What do the rich know, that I do not?

Rich Dad Poor Dad – Robert T. Kiyosaki, Warner Books

Rich Dad Poor Dad – Robert T. Kiyosaki

I bought this book already in 2006. I try to re-read it every few years just to remind myself of the basics of money, business and personal finance and to give myself a motivation boost.

The book is written from the perspective of young boy, the author, who ends up with two dads. The poor dad is his own – a teacher, union activist and employee. The rich dad is his friend’s dad – an entrepreneur, businessman and employer.

The book recalls teachings and learning the boy received from the rich dad about business and personal finance and compares it to the advice he received from his poor dad.

For me the three key messages of the book are:

1. Everyone should aim to be financially literate

Basic business skills are needed everywhere. For example you need sales and marketing to sell and buy things and also to sell your ideas, opinions and yourself to your family, friends and you employer. You also need accounting and sound understanding of personal finance when shopping, buying a house or handing your everyday bills. You need to know basics of the investing in order to make your spare money to grow.

This book gave me the kick needed to realize I am not going to learn this in the university. After that I have invested a lot of time and money to go through huge amount of books about business in order to sharpen my skills and understanding of the world of money.

2. The rich focus on building assets – the poor gather liabilities

Assets bring more money to your pocket, while liabilities take it away. Even so – many have hard time to tell them from each other. For example your car, boat or your own house are all liabilities. They require constant maintenance and make no money. On the other hand stocks, bonds, real estate and other investments are money-producing assets.

Make the mistake of investing your excess income to liabilities and you will grow your costs. Gather assets and at some point that is all the income you need. That is also called the Financial Independency. 

3. Pay yourself first

When I first heard this as a student, I could not wrap my brain around the concept. Now, earning regular salary and all, I finally get it.

There is a big difference between paying everyone else first and the scenario where you first pay yourself and then arrange everyone else to be paid after that. In the first one you passively leave your financial future to fate. The latter scenario forces you to be pro-active;  either cut the costs or earn more money to make it.

I have followed this principle for a year or so. Each month after receiving my salary, some of it is automatically directed to my investment and savings accounts. I will then have to do the whole month with whatever is left. This is both incredibly motivating and also surprisingly easy.

Even though I really love this book, I should warn that the author is somewhat controversial.

Some of the examples in the latter part of the books are quite speculative of the nature, especially the ones about retail business. Reading stories or example’s like this, it is important to keep a cool head and remember that there is no fast track to success. Investing your money to assets like stocks and retail can make you a millionaire, but it will take time.

It is often pointed out that the author himself has not succeeded as a in the retail business, but instead earned his fortune by writing books. Also many are shaken by the revelation that the book is fictional and the rich dad never existed.

However I believe this should not lead to dismiss otherwise a good book. It is not the Dostoyevsky of the business books, but I feel that it is not meant to be. For me the “Rich Dad Poor Dad” exists to motivate me. It is easy, fast to read and fun. It manages deliver every time I open it – what more could I ask?

The book “Rich Dad Poor Dad” is available for example from Amazon.com and Amazon.co.uk.

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