If you want to be rich, then you need to master the knowledge, attitude and habits of the rich. Here’s what I learned from Rich Dad Robert Kiyosaki.
I used to think that the biggest problem with the world was that the rich got richer and the poor stayed poor. However, I’m starting to learn that the difference between being rich and poor comes down to a couple of key things. Those things are knowledge and attitude.
With the right knowledge and attitude it’s possible to go from poor to extremely wealthy.
But it takes education. The kind of education we don’t teach kids in school.
The need for financial education sparked my desire to learn these lessons and to teach others.
Here’s what I learned from reading Robert Kiyosaki’s Rich Dad Poor Dad.
1. The Rich don’t Work for Money
Kiyosaki’s big lesson is that the middle class and working class, in general, don’t understand money. Money, for them, is tied up with great feelings of fear and desire. They are controlled by these fears and desires.
The rich are rich because they master money.
“It’s self inflicted fear and ignorance that keeps people trapped.”(Rich Dad, Poor Dad, Page 45)
It’s fear and desire that leads the poor to tell themselves stories. Stories like ‘everyone needs to work’, ‘only the lucky get rich’, ‘the system is rigged’, ‘the rich are crooks’ and so on.
The rich control their feelings about money. Control means they don’t react to feelings and they think. They think long term about what things mean and what they want.
This led me to start really thinking.
My story had always been the poor story – ‘I can’t afford it’, ‘everyone needs to work’, ‘I’m not one of the special ones’ and so on. I thought this way because I was scared.
I was scared I needed a job to survive. There was fear that I wasn’t good enough so I had to do well to keep my job. Then these feeling of fear were compensated by splurging on desires when I did have money. And so I was trapped in the cycle of fear and desire related to money.
But then I stopped.
The Rich Dad Lesson:
I started to think about these fears and desires instead of just acting on them. By stopping and thinking, I was able to see what I really desired and see what the real fear was.
Now my fears and desires work for me. Now I’m afraid of being stuck in a job till the day I die. I desire financial freedom and the power to help my family and be able to help those who are suffering.
Now, instead of asking how do I save my job, I ask how do I escape working a job and how do I get everything I want?
Instead of operating out of fear and desire, I question where I am and how I go from one level to the next to my long term goal of being rich and the master of money.
In short, and as I’ve already written about, the rich don’t work for money – they invest and make money work for them – this is only possible when you overcome fear and desire.
Once you overcome fear and desire you are able to start learning and attaining the knowledge of how to make money.
How do rich people make money?
They save their money and invest it. This is only possible when you have overcome fear and you have become knowledgeable about investment.
(For more on this topic, see my previous articles, How to Achieve Financial Freedom Through Investing.)
The other thing they do, is build businesses and make others work for them. This takes a whole lot of knowledge and a whole lot of courage. This is what I am contemplating now. This means becoming much better than I am now and overcoming huge fears. But I am committed to getting my goals and I will overcome.
2. Learn financial literacy
If we want to become rich we need to know how to make money. We need to understand financial literacy.
We live in a time of great change and there are plenty of examples of easy come and easy go. To be truly rich we need to know how to make money and more importantly how to make money in a risky world. Beyond that we need to know how to keep it.
“If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer through the changes. If they think money will solve problems, I am afraid those people will have a rough ride.”(Rich Dad, Poor Dad, Page 56)
Financial literacy is a must. Accounting is essential, so we build our wealth on sound foundations. We need to keep track of the money and assets we have working for us. Otherwise, it’s easy to lose track and end up losing it.
The first and most important rule of financial literacy is to know the difference between assets and liabilities. When you know the difference, then buy assets.
Assets are the things that make money. So buy assets that make money and you will get rich. Things like stocks, bonds, businesses and real estate.
However, don’t confuse assets and liabilities. The main confusion the poor have is that they see the family home as an asset. They see the family car as an asset. But these things don’t make money. They cost us money.
The rich buy assets. They track their assets and those assets make them money. The poor buy liabilities, like the family car and the family home, which they think are assets. However, those liabilities end up taking more of their money, not growing them money.
The Rich Dad lesson:
Know what an asset is, keep track of your assets and account for your wealth.
You need to track the money. The rich make sure their wealth is always growing in real terms, after taxes and depreciation and so on. The poor value their assets in things they have and don’t account for the money those things are chewing up.
