In this blog, I want to talk about 5 key learnings from the very famous book of Robert Kiyosaki 'Rich Dad Poor Dad'.
This is the number one book for Personal Finance. If you are understanding Personal Finances, knowing about the investments, the logic behind them. Then this book is for you and this teaches you a lot.
For those who want to watch the video instead of reading it, here is the link:
5 Key Learnings:
1. Know the differences between Assets and Liabilities:
The very problem faced by people is many of them don't understand the differences between assets and liabilities.
➔ An asset is something that puts money into your pocket and earns you money.
➔ Liability is something that takes out money from your pocket. Things that will cost your expenditure will come under liability.
So, the author here says you've to spend your life more on the assets and lesser on the liabilities. In simple words, for example -
● If you're renting any person in your house, then that house is an asset for you. Because the value of the house is increasing and it is providing you with rent as well. You are receiving money in your pocket.
● But if you're buying a car, so that is a liability. Because once the car is on the road, then it'll get sold for a lesser rate. Also, you have to look after its maintenance cost and many other things. To even make the car drive smoothly, you would have to spend money. So that is a liability.
So, this is the difference between assets and liability and your target should be investing in assets more and more. And invest less in liabilities.
2. Make money work for you:
What does this mean? What are you working for? To earn money. Right? So that means the more you give inputs, the more you work, the more you give time to it the more will you earn. So that is called you are working for money.
But the author says that you have to try that money work for you. So, a very simple answer to that will be passive income. Many people would have briefed you about passive and active income, what are they?
So passive income is something that if you have invested money which earns you more money. So, your initial money is earning you more money. That means the money is working for you.
Now how do we achieve this? The simple answer to it would be you can invest in the stock market, you can invest in bonds, you can invest in real estate. Or you can invest in anything which would generate a passive income after some time. Youtube videos are passive income as well.
So you should also focus on your passive income because it is the ultimate game. This alone will earn you money in the longer run.
3. Work to learn and don't work for money:
The simple meaning of this is whatever work you do your target should be to learn as many new things as possible. But you shouldn't work for money ever.
Now how do we do that?
In one job, learn as many things as possible. Then the next job of yours may be the opposite. So get some basic knowledge and go for a job in that field and grow in that. Now that you know the current skill, you can take up a new skill and learn it. So you are working for learning purposes in different places. You are not working for money. Hence, the author asks us to keep on trying new things.
4. Taking risks:
The author says, "I've never met anyone who likes losing money. And in all my years I've never met any rich person who has never lost money. But I've met a lot of poor people who have never lost their time."
It implies that you've to keep taking risks and shouldn't fear them. Many people think that their money will go down the drain so one shouldn't invest it anywhere. Whatever money has been earned, just save it with yourself. But that is not the right thing. Through that, you won't be able to grow much.
You will have to take risks if you wish to grow more. You must not put all your money at risk. Take them following your risk appetite. Usually, you have a high-risk appetite when you're young. Because then you don't have many responsibilities, you don't have to take care of anyone so much and you can directly focus all your money on investing and also enjoyment.
So according to your risk appetite, you should take risks.
5. Financial Education is your greatest asset:
Here, the author says money is not of so much importance. Everyone thinks that money is of utmost importance, but it is not it. Money is not so much important than that of how important financial education is. According to the author, if you have the correct financial education, if you have the right mindset, if you have an open mind, you'll be able to earn money.
But if you observe keenly, many people have won the lottery, got their jackpot hit, won crores in KBC. But still, they couldn't make good use of money, they lose it. Why did this happen? Because they couldn't manage their money properly. They didn't have this financial education.
Keeping your money safe requires financial education.
In conclusion, your target must be to get knowledge from everywhere and keep working on your skills gradually. Keep enjoying, keep taking risks, keep earning!!