on corporate ladder will solve the problem. We are scared to choose the right way of thinking and having audacity to ask ourselves – “Is working harder in the same pattern going to solve our long term problem?”. Workers work hard enough to not to be fired, owners pay just enough so that worker’s won’t quit and this vicious cycle continues till we retire.
#7. Money without financial intelligence is money soon gone-
There is an Indian saying – ‘पूत कपूत तो का धन संचय, पूत सपूत तो का धन संचय’ which roughly translates to “if you have a dumb son then why bother to earn wealth, and same is true if you have intelligent son”. Hope that make sense! :). If we then invest on us Financial IQ also can be developed . It is critical to understand that even if you work hard and collect wealth, chances are high that you will end being broke, if you do not have financial IQ. same as of those who win millions in lottery and still most of them end up being broke.
#8. Understanding Asset vs. liability – When we get our pay checks we are often tempted to buy many stuffs because of desire and greed. Sometime we purchase things understanding that they are asset however many of those things are liabilities. Asset and liability can simply be understood as – asset putsmoney into our pocket. A liability takes money out of our pocket. Buying home or a luxury car by taking heavy loan is liability not an asset. Most of us will disagree on home part.
#9. Schools are designed to create good employees instead of employers –
A person can be highly educated, professionally successful and financially illiterate. When I was reading these lines , it seems that it is written for me. I hold master degree in computer science from a reputed university, I am doing really good in my profession, cloud security architecting domain, but can I say myself a financially literate? Haah, Big NO! I have started learning finance recently and i am still at primary level. You can also relate to this, or may be Not! Go and read the book in either case, thank me later! 🙂
#10. Why the rich get richer and middle class struggle – The rich are getting richer because they are more literate in different areas than those who are struggling financially. In order to maintain wealth, it is important to understand it.
What is wealth? – It is person’s ability to survive number of days OR simply put “How long will I survive, if I stop working from today?”. Have you ever asked yourself this? I tried once, and the answer was scary. Once you are highly tempted to order something on amazon, ask yourself – do you really need this? Is it asset or liability, if it’s the later, then think twice. It is not how much money you earn makes you wealthy but how you spend it, does. The gap between Rich, middle class and poor’s widen day by day. Because The rich buy assets. The poor only have expenses and middle class buy liabilities which they think are assets.
#11 – Mind your own business, literally! Keep your daytime job, but start buying real assets, not liabilities –
Financial struggle is often the result of people working all their lives for someone else.
Keep expenses low, reduce liabilities, and diligently build a base of solid assets. Once you have solid amount of assets which starts generating money for you. then you can come out of the rat race of working for someone else and have control over your finances.
#12 – Understanding financial IQ – Financial IQ can be sum up as a deep understanding of four broad areas: Accounting, Investing, market understanding and The Law of the land. You also need to have understanding of how you can save taxes without any lawsuits. Because more you earn, bigger chunk is taken by govt. and you end up being milking cow for the land. We all should invest more in the financial education. the more we learn, smarter we become and we have better chances beating the situations. Some great learning platforms are Skill-Share, Medium, Financial books etc. The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth. An untrained mind can also create an extreme poverty that can crush family of generations.
#13. Risks are always there, learn to manage the risk instead of avoiding it – Most people never win because they are afraid of losing. Learning enables us to take risks because risks will always be there. We need to learn to tackle those risks, instead avoiding it. It’s what we do not know is our greatest risk and what we know is greatest wealth.
#14. Humans are designed to learn by making mistakes – The way our education system is designed is silly. It discourages us to pursue the path less travelled by. It encourages us to play safe, follow a known path, mistakes are bad and we are punished for making those mistakes. However this is not how humans are designed to learn something new. We learn by making mistakes. We learn to walk by falling down, same is true for riding bike or writing codes. The same is true for getting rich. Main reason why most people are failure in any domain of their life be it finance or relationships, because they are terrified of losing. Winners are not afraid of losing but losers are. People who avoid failure also avoid success.
#15. You want to know a little about a lot – The world is full of talented poor people. They are poor or get paid way less than what they are capable of. It is not because of what they know but because what they do not. For example – you will find an outstanding developer who can built complx application however at the same time he may be poor in his communication/negotiation skills and due to which he will be paid much lesser than he should. It’s good that you are master in your trade but you have to jack to the other trades as well.
#16.To be truly rich, we need to be able to good teachers as well as good students – You need to be good teacher as well as good students to excel in the field. You need to be able to give as well as receive, to be truly rich. Giving money is the secret to most great wealthy families. You have to be generous towards people and you will be always rewarded for that. We all should be socially responsible teacher who is deeply concerned with ever widening gap between the haves and have-nots.
#17. Obstacle in becoming financially independent – Even if you become financially literate, you may still face obstacle in developing abundant asset that could produce large cash to be financially free. The main reasons are Fear, Cynicism, Laziness, Bad habits and arrogance. The primary difference between rich person and poor person is how they manage fear or behave when the situation comes to take decision. I won’t go in details about these as it will make this article bigger than it is expected. You should refer to the book to know more.
#18. There is gold everywhere. Most people are not trained to see it – Ten commandments to gain financial freedom are :-
– The Power of Spirit: Find a reason greater than reality
– The power of choice : Make daily choices
– The power of association : Choose friends carefully
– The power of learning quickly : Master a formula and then learn a new one
– The power of self-discipline : Pay yourself first
– The power of good advice : Pay your brokers well.
– The power of getting something for nothing : Be an Indian giver
– The power of focus : Use assets to buy luxuries
– The power of myth: Choose heroes
The power of giving: Teach and you shall receive
#19.Final thoughts – Money is only an idea, If you want more money, simply change the way you think. Today world needs more generous wealthy people. The more such people we will have, more will be the the chances of diminishing the gap between poor and rich which is ever widening. The key to financial freedom and great wealth is a person’s ability to convert ordinary income into passive and/or portfolio income. These all are pointless till you actually get up and start taking actions. So take Actions!
With each dollar that enters into our pocket, we and only we have the power to determine our destiny. Spend it foolishly, and we choose to be poor. Spend it on liabilities and we choose to be middle class. Invest it on our mind, learning how to acquire assets, and we will end up choosing wealth for our future. Choice is ours, only ours!
Conclusion – I haven’t read any book in my entire life page to page and word to word. I wish I could have read this book in my teen age or early twenties. Nevertheless, I choose to invest on my learnings to acquire assets and also chose to sharing this knowledge with you and also to coming generations because our and future of our coming generation will be decided by choices we make today, not tomorrow.
Bonus – Below are some links of books on finance and productivity that has helped me be productive and gain financial literacy everyday, have a look! Do not hesitate to invest on books, they are not liability and they will never be!
I wish you a great wealth, philanthropic heart and much happiness. Until next blog, signing off! 🙂
– Qamar Nomani