My understanding of book:Rich Dad Poor Dad

I have started reading books in quarantine and I thought to share it with you all.

Recently I read Rich Dad Poor Dad. This book is based on the 19th century financial system and I really do not know how to imply this theory/formula in the 21st Century.

In this blog, I have written the overall summary of this book as per my understanding.

The basis of this book is wealthy people (Rich) and rat race (Poor).

How the rich people manage to be rich and how the middle class/poor people struggle to pay their debts. So let’s start with the lessons given in the book by the author Robert T. Kiyosaki.

Lesson 1: The Rich Don’t Work for Money

In this lesson, the author tries to convey the message that you should work through your experience. You should not be working for money, you should first work to gain knowledge or educate yourself.

- Do not give up when life pushes you around

- Do not blame about jobs or your low wages

- Stop blaming your boss for your problems

- If you do not take risks and you do what someone else (it could be anyone, your work company, your job etc.) expects, you will be stuck in it and never explore other things.

- Detach your financial related feelings from money. Do not mix your emotions with your financial issues.

- Take money decisions using your brain/knowledge, not by emotions.

-  Do not let money become your only motivation.

Lesson 2: Why Teach Financial Literacy?

As per the author, we always forget to see how much money we have saved after earning.

- So we need to learn the difference between asset and liability.

- An asset puts money in your pocket. Those are your earnings schemes like your stocks, intellectual property, bonds etc.

- A liability takes money out of your pocket. Those are your expenses like credit card, loan, and all debts.

Lesson 3: Mind your own business

- You should not leave your job. Along with your job, you should start something in your own interest that could be anything.

- People who struggles financially end up doing work for someone else in all their lives, whereas wealthy people focus on investing their time and money where their presence is not required, like bonds, stocks, anything else that has value, produces income and has a ready market.

- Reduce unnecessary expenses (luxuries)

- Stack of assets as large as possible

Lesson 4: The History of Taxes and the Power of Corporations

- People who work for someone else end up paying taxes from their salary and instead of buying assets, end up buying liabilities.

- People who work for own, they invest their income into assets.

Following Financial IQ given by the author:

1. Accounting:
             You have to understand your financial statements, which allows you to identify the strengths and weaknesses of any business.

2. Investments:
            It is nothing but the concept of money making money.

3. Understanding markets
           How the market functions. You need to understand the current market situation.

4. The law
           You should be able to understand the tax advantages like if you spend everything that is producing good cash flow. Will help you to only pay tax on what is left over.

Lesson 5: The Rich Invent Money

- You should understand the cash flow. If we always try to play safe/secure investment and never take a risk, our gains will always be less.

- For that, you have to find more opportunities to invest.

Lesson 6:  Work To Learn Don't Work For Money

- We often think of job security and career. But always forget that career is not giving security about your retirement plan or future plan(s).

-  You do not have to be best at your skills to do the best. You always keep educating yourself every time.

Following Management skills given by the author:

- Manage cash flow: you should be able to manage your finance balance sheet.

- Manage people: you should be able to involve or engage yourselves with the people who are smarter than you, so that you can gain knowledge and educate yourself more.

- Manage system (family /yourself): Apart from work, you should be able to give time for yourself and your family. As money is not everything in your life.

I am not sure whether I have understood the whole theory of what the author exactly wanted to convey. But this is it.

I would like if someone can give their thoughts on this book for my better understanding.