Why reading rich dad poor dad?
This book teaches you the basic lessons to grow your wealth.
No matter either you are a graduate student or postgraduate. But, if you want to grow your money you need to learn these lessons.
The lessons, I am going to share is authentic. Even these lessons were not taught in school.
However, some kids learn money-making rules, from parents. But what happens, if the parent has poor financial knowledge.
Therefore, the book is for you. Because it teaches you about financial education.
The Mentality of poor vs. middle-class people.
The mentality of middle-class and poor people is same. However, everyone wants their kids to earn well enough to live life happily.
Middle-Class people think that the kids should go to school, work hard so he will get a high paying job.
But, the untold truth is schools only provide professional education, not financial education.
And, in today’s 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, 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 more money.
Learning financial literacy.
You can see majority of people, struggle financially because they do not know about financial knowledge.
If you want to become rich. You need to learn the difference between assets and liabilities.
Asset: An asset is something that adds money in your wallet.
Liabilities: Liabilities is something that pull out money from your wallet.
You might hear the quote: The Rich Get Richer and the poor get Poorer.
It was a little line that separate rich people from the poor.
Rich people focus to create assets while poor and middle-class people purchase liabilities. If you want to become rich you need to buy assets.
Because the more assets you will create the more money you will make. Likewise, the more liabilities you will have the more bills you need to pay.
The background of taxes.
When you study the history of taxes you will find out that in ancient times. Government impose the taxes in wartime only.
Sooner income taxes become permanent. The idea of taxes is used to punish rich people. But rich do not play with the same set of rule and find out loopholes to save money.
Rich people use the power of corporate sector. Because the cash follow in corporate sector is different from the cash flow of employee.
Here is a cash flow formula for business owner as well as for employee.
Business Owner: Earn > Spend > Pay Taxes.
Employee: Earn > Pay Taxes > Spend.
The concession of the corporate sector give rich people an advantage over the poor and middle-class people. Because the income tax rate of the corporate sector is less than the individual tax rate.
Two emotions that causes you trouble.
It is normal to desire expensive items.
But, the joy that brings from money is short-lived and soon vanish with time. And then, you will demand more money to add joy.
Once you get your income cheque, you will pay the bill and spend the remaining in luxurious items. Then you will have no money at the end of the month.
Because your greed emotion makes you blind to buy expensive items that only help you to look rich. But, in reality, it was making a hole in your pocket.
This thinking will force you to get up the next morning, go to work, and work hard to get the incentive.
The first step is to use your emotions to think, but not to think with your emotions. The author calls this rat race.
Work > Earn > Spend.
Once you mastered your emotions, you can use your emotions to polish your skills.
Method to calculate your Wealth.
You can calculate the wealth on the number of days you can survive once you stop receiving paychecks.
Example: You have $2000 in your bank account and your living expenses are $200 a day. Then, your wealth is 10 days. However, if you reduce your living expenses to $100 a day. Then, your wealth will become 20 days.
At Last: Here are my favorite Quotes from this book.
- A mistake is a signal that it is time to learn something new, something you don’t know before.
- If you want to go somewhere, it is best to find someone who has already been there.
- In the real world, the smartest people are people who make mistakes and learn. In school, the smartest people don’t make mistakes.
- To be a successful business owner and investor, you have to be emotionally neutral to winning and losing.
- Money without financial intelligence is money soon gone.
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Above article is the extract version of the book “Rich Dad Poor Dad” written by “Robert Kiyosaki and Sharon Lechter”.