What Rich Dad, Poor Dad teaches us?

Many people across the globe earn enough and still struggle to make both ends meet. Most of these people work hard, buy new things, but yet, at the end of the month they are left with no or a minimal amount in their hands. Many economists and investors have talked about this phenomenon in different ways. Some have even written books on this. "Rich Dad, Poor Dad" is one such a book which has become very famous!

Here, Robert Kiyosaki, the author of this book who is also a known businessman and investor in the USA, has shed light on the financial struggle of people and how he learned to overcome this struggle and lead a wealthy and successful life. He calls this struggle as "RAT RACE". This book is what his personal experiences have taught him; how his two dads (Biological father- poor dad and the father of his friend- rich dad) has, directly and indirectly, showed him the way of leading a sustainable and financially independent life.

This book will help to understand how we have the potential to escape this "rat race" and lead a life of financial independence.

The general belief is that you must go to school, earn good marks, get a degree from known college, and apply for the best possible company; your life is set, right? Most people think that getting a good job will make them financially independent! Even our education system is theory-driven, which is of the causes of financial illiteracy in India. We all are taught how to work for money. But, anybody hardly teaches us how to make money work for us.

Hence, people hardly know how to handle money; what most of us know is how to spend money.

No wonder, most of us work for a monthly salary or monthly client's payment.

Here are a few lessons for us from 'Rich Dad, Poor Dad'':

1. Acquire assets, not liabilities:

Many people do not know what assets and liabilities mean! We are taught to either spend or save. Most of the time, when we spend money, we are adding to our possession of liabilities. A classic example would be an automobile. After buying a car or bike, most of us consider it as a possession. It is a possession, not an asset. Assets add money in your wallet; liabilities take out money from your wallet. Rover Kiyosaki says that the only way to achieve financial independence is to accumulate money-generating/income-generating assets.

This thought is unlike the thoughts of most people around you; however, if you are seeking a life where you control the money (and not the other way around), you will have to think differently than others.

2. Invest in becoming rich

Some people earn enough money but still complain about not having enough luxurious things. This happens because their income and expenses go up hand in hand. The more they earn, the more they tend to spend. Their assets 'don't increase, but their liabilities do. Such people don't work for themselves. They earn for their boss, the government (by paying taxes), and the banks (by helping to pay off the debts). The more they work (with the same monetary habits), the more they serve these three parties.

People become rich when their assets are earning enough money for them, and are this income is more than their expenses. Such people invest part of this income in new assets, which again help in generating extra income; and the cycle goes on!

Reinvesting income into new assets, which are giving returns with the compounded interest rate, was once referred to as the "eighth wonder of the world" by Einstein.

Here are a few income-generating assets:

Stocks

Bonds

Mutual Funds

Businesses where your physical presence is not needed.

Real estate

Apart from the lessons mentioned above, here are a few more lessons from the book Rich Dad, Poor Dad:

• Most people rely on the profession to earn money; smart people rely on their assets.
• Luxuries to be brought last.
• Create enough cash flow before making an expense.
• Excess income should be reinvested into other assets
• Focus should be acquiring more assets, not income.
• Reduce liabilities.
• Have a corporation to protect your assets and reduce taxes. A corporation earns, spends, and then gets taxed on what is left, unlike employees.
• Learn investing before making investments.
• Pay yourself first, not last.

3. Learn a selling skill

One example is given in the book, where a woman holding the English Literature master's degree asks Robert how she can become a best-selling author. Kiyosaki suggests her to go for a sales training course. He says, if you see the cover page of most of the successful books, it says 'best-selling book’ not 'best-written book.' It is essential to learn to sell your skills. Selling and networking could help you become rich.

4. Fear and self-doubt could assassin your growth

Do you know what keeps a poor or middle-class person from becoming rich? It is their risk-bearing capacity. Those who are scared of losing money would never be able to earn more. The difference between rich people and poor people is mainly due to how they handle their fears and insecurities. "Poor dad" always play safe and stay away from risks. This might help in the short-run, but it is still costly in the long run. As "Rich Dad" says, in the real world, it is often bold people who go ahead, not the smart one.

5. Look at the brighter side, look at the opportunities

The rich always never say or think, "I can't afford it." Rather, they ask, "How can I afford it?". This small change in the statement changes the whole perspective of the person. The brain gets shut for all the relative negative thoughts and starts looking for solutions. The second thought opens your mind to think of "possibilities, excitement, and dreams." Robert says that the majority of the poor and middle class are thinking, 'I can't afford this’! This has to be changed.

The book is a must-read for all! Even if you are a student, you have got to read it. It might help you in making better career choices too. There are many other things mentioned in the book related to money, cash flow, business, investment, and overall financial management.