The book by Robert Kiyosaki, "Rich Dad, Poor Dad" openes the eyes to the world of wealth. We can learn the fundamental differences between how the rich think and act toward money compared to everyone else.
There are four crucial lessons from "Rich Dad, Poor Dad" that can change everyone's financial life:
1. Most people work for money — rich people have money work for them
This lesson has become such a cliché that many consider it to be a myth. But it's absolutely true.
Talk to just about anyone about how to make money, and the conversation will inevitably gravitate toward jobs. That's not wrong thinking either, at least not early in your life. The first step toward building wealth is generating a basic income. If you have no assets, and no skills you can sell to the general public in exchange for money, a job is certainly the most convenient way to produce a cash flow.
But the difference between rich people and everyone else is that the rich don't stay in the job phase for very long. They realize early that to become rich, they need to become the people who hire others into jobs, and not a job holder. By contrast, the rest of us typically spend our lives in the job phase. And we're trapped once they believe that a job is the only way to earn money. That locks you into working for money for the rest of your life.
But the rich learn the virtue of becoming business owners early. And running a business is, more than anything else, about learning how to leverage resources and people to earn more money than you ever could by exchanging your own labor for a wage.
For example, as a business owner, you can gravitate toward your talents — those skills and abilities you have that hold the greatest potential for you to earn big money. Once there, you can either hire others as employees or use subcontractors to do the work that generates the income. Essentially, you become the overseer of the business, rather than a front-line worker.
As the business becomes more profitable, you invest some of those profits into building your business and increasing your income. 2.It is not about how much money you make; it's about how much money you keep.
The concentration on conserving money is one of the characteristics that distinguishes the wealthy — particularly the self-made wealthy — from the rest of the population.
One of the fundamental obstacles for most people is that budgetary priority goes to spending. Saving gets only what's left over. For example, let's say you have a net household income of $5,000 per month. After paying necessary expenses and a few luxuries, you have $250 left to put into savings.
That means only 5% of your net monthly income is going into savings. And in many households, even that amount is swallowed up by unexpected expenses. In others, the amount seems so insignificant the savings effort is abandoned entirely.
The situation is very different among the rich, particularly among those who aspire to become wealthy. Though financial planners may recommend saving and investing 10% or 15% of your income on a regular basis, the aspiring rich may save 30%, 40%, and even 50% or more of their income.
There's no question that saving that amount of money can only be accomplished if you can successfully live well below your means. That arrangement is usually temporary. As savings and investments grow, so does the income they generate.
Let's work an example using the same $5,000 monthly income we used above. The only difference is this person saves and invests 50% of his income each month, or $2,500. Assuming an average annual return on a portfolio of stocks and bonds this saver will accumulate over $1,276,000 in just 20 years.
In other words, he'll be a millionaire within 20 years. And that doesn't even reflect the fact that both his income and his savings and investment contributions may increase over the years. This is an illustration of how much money you keep makes a bigger difference in the long run than how much you make.
3.Rich people amass assets, not liabilities that they mistake for assets.
One of the major misconception so many people have about rich leople is that they all inheriated their money. But that belief set is completel,self- defeating. This is the exact opposite of many other people think. Embracing the consumer mindset of the media and advertising culture, they instead "invest" their money in personal possessions they believe to be assets. Probably the best example is the family home. Most people think of it as the biggest asset they have, and even devote a disproportionate percentage of their income both to acquiring and maintaining it.
But even while a house can build value over time, it's not an income-generating asset. Quite the opposite: It costs you money to keep it. It's really not an investment until and unless you sell it, take your cash, and invest it in something that will produce income.
Other non-income generating "assets" include cars, recreation equipment, furniture and entertainment equipment, and vacation homes. All may feel good to own, but none generate any income.
Typical assets acquired by the rich include stocks, bonds, investment funds, income-generating real estate, real estate investment trusts, and businesses. What all have in common is that they either have the ability to generate a steady income, increase in value, or both.
Over time, the growth in income-generating assets results in a higher income. Eventually, the income being produced by those assets may be sufficient for the owner to live comfortably without having to work anymore.