Rich Dad Poor Dad

Introduction

Robert Kiyosaki, author of the best-selling book "Rich Dad Poor Dad", offers financial planning insights and explores how wealthy people think.

• However, his financial history is complex. His company, Rich Global LLC, filed for bankruptcy, and he has acknowledging for over 1.2 billion in debt. Despite this, Kiyosaki defends his approach by claiming to use debt strategically to acquire assets that generate income.

Turning Dreams in Action

Most people only talk and dream of getting rich. The most important thing is to take action.

• Remember, opportunities come and go. Recognizing when to make quick decisions is a valuable skill.

Also, most people blame everyone else for the problem, except themselves.

• However, it is easier to focus on self-improvement than to try to change everyone else. Embrace lifelong learning and personal growth.

Remember, financial security offers more than just material possessions. It provides options - the ability to choose quality healthcare, education and lifestyle.

• To get yourself started, ask the deepest desire that lies inside you.
• A strong purpose is a combination of your want's and don't wants. It is the driving force behind your financial goals.

Financial Upbringing: Shaping Mindsets for Success

One of the reasons the rich get richer, the poor get poorer, and the middle class struggles in debt is that the subject of money is taught at home, not in school.

• Most of us learn about money from our parents.
• This raises a critical question: What can parents with limited resources teach their children about wealth creation, other than studying hard and graduating with excellent grades?
• School, on the other hand, focuses on scholastic and professional skills, but not on financial skills.
• As a result, the cycle of poverty repeats endlessly.

The contrasting mindsets of Kiyosaki's two dads illustrate the power of financial beliefs.

• One dad had a habit of saying, “I can’t afford it.” The other dad forbade those words to be used. He insisted I ask, “How can I afford it?” One is a statement, and the other is a question.
  
• One dad thought that the rich should pay more in taxes to take care of those less fortunate. The other said, “Taxes punish those who produce and reward those who don’t produce.”
• One dad recommended, “Study hard so you can find a good company to work for.” The other recommended, “Study hard so you can find a good company to buy.”
• One dad said, “The reason I’m not rich is because I have you kids.” The other said, “The reason I must be rich is because I have you kids.”
• One encouraged talking about money and business at the dinner table, while the other forbade the subject of money to be discussed over a meal.
• One said, “When it comes to money, play it safe. Don’t take risks.” The other said, “Learn to manage risk.”
• One believed, “Our home is our largest investment and our greatest asset.” The other believed, “My house is a liability, and if your house is your largest investment, you’re in trouble.”
• Both dads paid their bills on time, yet one paid his bills first while the other paid his bills last.
• One dad believed in a company or the government taking care of you and your needs. The other believed in total financial self-reliance.
• One dad struggled to save a few dollars. The other created investments.
• One dad taught me how to write an impressive resume so I could find a good job. The other taught me how to write strong business and financial plans so I could create jobs.
• My poor dad always said, “I’ll never be rich.” And that prophecy became reality. My rich dad, on the other hand, always referred to himself as rich. He would say things like, “I’m a rich man, and rich people don’t do this.” Even when he was flat broke after a major financial setback, he continued to refer to himself as a rich man. He would cover himself by saying, “There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”
• My poor dad would say, “I’m not interested in money,” or “Money doesn’t matter.” My rich dad always said, “Money is power."

Shifting Your Focus: From Working for Money to Making Money Work for You

People's lives are often controlled by two emotions: fear and greed (desire).

• Fear of bills, job loss, inadequate savings or starting over keeps many people stuck in unfulfilling jobs. Consequently, most people become a slave to money, and then get angry at their employers. Meanwhile, some rich people are fear losing the money and keep working even though they have plenty.
• Many people work for money because they desire what money can buy, but the joy is often short-lived. They soon need more money for more joy, more pleasure, more comfort and more security.
• This relentless cycle of chasing money to afford more spending keeps them trapped in the so-called "rat race".
• Therefore, to break free, we need to shift from being controlled by emotions to think rationally. Instead of working tirelessly for money, we should make our money work for us.