The only way to know these things is financial literacy. This is something we should teach a whole lot more. A more educated population that can avoid the traps of debt and inefficient asset allocation, is a population in a much better position to promote real economic growth and prosperity. Unfortunately, this is not on the curriculum for the majority of the population.
3. Mind your own Business
“Financial struggle is often directly the result of people working all their life for someone else. Many people will have nothing at the end of their working days.”(Rich Dad, Poor Dad, Page 86)
Don’t confuse your profession with your business. I’m a teacher, but that’s not my business. Not yet. People forget to mind their own business – they mind someone else’s. Your business is in your asset column.
When people rely on their job, they are vulnerable. Take me, I am currently working, as a teacher, on a 2 year contract. If that’s all I have, then I am a slave. However, now I have investments and a plan, if I get “downsized” I’m not going to be so worried.
Mind your business means knowing your situation. It also means knowing how the bank evaluates your situation; what your liability in taxes are, being aware of your assets, liabilities, strengths and weaknesses.
Most people just don’t know. They get a check from their employer and the bank says great and they can buy what they want. From there on out they are stuck minding their boss’s business, praying they don’t ever lose it and hoping for a raise.
The Rich Dad Lesson:
Build your business.
Build your assets column with a list of assets that make you money when you don’t need to work. Such as stocks, real estate, and a business that you own but don’t need to run.
This won’t be easy. This takes some building to set up and a lot of hard work. But it is how you get rich.
Set up this business and you’ll be on your way to financial freedom and true wealth.
4. The History of Taxes and Power Corporations
Love them or hate them, and I don’t hate them as much as Mr Kiyosaki, taxes are a huge expense on individuals. Now, I actually believe it is our responsibility to pay taxes and I see the need for the government to provide infrastructure and other social needs.
However, to avoid being overly taxed and double taxed, on the income created by entrepreneurial endeavors, the rich use the power of the corporation to protect their wealth.
“It is the knowledge of the power of the legal structure of the corporation that really gives the rich a vast advantage over the poor and the middle class.”(Rich Dad, Poor Dad, Page 98)
Advantage of Corporations
This was a huge lesson I learned from the Rich dad. Setting up a corporation protects your earnings and has lots of other perks.
Understanding the law and the power of corporations is a huge advantage that the rich have. By wrapping their investments in a corporation they provide protection for them from lawsuits and provide loopholes that can reduce taxes on earnings.
I’m not an expert and this is an area that I’m willing to say I need education and most likely I will need to rely on outside assistance. However, the very basic accounting behind the corporation is the ability for the owner to spend pretax dollars.
As an employee, you get paid a salary, which is taxed immediately and then you may be able to claim some back after you’ve done spending the rest. However, as the owner, you collect the money then you have a huge range of options on how you can spend the money before it gets taxed.
If you know the tax code, then there is a huge number of advantageous and enjoyable ways to spend those pretax dollars. Once you’ve spent those dollars, you are taxed on what’s left, which is a lot less than being taxed on what you started with.
Again, I’m no expert, but the basic take away for me is there are huge advantages to owning a corporation.
If the money I make investing and from other ventures goes into the corporation, then I can claim a whole range of business deductions that I can use to further advance my business. Once those deductions are paid for, I then pay a smaller amount of tax on what is left.
I’m not against taxes, but when I’m taking a huge risk to try and go alone and even to build something that will employ others and have a positive influence on the economy, it seems fair that there are some incentives. Also, working double time, only to see half of the year spent on paying taxes, seems unreasonable.
5. The Rich Invent Money
Entrepreneurs literally invent industries that generate money. Rich dad gives the examples of Alexander Graham Bell and Bill Gates. Before these two, there was no market for telephones or personal computers. After them there were billion dollar industries that generated huge profits.
It is the same with investing. By owning assets, protected correctly by corporations and the knowledge of the laws, money is invented without ever having to work or save.
Like with our own investments. Our shares produced dividends this month. Money went straight from our asset column into our income column without any thought, effort, hard work, sweat or tears: Money was simply invented.
The Rich Dad Lesson
Develop your financial IQ and be the type who invents money and not the type who collects money.
Kiyosaki explains why he builds his financial IQ:
(Rich Dad, Poor Dad, Page 111.)
