Do you ever wonder how other people have it easy while you can’t keep up with your monthly dues even if you work double time? If you are, then you are not alone. So many people want to become rich but aren’t aware of their habits that are slowing them down towards achieving their goals.
In this article, you will learn about the key points mentioned in Robert Kiyosaki’s book, Rich Dad Poor Dad. It will help you realize what you’ve been doing wrong and how you can attain financial freedom. Here are 10 key takeaways from the book.
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What’s the Book, Rich Dad Poor Dad All About?
Rich Dad Poor Dad is written by Robert Kiyosaki and Sharon Lechter. It eventually became a New York Times bestseller. On its 20th anniversary, Kiyosaki said that about 40 million copies of the book were sold in different parts of the globe.
The book tackled the importance of building wealth by increasing your financial IQ, investing, starting a business, gaining financial independence, and financial literacy. The “rich dad” in the title was referring to the father of Kiyosaki’s friend who became wealthy through intelligent investing and entrepreneurship. On the other hand, the “poor dad” was based on the character of the author’s father, who never gained wealth despite working hard all his life.
Top 10 Key Takeaways from the Book: Rich Dad Poor Dad
1. Rich people know how money could work for them instead of the other way around
Many people think that they can only acquire money by getting a job. While this is true, you must never allow yourself to get stuck at this phase. Getting a job is the most convenient way to get the cash flowing.
But if you want to get rich, you must not be content with the steady cash flow. You have to aim for more.
How do you get it done?
First, you must not fall into the belief that it is the only way you will earn money. This kind of thinking will only make you work for money for as long as you hold on to that notion.
Many rich people set their minds early on that they want to become business owners. They do this by leveraging their resources and tapping into their abilities and skills. Instead of getting stagnant in the job phase, they venture into businesses that give jobs to others.
If you have invested in a business, you will maximize your potential and skills to make it work and profit from the venture. This will allow you to subcontract or hire people to do work to produce the business’ income.
Bottom Line:
Being an employee can limit your cash flow. What you can do is either run a business on the side or focus your efforts on one.
As you gain more profit from the business, you expand or invest the money in other ventures. In short, you look for ways to make money grow that will make the business more profitable and you, as the business owner, richer.
2. It’s more important to keep track of the money you save than the money you make
The problem for many people is that they don’t prioritize saving, but most of their money gets spent and only afterwards they save whatever is left.
For example, a household that earns $5,000 monthly spends most of the money buying necessities and luxuries and paying bills. More often than not, they will only have 5 percent left for their savings, and in other instances, there won’t be anything left at all.
What happens often is that something unexpected comes up that will require you to spend what you intend to save, or you think that the money left is insignificant, so you no longer bother saving it.
How do you get it done?
Rich people or even those who still aren’t but are focused on getting there pay more attention to their savings. While many financial advisers would recommend investing and saving 10 to 15 percent of your monthly income, those who are keen on becoming rich would go beyond that percentage. They would make ends meet even on a tight budget to allocate 30 to 50 percent of their regular income to their savings.
You may think that it is hard, and it is, especially when your income isn’t that much. But the point here is to make it your goal to save no matter how much you are earning. It may require you to give up certain things you’ve always wanted to buy or downgrade certain parts of your lifestyle, but it will all be worth it in the end.
From the sample above of $5,000 monthly income – if you will save and invest half of it each month in bonds and stocks, there is a possibility that your $2,500 a month will grow into more than a million dollars in 20 years.
Bottom Line:
Becoming rich is hard work. It’s a process, and not unless you win a lottery. It will not happen overnight. You have to give importance to what you save, even if it means living a simpler life while you are still on the road to becoming richer.
3. Rich people choose wisely when it comes to acquiring assets
Not all rich people get their wealth through inheritance. Many of them worked hard and saved harder to get where they are. What differentiates self-made millionaires from people who find it hard to get rich is that they don’t embrace the consumer mindset. Rather than spending on what they see in advertisements or whatever’s trending, they invest their money in anything they regard as an asset.
How do you get it done?
You have to focus on income-generating assets instead of spending too much money on possessions that may depreciate over time. A good example is a family home. Even though its value can build through the years, it isn’t enough to generate income. You can’t consider it an investment unless you sell the house and invest the money in an income-generating property.
Aside from a house, you must also learn not to invest too much of your money in other assets that won’t generate income. These include vacation homes, entertainment equipment, furniture, recreational tools, and cars. Instead, you should invest in income-generating assets, such as businesses, real estate investment trusts, real estate, investment funds, bonds, and stocks.
Bottom Line:
Income-generating assets will shoot up in value, generate income, or both, through time. As a result, they will yield higher income, making it easier for you to become rich and live a more comfortable life.
4. You are likely to experience financial dilemmas when you stick to working for someone else for the rest of your life
This doesn’t mean to put a negative connotation to people who are employed, especially those who have been working for other people most of their lives. It only aims to give you some enlightenment about what’s hindering you from getting rich.
While you are earning money from your employment, you are constantly trading time for your wage. Since you can only allow limited time for your work, your potential earnings are also limited.
Your employers are also bound to the salary they can give you no matter how hard you work, the quality of your output, or your position. So, for example, if your work has a pay range from $30,000 to $50,000, your employers will not give you more than $50,000 even if you have exceeded their expectations of the kind of work you can provide.
