8 Key Lessons On Financial Freedom From ‘Rich Dad, Poor Dad’   Aug 21, 2018


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Be as careful of the books you read, as of the company you keep; for your habits and character will be as much influenced by the former as the latter.”- Paxton Hood

‘Rich Dad, Poor Dad’ has been one of the most influencing books since it was first published.

Why?

The author elaborates his journey of revelation about money management and his path to financial freedom .

Plot summary:

The author, Robert Kiyosaki narrates the money lessons he learnt over the years from two fathers. He outlines the stark difference between the two father’s ideology of money.

Poor dad (biological father), the educated one made money mistakes and was stuck in “rat race”. He believed in “Love of money is the root of all evil”.

On the other hand, rich dad (friend’s father) taught him to move ahead with a bold mindset and believed in “Lack of money is the root of all evil”.

It is a simple story with examples to understand cashflows, building assets, and learn from failures. A thought-provoking book that makes you ask yourself a few important questions,

Do I want to continue running the rat-race?’

‘Have I built assets or liabilities?

‘Are my expenses more than the income?’

‘Am I afraid to take risks?’

Here are some key takeaways from Robert Kiyosaki’s bestselling book, ‘Rich Dad, Poor Dad’, which I think we can all use.

  1. Manoeuvre Your Thoughts

    If you say “I can’t afford it”, then you prevent yourself from thinking about various possibilities to grow.

    Instead ask this question, “How can I afford it?”. This acts as a feeder for your brain to churn up possibilities.

    Manouevre every negative ‘can’t do’ thought into a ‘can do’ healthy attitude.

    For instance, in the book, Robert Kiyosaki learnt to get out of the ‘rat-race’. By working free for friend’s dad he learnt about handling fear and desire to make money work for him and his friend.

    While working free at the store, he figured out a way to use the old comic books for his own advantage to earn money.

  2. Take Risks and Become Smart With Experience:

    As per the book, rich people take risks because they find opportunities in life that come and go , that can potentially turn them into billionaires.

    The author took a risk with his first investment, it was a small 18,000 dollars condominium in Hawaii that fetched him 25 dollars a month. Although he did not earn a lot from it, he became smart and subsequently, with every deal, he got smarter.

    So, stop seeking mediocrity, take a calculated risk that can aid you to build wealth and become smart with each experience. Try to strategise your investments, set forth for your journey of wealth creation and accomplishing financial goals right.

    [Read: How to Set S.M.A.R.T Financial Goals]

  3. Be A Financial Literate:

    According to Kiyosaki, this is the most important instruction that will help a person to build a strong foundation.

    Robert says, “Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.

    Our education system teaches us to work for money, but keeps us ignorant of how to make, keep, and manage money. We should learn how to create wealth, that is learning about advocacy for financial independence.

    Financial freedom takes you towards financial independence.

    Therefore, to ensure financial freedom, be mindful of the inflation factor and have the right investment/asset mix suitable to accomplish your financial goals.

    [Read: How To Plan Your Financial Freedom]

    Depending on your goal to maintain a higher equity allocation and by regularly investing with discipline–– through Systematic Investment Plans–––can help you achieve it.

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  1. Stay Focused (Mind Your Own Business):

    Robert Kiyosaki describes that an individual should remain focused on the end goal (which can lead to  financial freedom) and work for it (mind your own business).

    Therefore, try to figure out different legitimate ways to build wealth, look for opportunities or invest in businesses to build more assets and generate a strong flow of income. And use the income earned to generate more returns or wealth so that it leads you to financial freedom. Effectively, you should be making money work for you.

  2. Understanding Tax The Corporation Way:

    Robert Kiyosaki explains, how the Corporations pay taxes. They earn, spend, and lastly get taxed on the remaining amount.

    Whereas, an individual is taxed on his earnings first and then allowed to spend. The system is exploitive but it could be stopped------by gaining knowledge in four broad areas of------accounting, investing, understanding markets, and law. This will help engage you in meaningful tax planning, and savings on the  outgo taxes, which can be invested wisely to augment your wealth further.

    When you invest in Equity Linked Savings Scheme (also known as tax saving mutual funds), or any mutual fund scheme, choose a Direct plan over a Regular Plan offered by the fund house, as the lower expense ratio for the former can translate into higher returns in the long run. 

    [Read: How Even 1% Difference Can Make A Huge Difference To Your Investments]

    Watch this video:

  1. Invent Money:

    The author also suggests that “a trained mind is a rich mind.” Because the more you train your mind to take bold steps, you will move ahead. The rich create their own luck from obstacles and it is the same with money. It has to be created.

    Kiyosaki reiterates the importance of financial education and says, ‘hire intelligent people to capitalize on their knowledge’. Building your knowledge base gives you more power.

    So, familiarise yourself with the different forms of investment avenues, strategies, and opt for independent research services. It can make you self-sufficient and you would be equipped to transact independently on a  sound robo-advisory platform as well.

    [Read: All You Need To Know About Robo-Investing]

  2. Work to Acquire Life Skills, Not for Money:

    Robert thinks people are, “one skill away from great wealth.

    Life skills (communication, management of systems and people, etc.) are equally important for financial success and are not taught in school.

    You should acquire these life skills to help yourself on the path to financial freedom. Effective communication and people management skills make the tasks easy to seek meaningful information from your investment adviser.

  3. Control Emotions:

    The author highlights that human beings always give in to five traits: fear, cynicism, laziness, bad habits, and arrogance. How one handles these traits makes a whole lot of difference.

    Don’t be pessimistic and worry about the falling sky. Or dream with too much exuberance or optimism.

    Instead, learn to channelise your emotional balance and be focussed on accomplishing your financial goals. A well-trained mind is set to achieve a lot more than a fickled, short-sighted, and cynic  mind.

Conclusion….

The lessons in this book are timeless.

It is time to acquire knowledge about finance, markets, tax rules and regulations, andlife skills to build wealth.

Happy Investing!

Author:Aditi Murkute



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