“I do it because it is the most exciting time to be alive. I’d rather be welcoming change than dreading it. I’d rather be excited about making millions than worrying about not getting a raise.”
When I started to think like this, it became empowering. I used to live in fear that I wouldn’t have enough to retire on. I was afraid that younger teachers would be better educated and one day I’d struggle to get a job. Also, I sometimes worried if I lost my job I’d be in real trouble.
However, now I feel like I’m always building skills that make me stronger than the rest. I feel like everyday I see another opportunity to invent more money. And I feel like I’m on track to have a bright positive future. I run towards this vision much more than I ever ran away from the fear.
So now as I contemplate the initial stages of my entrepreneurial journey, I feel confident as an investor. Now that I’ve learned some of the language of investing and I have some IQ, I’m positive that we will make a fortune, which is much better than at the beginning when we feared every little dangerous step.
Going forward I need to learn more about corporations and build my business IQ, so that I can be positive about finally making that switch from employee to business owner with confidence and capability.
What we all should know:
• Financial literacy. The ability to read and judge numbers.
• Investment strategies. The science of making money.
• The market. Supply and demand.
• The Law. Accounting, corporate, state and national rules.
(Rich Dad, Poor Dad, Page 120.)
6. Don’t work for Money, Work to Learn
“… most people need only learn and master one more skill and their income would jump exponentially… When it comes to money, the only skill most people know is to work hard.”(Rich Dad, Poor Dad, Page 133)
Kiyosaki gives the example of the writer.
The writer wants to write a best-selling novel. His advice to her is to take a course in sales. To this she responds with anger and considers it a ‘sell-out’. However, he makes a very good observation, that he is not a great writer, but he is a best-selling author because he knows how to sell.
This example makes it very clear. The author wants to be a best selling author and make lots of money out of the skill she is very good at. However, she doesn’t want to learn the skill that is needed to be able to achieve the sales she wants.
Kiyosaki’s advice is that she leave her job, find a new one, even one that pays less, so she can learn the skills she needs to be able to make her passion more productive.
This I now consider as great advice.
I see plenty of teachers around me. They are among the smartest and most well educated people around. However, they don’t earn half as much as people with half the education. The truth is, they have lots of education and know a lot of really valuable information, but they have no training in how to use those skills to make money.
Seeing this, I think I’m going to use my time to learn the skills I need to go to the next level. So while I’m not going to quit my job just yet, I’m here studying and learning about financial IQ, about sales, and blogging, and marketing, and business structures and so on, so I can put my intelligence to work. So I can spend more of my time doing what I love. Such as writing that best selling novel, to go traveling, and one day to contribute to helping those in need.
The sad truth is, if you are just working for a pay check, you are signing off on your time. Your time should be spent working towards getting free. You can only get free and live the way you want when you have access to the skills to make money your slave.
Here we come to the end of our brief overview of how to achieve success with the rich dad, Robert Kiyosaki. This is by no means the only lessons in his extremely helpful book. I strongly recommend you look him up on Youtube here and go out and purchase a copy of his book for yourself. He has so much more to offer and I believe this book was an incredibly valuable investment for myself.
The main take away message I got from Rich Dad Poor Dad, was that we have a choice. We can chose to take control, learn the skills we need, overcome fear, take responsibility and take charge of our destiny.
This approach and this attitude is what leads people to become rich. The other choice is to take the easy path and give over your agency and work for someone else who has all the power over you and your destiny.
For me the choice is easy. The actual execution is not easy. It’s a step by step process dealing with many lessons and confronting lots of fear. But at the end of the day, I feel more empowered and I feel inspired that I will be in charge of my life and I am writing my own destiny and becoming more than I have ever been.
The choice is yours. Float through life hoping for the best, of get real and start working towards living life with energy and living life on your terms.
Thanks again for allowing me to share these thoughts. For more lessons on how to become rich read my article Millionaire Mindset, 6 Steps to Behave Like a Millionaire.
Mission for Success
The mission for success is to take our life to the level of awesome. We are actively learning the lessons that will bring us more success, that will improve the future for our children and will help make the world a better place.
If that’s something you want for your life, feel free to come join the mission for success by clicking here: Mission for Success!
All the best, and remember to keep striving for success.