5 lessons I've learned from "Rich Dad Poor Dad"

5 lessons I've learnt from "Rich Dad Poor Dad"

Robert Kiyosaki and his book "Rich Dad Poor Dad"

If you are an entrepreneur you may have already heard about this financial education book from best selling Author Robert Kiyosaki. He shares his story on how he got educated about money from to different stand points. One was his real dad, also called the "poor dad", and the other one his best friends dad, the "rich dad".  This gave him the opportunity to decide which life he wants to live. Robert also talks about how to escape from the so called "rat race" and shares stories of friends who successfully quit their job and started living their dream live.

Lesson #1: The rich don't work for money

There is a significant difference between earned and passive income. Earned income needs your physical presence and therefore your time. On the other hand passive income is generated trough assets that don't need your appearance. Robert's poor dad earned an income trough his job as a teacher and wasn't financially educated. Mike's dad, the rich dad, was financially educated and understood the principles behind letting money work for you. The CEO of Apple for example still has an earned income. The average Joe also has an earned income. If he gets fired or quits his job he doesn't have any other source of income. Robert Kiyosaki, Warren Buffet or Peter Lynch earn money trough bonds, stocks or real estate and this is exactly why they are so rich.

Robert Kiyosaki tells us that he learnt about this golden rule at a really young age. This helped him to get the right mindset and don't be trapped in his 9/5 job. At the age of 9 Robert and his best friend Mike learnt the principles about making money passively. His rich dad educated him about the forms of a passive income and how to let money work for you. This is called passive income. Most of the people have one source of income which is earned income. This type has the highest tax rate and on top of that you exchange your time, which is limited, for money. Robert learnt early enough how to set up different sources of income that would pay for his desired lifestyle. Because of this important lesson he already knew more about money than his financially poor educated dad. 

The average millionaire has 7 sources of income and most of them are not earned but generated trough assets. Mastering this rule is on step in the direction of being wealthy.

Lesson #2: Know the difference between a liability and an asset

There is a big misconception nowadays about assets and liabilities. Assets put money in your pocket and liabilities take it out of your pocket. For example: A lot of people say that their house is an asset. In reality it is a liability because you have to pay mortgage, a home loan or property tax. That's the reason why your home shouldn't be your biggest investment says Robert Kiyosaki. A much better investment for example would be assets that generate enough cash flow to pay for your apartment. Cash flow generating assets would be stocks, bonds, real estate or dividends. That's what Robert Kiyosaki learnt from his rich dad and what helped him to acquire a good amount of wealth in the last couple of years.

(Picture by: https://www.listenmoneymatters.com/passive-income-ideas/)

 

Another thing he wants to make clear is that earned income is the highest taxed form of income. Capital gains (if reinvested in the market again) have a tax rate of 0%. This is really important because this shows us that the rich pay the least in taxes. They are not smarter than other people but they are financially educated. This is probably the biggest reason why people find it so hard to make money because they don't know to let money work for you. Robert outlines this by a great example from one of his friends.

His friends had a son that needed a car and $3000 dollar to get it. He gave his son $3000 dollar with one request: He had to turn the initial $3000 into $6000 by investing them. His son got a few books on how to do that and got hooked with the idea of creating a passive income. Although he was down almost $2000 his dad was still proud of his son and thanked Robert for his advice. 

Robert worked at a few different companies but always built his asset column so that he can get the Porsche he wanted so badly. That was his motivation and he achieved his goal. He got one of the best 3 sales people at one of the companies (although he was one of the worst at the beginning) and earned more money to invest in his bonds, stocks or dividends. His desire of being financially free and earning income without the need of his physical presence is what got Robert Kiyosaki so wealthy. But there was another lesson that helped him...

Lesson #3: Invest before you spend

He started to invest when he was young and always invested in his assets first before spending his money or paying bills. 99% of the people do the exact opposite for one of two reasons:

1) They think that they will have more money problems if they don't pay their bills first or

2) They think that they should invest the money that remains after paying their bills.

This mindset keeps the poor from getting rich. Robert still paid his bills but he invested in his assets first so that they pay for his monthly expenses. And if you don't pay your bills one month then you won't get into jail and the potential damage is very low. This simple but powerful method of building your asset column first is one of the ways how Robert Kiyosaki got so rich. Not only did he understand the principles behind earning passive income but also how to build his asset column.

Lesson #4: Why the rich pay less taxes

You may think "Oh yeah but that's not legal". But it is. And the rich use these loopholes and you can too But the truth is that the average person doesn't know how to pay less in taxes. They let it happen to them and the rich fight back. The quote "Money rules world" isn't that far off from it's truth.

Robert Kiyosaki has a net worth of around $80 Million (Photo by: https://www.toolshero.com/toolsheroes/robert-kiyosaki/)

Robert Kiyosaki says that the reason why rich people pay less tax is because they know where to put there money and let it work for you. These passive incomes are taxed less than a normal job. This is the reason why Robert wants you to build an asset column. Earned income is taxed more than 50% in some countries, such as in Austria where I'm from. But bonds, capital gains and stocks are taxed far less. The rich don't let the government push them around. It has always been this way and it will probably be this way forever. So in order for you to acquire great wealth you have to let money work for you. This gives you more time and also a lower tax rate.

Lesson #5: You don't have to know anything

Robert always participated at the meeting of his rich dad. Whether that was an accountant, a manager or a salesperson. That gave him the opportunity to learn a simple lesson early. That is surrounding yourself with people that are smarter than you. You don't have to be an A+ accountant because this is not your business. There are extremely good accountants out there and Robert is willing to pay more because he wants to benefit from it. That way he saves tons of money in taxes and has someone doing it for him. It's worth every penny says Robert Kiyosaki. 

He always admired people such as Warren Buffet or Donald Trump. Not because of the character but of there knowledge about one particularly field in the business world. He always wanted to be like Warren Buffet when it came to investing and like Donald Trump when it came to real estate. The best selling author hired several people to look at the market and help him to get the most out of it. Therefore hes willing to pay more money because the people that are smarter than him bring him more money at the end of the month than he paid.

My recommendation

In my opinion Rich Dad Poor Dad is one of the best books out there about financial intelligence. It helped to get a different few of money and showed me things I never even thought of. I highly recommend every entrepreneur to read this book if they want to live a life of financial freedom. It helps you have a clearer idea on how to set up your expenses to live the life you desire.

Get your copy of Rich Dad Poor Dad today and change your life to the better!

Have a good day and keep hustling :)