There are some must-read books on personal finances that will help you develop good saving and investing habits.
One of them is Robert Kiyosaki’s Rich Dad, Poor Dad, a must-read if you want to learn about personal finance.
Now I’ve interviewed Robert three times on this podcast and while I don’t agree with many of his views on Real Estate, and I definitely don’t agree with his views that we’re heading forth an economic Armageddon, I respect the lessons I learned from him many years ago on personal finance.
So today in this podcast with Mark Creedon, founder of Metropole’s Business Accelerator Mastermind, I’d like to share 20 lessons I believe you should understand from his great book Rich Dad, Poor Dad.
At the end of today's show, I hope you learn a few new things about money and finance and that I will have reinforced a number of things you already knew, and maybe we can help you escape the vicious cycle of working hard your whole life.
Many people work hard but never seem to earn enough; they remain in what is called the “rat race” and never achieve financial independence.
The main reason this occurs is that people are not financially literate.
They learn poor habits from their parents and those around them as they grow up and then when they go to school the education system teaches them how to work for money but doesn’t teach them how to make money.
In the 90s Robert Kiyosaki wrote his bestselling book Rich Dad Poor Dad and shows his readers a way out, a way to get ahead financially.
In his book, he says the fundamental trouble with working for money is that a job is a short-term solution to a long-term problem.
So, what’s his secret to financial independence?
- The rich make their money work for them
You must have heard the phrase "live to work or work to live".
This is one of the basic concepts addressed in the book Rich Dad Poor Dad.
Most people work to survive. If they have money problems, they ride them out or ask for a raise.
On the other hand, the rich don’t work for their money.
They buy assets that generate income.
This is one of the book's most important lessons.
Another important lesson from the book is that “It’s not how much money you make that matters. It’s how much money you keep.”
- Financial education is your greatest asset
According to this book, money isn't your greatest asset.
“The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth” says Kiyosaki
He believes that if people are prepared to be flexible, have an open mind, and learn, they tend to get richer.
“Intelligence solves problems and produces money, but money without financial intelligence is quickly lost," says Kiyosaki.
Sure, some people get a raise or a financial windfall, but unless you’ve grown to be the type of person that can handle that amount of money or income, the money will soon disappear.
So, an important message from this book is to become financially literate.
- Know the difference between assets and liabilities
"An asset is something that puts money in your pocket and a liability is something that takes money out of your pocket," Kiyosaki explains in his book.
He says that rich people acquire assets and poor people add liabilities.
Kiyosaki says don’t buy liabilities on your way to financial freedom.
Many people buy luxuries first, like big cars, heavy bikes, or big houses to live in.
But the rich buy assets first and the income from their assets buy luxuries.
- Don’t be controlled by emotions:
Be in control over your emotions says Kiyosaki.
He reminds us that when share prices decline, people get scared, run away, or sell up.
However, when the local supermarket has a sale, people buy as much as they can.
You see…most people’s lives are controlled by the two emotions of fear and greed.
Fear keeps people in this trap of working hard, earning money, working hard, earning money, and hoping that it will reduce their fear.
Secondly, many people are driven by the greed of wanting to get rich quickly.
That’s why it’s important to have a plan, either a Strategic Property Investment Plan for your investments, or a business plan for your business.
It’s very difficult to make sound financial decisions unless you know what you want to achieve and your time frames.
- Work to Acquire Life Skills, Not for Money:
Another of the book's great teachings is that work is to be used as a platform to improve the skills you have.
In other words, work to learn, don't work to earn.
Find a job where you can learn life skills.
Kiyosaki thinks people are, “one skill away from great wealth.”
He stresses that learning can make you much more knowledgeable and can provide you with unique skills to improve your professional situation.
- Failure inspires winners and defeats losers.
Kiyosaki tells us the rich take risks while the poor people are scared to fail.
He says every rich person has lost money at some point, but many poor people have never lost a cent.
Playing not to lose money means you will never make money. “Winning means being unafraid to lose.”
- Learn to manage risk
In his book Kiyosaki teaches us that “Investment is not risky, not knowing the investment is risky. If you want to reduce the risk, then increase your knowledge.”
He explains that this type of knowledge will not come from going to college; it will come from reading books or sitting with people who understand “the investment.”
- Mind your own business:
Kiyosaki also encourages his readers to start a business.
He says, if you have a job, keep your job and start a part-time business and work it.
Never leave your job until you build your own business.
Don’t struggle all of your life for someone else.
Start your own business and grow it.
- Find a reason
Everyone wants to be rich, but many of us don’t want to struggle.
Kiyosaki tells us we must have a clear purpose in mind.
“Why do you want to earn more passive income?”
- Pay yourself first:
If you can’t get control of your own finances, then it’s difficult to get rich.
If you lack financial discipline, then it is impossible to become rich.
So, pay yourself first.
Each month, first invest a certain amount of money into income-generating assets before you pay your bills.
What happens if you come up short?
Use this pressure to pay to inspire you to come up with innovative ways to get enough money to pay the bills before the bill collector comes knocking at your door says Kiyosaki.
Always pay your bills.
Just pay yourself first, not last.
If you pay yourself last, you would feel no pressure, but you would probably not come up with new sources of income either.
These are some of the many financial lessons in Robert Kiyosaki’s great book Rich Dad Poor Dad.
And you’ll find an interesting question that Robert Kiyosaki poses to the readers of his book.
"Wealth is a person's ability to survive so many numbers of days forward... or if I stopped working today, how long could I survive?"
How long could you survive if you had to stop working today?
Links and Resources:
Why not join Metropole’s Business Accelerator Mastermind
Learn more about Mark Creedon – Business Coach to some of Australia’s leading entrepreneurs
Get a copy of Mark’s new book here – Have a Business, Not a Job
Get a bundle of eBooks and reports – www.PodcastBonus.com.au
Some of our favorite quotes from the show:
“As life evolves, as business challenges come up, as property challenges come up, your emotions will get the better of you if you haven’t actually lived through this before.” – Michael Yardney
“It’s actually not the structure, what you’re doing, it’s actually the knowledge, are you able to do it.” –Michael Yardney
“If you don’t have a good reason, it’s actually difficult to stay on the path, especially when all the challenges come.” – Michael Yardney
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