Learning lessons from Rich Dad Poor Father can be a powerful tool in your personal finance strategy. These books focus on the importance of defining your priorities, paying yourself first and avoiding debt. Many people fail to realize that they must invest in themselves first before focusing on others. If you want to achieve financial success, read them! You may be surprised at what you learn! Listed below are some of the most valuable lessons learned from Rich Dad Poor Dad.
Assets make money
Robert Kiyosaki, the author of the book Rich Dad Poor Father, makes an interesting point in the third chapter of the book: most people confuse their profession with their business. The author aims to make people understand the difference and encourage them to be fearless and build a financial column for themselves. However, the author doesn’t claim to be an expert financial advisor. Rather, he is a motivational speaker and offers practical advice for the common man.
In the book, we learn that assets make money while liabilities take it. This simple principle is often overlooked in our daily lives, but it is true in the vast majority of situations. For example, a car is not an asset. It decreases in value, requires maintenance, and costs money. In a sense, it is a liability. This principle makes it crucial for the average Joe to understand how to invest in his business and avoid his liabilities.
Liabilities cost money
While assets put money in your pocket, liabilities cost money. These can range from high-priced cars to expensive television sets. However, only after you’ve earned enough income to cover all of these expenses, should you invest in a liability. In Rich Dad, Poor Dad, you will only buy liabilities when you have accumulated enough assets to cover their cost. You can also use your assets to pay the liabilities.
One of the biggest mistakes that people make when it comes to investing is that they purchase too much of a liability. Many deceptive investments look like assets, but they actually cost you money. Listed below are ways to avoid buying assets that cost you money:
Pay yourself first
Many of the financial problems that people face today can be avoided by avoiding spending and investing in assets that generate income. In other words, pay yourself first. Pay yourself first every month by allocating money to your assets column before paying your bills and expenses. Pay yourself first is the key to financial independence. This principle is very similar to that of the richest man in Babylon. Read the book to learn more about it and how you can start to implement it in your life today.
While the concept of paying yourself first sounds simple enough, implementing it can be difficult. It can be difficult to follow if you do not have a budget. If you do not have enough money left after paying bills, you may not be able to save for your financial goals. Paying yourself first will give you more money for other things. It will also help you get into the habit of saving.
Don’t allow cynicism of others to overtake your control
If you have a tendency to be cynical, try to understand why. Typically, people with this attitude are fueled by fear or pain. By recognizing why you feel this way, you can work to change your mindset. A simple solution is to shift your social circle to include more positive people. While you’ll never change the cynicism of others, you can learn to avoid getting caught up in it.
Cynicism comes with a certain kind of glamour. Cynics tend to assert that people can’t succeed because all ideals are absurd. They also say that the do-gooders are only out to flaunt their virtues. However, there’s a far better way to counter cynicism: simply take a deep breath. By slowing down, you’ll reset your internal rhythm and relieve tension in your body.
Investing in real estate
One of the most influential personal finance books of all time, Rich Dad Poor Father is often overlooked when it comes to real estate investment. While the book itself does not address this topic, devotees acknowledge that it has transformed their mindset and helped them make good investment decisions. The book’s two core messages are: pay off debts and invest in income-producing assets. While personal residences do not generally constitute assets, they can serve as a source of passive income and create passive income.
While an average person might spend a week looking for an investment opportunity, a trained real estate investor can locate four deals in a single day. Rich Dad firmly believes in the power of a business and how it can help an individual to invest. In addition, businesses can purchase assets that are tax-exempt. Of course, not all investments are available to ordinary employees. Some are only open to affluent business owners. These people can choose investments with the lowest risk and greatest returns. They are also known as accredited investors.
