What The Rich Teach Their Kids About Money - That The Poor and Middle Class Do Not!
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I love this book, it financially teaches me about how to manage personal
finance and shift my paradigm about money.
The author writes about his real-world experience and what he went thru
and teaches others the language of money and how to be financial freedom, which
didn't practice in society.
In this book, Robert discusses what he learns about money, investing and
real estate. Having two dads (Poor dad-his father & Rich dad-father of his
best-friend) offered him the choice of contrasting point of view about money.
He shares the contrasting perspective of both dads in an engaging,
thought-provoking and inspiring manner.
The author also shares a lesson from his favorite poet "The Road not
taken" by Robert Frost.
The Road not
Taken
Two
roads diverged in a yellow wood,
And
sorry I could not travel both
And
be one traveler, long I stood
And
looked down one as far as I could
To
where it bent in the undergrowth;
Then
took the other, as just as fair,
And
having perhaps the better claim,
Because
it was grassy and wanted wear;
Though
as for that the passing there
Had
worn them really about the same,
And
both that morning equally lay
In
leaves no step had trodden black.
Oh,
I kept the first for another day!
Yet
knowing how way leads on to way,
I
doubted if I should ever come back.
I
shall be telling this with a sigh
Somewhere
ages and ages hence:
Two
roads diverged in a wood, and I—
I
took the one less traveled by,
And
that has made all the difference.
The author said that
money is one form of power, but what is more powerful is financial education.
Money comes and goes, but if you have the education about how money works, you
gain power over it and can begin building wealth.
The main focus of this
book is the 6 lessons.
Lesson #1. : The Rich don't work for money - The poor
and middle- class work for money. The rich have money work for them.
Quote :
'People's lives are
forever controlled by emotions: fear and greed.'
' So many people say,
Oh I'm not interested in money. Yet they'll work at a job for eight hours a
day.'
Lesson #2. : Why Teach Financial Literacy? – It’s not
how much money you make. It’s how much money you keep.
Quote :
‘Rich people acquire
assets. The poor and middle class acquires liabilities that they think are
assets.’
Rule # 1: You must
know the difference between an asset and a liability, and buy assets.
Quote :
‘An asset puts money
in your pocket. A liability takes money out of your pocket.’
‘Cash flow tells the
story of how a person handles money.’
‘A person can be highly
educated, professionally successful, and financially illiterate.’
Lesson #3. : Mind Your Own Business – The rich focus
on their assets columns while everyone else focuses on their income
statements.
Quote :
‘Financial struggle is
often the result of people working all their lives for someone else.’
‘Start minding your
own business. Keep your daytime job, but start buying real assets, not
liabilities.’
Lesson #4. : The History of taxes and the power of
corporation – The author rich dad just played the game smart, and he did it
through the corporations-the biggest secret of the rich.
Quote :
‘If you work for
money, you give the power to your employer. If money works for you, you keep
the power and control it.’
‘Each dollar in my
asset column was a great employee, working hard to make more employees and buy
the boss a new Porsche.’
Lesson #5. : The Rich Invent Money – Often in the
real-world, it’s not the smart who gets ahead, but the bold.
Quote :
‘Games reflect
behavior. They are an instant feedback system.’
‘The single most
powerful asset we all have is our mind. If it is trained well, it can create
enormous wealth.’
‘The problem with
“secure” investments is that they are often sanitized, that is, made so safe
that the gains are less.’
‘It is not gambling if
you know what you’re doing. It is gambling if you’re just throwing money into a
deal and praying.’
‘Great opportunities
are not seen with your eyes. They are seen with your mind.’
Lesson #6: Work to learn, Don’t work for money –
Job security meant everything to my educated dad. Learning meant everything to
my rich dad.
Quote :
‘You want to know a
little about a lot’, was Rich Dad's suggestion.’
‘Job is an acronym for
Just Over Broke.’
The main management
skills needed for success are :
- Management of Cashflow
- Management of System
- Management of People
The most important
specialized skills are sales and marketing. The ability to sell to communicate
with another human being is the base skill of personal success. Communication
skills such as writing, speaking, and negotiating are crucial to a life of
success.
The other 2 last
chapters;
Chapter 7: Overcoming
obstacles – The Primary difference between a rich person and a poor person is
how they manage their fear.
Overcoming Fear: The fear of losing money is real. Everyone
has it. Even the rich. But it’s not having a fear that is the problem. It’s how
you handle fear. It’s how you handle losing. It’s how you handle failure that
makes the difference in one’s life.
Quote :
‘For most people, the
reason they don’t win financially is that the pain of losing money is far
greater than the joy of being rich.’
‘Failure inspires
winners. Failure defeats losers.’
Overcoming Cynicism: Doubts and cynicism that keep most
people poor and playing it safe. The real world is simply waiting for you to
get rich. Only a person’s doubts keep them poor.
Overcoming
Laziness: How to beat laziness?
The answer is to be a bit greedy. A person needs to sit down and ask, “What would
my life be like if I never had to work again? “, “What would I do if I had all
the money that I need?” Without that little greed, the desire to have something
better, progress is not made.
Quote :
“Rich dad believed
that the words ‘I can’t afford it’ shut down your brain. ‘How can I afford it?’
opens up possibilities, excitement, and dreams.”
Overcoming Bad Habits: Pay yourself first, your asset column is
far more important.
“If I pay myself
first, I get financially stronger, mentally and fiscally.’
Overcoming Arrogance: “What I know makes me money. What I
don’t know loses me money. Every time I have been arrogant, I have lost money.
Because when I am arrogant, I truly believe that what I don’t know is not
important.” When you know you are ignorant in a subject, start educating
yourself by finding an expert in the field or a book on the subject.
Chapter 8: Getting
Started – There is gold everywhere. Most people are not trained to see it.
- Find a reason greater than reality: the power of the
spirit
- Make a daily choice: the power choice
- Choose friends carefully: the power of
association
- Master a formula and then learn a new one: the power of
learning quickly
- Pay yourself first: the power of self-discipline
- Pay your brokers well: the power of good advice
- Be an Indian giver: the power of getting something for
nothing
- Use assets to buy luxuries: the power of focus
- Choose heroes: the power of myth
- Teach and you shall receive: the power of giving
The key to becoming
wealthy is the ability to convert ordinary income into passive income or portfolio
income as quickly as possible.
3 type of different
income :
- Ordinary Income – Money you work for
- Portfolio Income – Income derived from paper assets
such as stocks and bonds
- Passive Income – Income derived from real estate
investment
Author’s advice:
Take Action!
All of
you were given two great gifts; your mind and your time. It is up to you to do
what you please with both. With each dollar bill that enters your hand, you,
and only you have the power to determine your destiny. Spend it foolishly and
you choose to be poor. Spend it on liabilities, and you join the middle class.
Invest it in your mind and learn how to acquire assets, and you will be
choosing wealth as your goal and your future. The choice is yours, and only
yours. Every day with every dollar, you decide to be rich, poor, or middle
class.
Keep Connect :)