Why reading rich dad and poor dad?
This book teaches you the basic lessons for money. The lesson that was not taught in any school. We learn about money from our parents, but what if, our parents have poor financial knowledge. And our colleague has no idea about the correct financial education. Therefore, this book becomes useful because it teaches you about financial education.
The Mentality of poor vs. middle-class people.
Middle-Class people teach a single idea to their kids. Stay in school and work hard, so that you will get a high paying job with security.
But schools only provide professional education, not financial education. In today world, it is good to have professional education, but solely depend on your life on professional education is not a good idea. To live your life well, you need to learn financial education. Because it is the only education that helps you to grow your money.
Why bothering myself learning financial education?
Money is one form of power. So if you have money, you have the power. However, money comes and goes. If you have financial education you can force your money to generate money to build your wealth.
Learning financial literacy.
If you want to become rich. You should learn one formula. Most people struggle financially because they do not understand the difference between assets and liabilities.
Asset: An asset is something that adds money in your wallet.
Liabilities: liabilities is something that withdraws money from your wallet.
The only difference that makes rich people richer than poor people is that rich people acquire assets while middle-class people acquire liabilities. If you want to become rich you need to buy assets. The more assets you have the more money you will generate. Likewise, the more liabilities you have the more expenses will generate.
Buying an asset like planting a tree. You water it for years, and then one day it does not need you anymore. The branches of the tree become long enough to give you shelter for years.
The background of taxes.
When you study the history of taxes you will find out that in ancient times. Taxes imposed in wartime. But sooner income taxes become permanent. The idea of taxes was popular and accepted by other people to punish rich people. But rich do not play with the same set of rule and find out loopholes to save money from taxes.
The rich people hide money because they know the power of a corporate sector. The below diagram shows the cash flow of the corporate sector as well as an employee.
The knowledge of the corporate sector give rich people a vast advantage over the poor and middle-class people. Because the income tax rate of the corporate is less than the individual tax rate.
Two emotions that causes you trouble.
It is normal to have the desire to buy an expensive thing, something more exciting, and better. But the joy that brings from money is short-lived and soon they will need more money for more comfort and joy.
The Desire to buying expensive things. Force you to get up in the morning, go to work, pay bills and then enjoy life on remaining. Once they get their paycheck again they spend in buying luxurious items. But they do not realize that the luxurious product was making a hole in their pocket.
The first step is to use your emotions to think, but not to think with your emotions. Once you mastered your emotion and work to polish your skills. You will come out of rat race and will have more than you think.
Method to calculate your Wealth.
Wealth is calculated on the number of days you survive once you stop getting paychecks. Let’s say I have $2000 dollar. Now my monthly expenses were $1000. Then my wealth is two months, assuming thirty days in a month.
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