Financial Freedom: Building Wealth Through Assets, Not Liabilities

Many people mistakenly believe that financial security hinges solely on how much money they make. In reality, it is more about how much you keep.

• Countless lottery winners and high earners illustrate this point - they become rich quickly but end up back where they started due to a lack of self-discipline and financial literacy.

The key lies in understanding the true definitions of "asset" and "liability" in practical terms.

• An asset puts money in your pocket, while a liability takes it out.
• While buying assets seem straightforward, many struggle because they actually focus on acquiring liabilities with ongoing expenses, like mortgages and car loans.

Instead of working tirelessly just to earn a living, shift your focus from simply increasing your income to building assets that generate income for you.

• Invest your income (i.e. salary) in true assets like real estate that produces rental income, stocks that pay dividends, or intellectual property that generates royalties.
• These assets allow your money to work for you, providing a steady stream of income that can be reinvested or used to offset expenses.

As your cash flow from assets grows, you can then indulge in some luxuries without jeopardizing your financial future.

• The poor and middle class often buy luxuries (i.e. liabilities disguised as assets, like big houses and jewellery) with their hard-earned income to project an image of wealth. This can potentially impact their future and even their children's inheritance.
• The rich, on the other hand, prioritize building true income-generating assets and only indulge in luxuries last using the income generated from those assets.

In summary, rich people acquire assets that generate wealth. The poor primarily have expenses, and the middle class often acquire liabilities that they mistake for assets.

The Myth of Taxing The Rich

Historically, the idea of taxes has been popularized by framing them as a way to redistribute wealth from the rich to the poor. However, this narrative may be misleading.

• In the business world, efficiency is valued. Companies that minimizes expenses and headcount are praised by investors.
• In contrast, governments operate with different objectives. If a government department fails to spend its entire budget allocation, it risks losing those funds in the next budgeting cycle. Therefore, avoiding a surplus is not necessarily seen as positive outcome.
• As government programs and services expand, more tax dollars are needed. This leads to a situation where even lower-income levels are subject to taxation.

The rich reduces their taxes burden through corporate loopholes.

• A corporation earns, spends everything it can (e.g. company retreats, vehicles, employee health insurance and meals), and is then taxed on remaining profit.

Employees, on the other hand, are taxed on their entire earnings and must live on what remains.

• The harder the middle class works, the more they are taxed.
• This can lead to a feeling of working for multiple entities: employers, bank through loans and the government through taxes.

The Roadblocks to Wealth Creation

Even financially literate people can struggle to build wealth. Here are five common obstacles.

Fear of failures

• The fear of losing money can be paralyzing.
• However, failure is part of success, just as we learn to walk by falling down. Remember, winners see losing as a chance to learn and grow, while losers become discouraged by setbacks.
• Those who never try, never win.

Self-doubt and cynicism

• Negative self-talk and comparing yourself to others can hold you back.
• Instead of dwelling on "what ifs" and unchecked self-doubt, winner use analysis to  see opportunities that everyone else missed.

Laziness

• Sometimes, people stay busy to avoid something that they do not want to face. When reminded, they often respond with anger or irritation.
• To overcome laziness, ask yourself "What is in it for me" to get motivated (e.g. a desire for a better life).

Bad habits

• One bad habit is neglecting to "pay yourself first".
• Let the pressure of creditors motivates you to find additional income streams.

Arrogance

• The wealthy are not always the smartest, but they are often lifelong learners with a broad knowledge base.
• Humility allows you to ask questions, seek guidance, and  continuously improve.

Summary

The second half of "Rich Dad Poor Dad" heavily promotes Kiyosaki's real estate strategy of buying and reselling at opportune market moments, implying that wealth creation is straightforward and easy.

• However, this approach might not be as feasible today due to inflated property prices. The high upfront costs could result in significant debt burdens.

That being said, if you are interested in Kiyosaki's overall financial philosophy, his book "Why the Rich Are Getting Richer" offers a deeper exploration of his thinking.