How do you get it done?
You don’t have to jump right in, quit your job, and start a business, especially if you don’t have the capital. Instead, you can invest in your skills and start selling them to the public or on a business-to-business basis.
You own your time when you are self-employed. You can set the limit of how much work you are willing to accept and how much time you will allot for them. You can easily earn $50 per hour in this setup, depending on your skills and speed.
You can take courses on the side to improve or add skills. This will make it easier for you to earn more per hour or create additional business sidelines that are more profitable and challenging.
Bottom Line:
If you can’t start a business but want to get rich faster, the next best thing is becoming self-employed. This way, you will own your time, and you won’t be limited by the set work hours in an office setup. You are also entitled to benefits, which you can invest in, such as retirement plans, like the Solo 401(k) and SEP IRA.
5. People who love taking risks have higher chances of getting rich than those who are prefer being confined in their safe zones
The title of the book, Rich Dad Poor Dad, pertains to two fathers. The rich dad, the father of the author’s best friend, created his wealth. Rather than avoiding, he accepted risks and learned how to manage them. He believes that it is his responsibility to create his wealth. As a result, he surpassed mediocrity and gained more than what he could earn had he stayed employed and working for other people.
The poor dad pertains to the author’s father, a Ph.D. academic degree holder focused on job security, good company, and a high and stable salary. He was more into promotions, benefits, and perks of the job.
How do you get it done?
No matter how intelligent or how good the “Poor Dad” is, as long as he stays in his comfort zone, he wouldn’t be able to seize his maximum potential and other opportunities. He will only be as rich as the highest salary his employer could afford to give him.
On the other hand, the “Rich Dad” can gain more by thinking out of the box and investing in ventures that could land him his fortunes.
Bottom Line:
Education is important, but what you do after is more crucial. You always have two choices – be bound in an employment contract that sets a limit to how much you could earn, or be the boss of your own time or your own company or business to speed up the process of making more money.
6. Do not get trapped in a rat race
A rat race is a meaningless pursuit. In the book, Kiyosaki defined it as the trap that you allow yourself to get into by depending solely on your salary to make a living.
How do you get it done?
When you rely on your salary, you spend according to how much you are getting. Upon promotions or salary increases, you tend to upgrade your expenses and lifestyle. If you allow this pattern to go on, you will never be able to get out of the trap. You become content with what you are getting and adjust the way you live depending on your wage that you tend to forget the bigger world outside of your box that could make you richer and more fulfilled.
Bottom Line:
You have to get out of the rat race before you get trapped.
7. Play to win and get rid of the “I can’t afford it” kind of thinking
Two factors affect negative thinking and bad decision-making – fear and greed. You do not want to get out of your security zone because you are constantly afraid that you’ll never make it.
How do you get it done?
Change the way you think and feel. For example, instead of making a negative reply without trying, start by asking how I can afford it? This will make it easier for you to get rid of the fear and greed and start challenging yourself to do more and achieve more.
Bottom Line:
You have to make money work for you, and you can only do that when you begin looking for opportunities to start your own business or become self-employed.
8. Invest in yourself
If you lack the confidence that you can make it big even if you quit your regular job with a fixed monthly income, the problem may lie in your uncertainties with what you can do. It will be easier to answer the question – how can I afford it, when you have a clear idea about what you can do and offer.
How do you get it done?
You have to start investing in expanding your skills and knowledge about financial literacy. You can attend seminars, enroll in classes, or read books about the matter. You can also start hanging out with people with the same interests, so you can expand your network while gaining insights from them. You can also hire people to work with you or teach you what you need to know to start investing and making it work to your advantage.
Bottom Line:
There are times when you will be lucky to get lots of money at once. However, this does not guarantee that you will become rich. Without financial intelligence, you will risk losing the money even before you can put it in a profitable venture or investment.
9. Learn how to become tax efficient.
There’s a huge difference between an employee and a corporation getting taxed for their services. An employee earns money by getting a salary. Tax is deducted from the salary, so they do not get the full amount of what’s due. After the taxes have been deducted, an employee needs to make ends meet with whatever amount handed to them.
On the other hand, a corporation earns money – from the services, transactions, and hard work of their employees. It spends money to expand the business and make it grow and gets taxed on the money left after everything is done.
How do you get it done?
You have to make taxes work for you and not earn a living to pay them. It is easier to get this done when you are the employer and not the employee.
Bottom Line:
Earning money is not enough to make you rich. You have to consider all aspects, including the taxes you pay and what for.
10. Do not rush
You don’t have to rush things and quit your regular job all of a sudden to start a business. Do things only when you are ready physically, emotionally, mentally, and most important of all, financially.
How do you get it done?
Save up while you are still tied up to your full-time job. This will make it easier for you to acquire enough money to invest, start a business, or become self-employed.
Bottom Line:
There is a right time for everything, and if you want to become rich, you have to make calculated steps towards the fulfillment of your goal.
Final Words
The goal of becoming rich may sound too good to be true, especially when you are a regular employee with an income only enough to pay your bills. However, this doesn’t mean that you can’t make it. You can start by reading the book Rich Dad Poor Dad and take its financial advice to heart.
