Author: Dr. Rohini R
Rich Dad Poor Dad is the #1 Personal Finance book of all time and highly recommended. The book is the story of Robert Kiyosaki (the author) story of growing up with two dads, his real father and the father of his best friend, the rich dad. He speaks about how both men shaped his thoughts about money and investing. The book advocates the importance of financial literacy, financial independence, building wealth through investing in assets, real estate investing, starting and owning businesses, as well as increasing one’s financial intelligence.
Our parents have experienced numerous challenges. However the lessons they learnt from these struggles were not enough to pave the path of financial success for their children today, especially in India. It can be easily observed that almost every other millennial struggle with their personal finances. Even after getting a high paying job their, financial struggles never seem to come to an end. Why is that? A major factor is the lack of Financial Intelligence. This is something most of our parents and education system failed to teach us.
Rich Dad Poor Dad is the most highly recommended book on personal finances worldwide. If you haven’t had the time to read the book or don’t think you would have the time to pick it up in the future, here are some of the important life lessons from the book and hopefully they can help change your mindset towards finances:
• Make Money, Not Just Save Money
Saving important however, times have changed. With increasing inflation and ease of investment today, it is essential for all us to park our surplus money in a strong investment vehicle, so we not only save but also grow our money. This book mentions that we save money for only two reasons:
- Focused Goals: Clarity is power of these individuals. Whether it is buying your dream home within 5 years or saving to launch your business. However, majority of them lack the ability to turn their money into a catalyst
- Uncertain Goals: Fear is the major driver of these individuals. We can simply observe the people around us and we will find that majority live in fear of the future.
The book teaches us that investing excess money wisely can fulfill both goals simultaneously and can make you much more prosperous. Basically your money has to work for you.
• Formula for Passive Income
Passive income is income for which you don’t have to work or may be do a minimal amount of work but earn a consistent income. The book clearly shows how this undoubtedly sounds lucrative. However, it requires an in depth knowledge and research to understand what kind of source you can set up to generate passive income.
There are many ways to generate passive income. A financial advisor can guide you through the same. One of the most common passive income is rental income. Real estate is not as early as it sounds, some points to keep in mind are:
- Shortlist a profitable location
- Accumulate enough wealth to buy property
- Strategy to rent the property
- Financial analysis to earn highest profit
Most importantly, you need to make sure that the income generated is enough to match your financial needs, if not it can become a liability instead.
• Asset vs Liabilities
A concept easy to understand but difficult to apply.The book trashes all our traditional beliefs and motivates us to think objectively. Our parents have taught us that the best asset to buy is a house. What is even worse is we are’s our motivated to take a home loan to buy it and be proud of it, while sinking in debt.
This is where we are absolutely wrong. Its never wise to buy an asset by incurring debt. Especially when the interest on the debt is too high for something we buy an asset for consumption instead of investment. Moreover the expenses to maintain the house like electricity, repairs & others increases your financial burden.
Hence, its best to stay wise and learn to differentiate between assets and liabilities.
- Improve Your Circle
Life is all about the energy you absorb and reciprocate.This is how the world works. Positivity will sow new seeds of inspiration & negativity can drain any motivation we have. We cant avoid or control the energies around us but we definitely can choose what we absorb.
The book guides us to be around the people who are ambitious, hungry for knowledge and people smarter than you (leave your ego at the door). People who talk the talk and walk the walk. Such people will share similar enthusiasm, teach you new things and help you grow everyday.
• High Income Skills
High Income skills are the skills which you are already strong at and can monetise. Individuals who are able to do this are the ones who turn their passion into money making machine.
What you primarily need is self awareness and understand what skills you have and which ones people will pay you for. These skills may be unrelated to your college degree or your day job as a doctor, engineer, teacher etc. Therefore, its time to unlock your unique potentials. You may also use your skills to start your own business. If your current skills are not fulfilling your financial gains, learn new skills. Thing are constantly changing, your existing skills can become irrelevant very quickly and you may need new skills to survive. The author stresses on learning new skills. He says everyone is “one skill away from great wealth.”
You should acquire these skills to put yourself on the path to financial freedom.
- Life skills are important
Life skills, such as effective communication, management of systems and people management sills , etc. are equally important for financial success. These are not taught in school or college. People with great life skills stand out and are on the path to success. Life skills are as important or even more important than academic skills and help you climb the success ladder faster.
Seek help and advise from financial, business and communication advisors.