Rich Dad, Poor Dad

P.S: This post is not for those who are not bothered by their financial situation or debt. If you are still reading this then you are on the wrong page. For the rest pls proceed.


Rich Dad, Poor Dad was authored by Robert Kiyosaki and still sells a good number of copies which only proves the unique point of view that the author has brought in terms of Financial Education. I first came across this book in 2005 and had cursorily glanced through it thinking it was written only for the Rich. Somehow this book was parked at the back of my head and when I read it again there were enough gems of Wisdom that I have to share with you my readers.

So what is the story of your life? Wake up, go to office, work, come home, relax. Cycle repeats. Come month end you get your salary and although it puts a smile on your face there are enough people standing outside your door to be paid. (Rent, Phone bill, internet bill, medical bills, education loan……) the list can challenge the heights of Mt. Everest. Monthly cycle continues. Now you are excited coz you have your appraisal coming along and you are secretly aiming for a double digit % hike in your salary. But your boss and the organization think otherwise. So what do you do? You join a new company and all the above continues. Job cycles continue and the number of people knocking on your door during the month end also increases.(New additions on the list->Credit card bills, car loan, home loan, golf club membership,..). Now you are at the end of your life and when you look back you see that all this while money has been dominating & defining a major part of your life. Story of our lives. Next generation comes in and again begins this Rat race.

When the author was a child he had 2 fathers. One was his genetic father, whom he refers to as his poor dad, who had a doctorate and believed big-time in education. His Rich dad was his best friend’s father who taught him the ropes to become rich, was a 9th grade dropout and also a big believer in education. The stark contrast in the ways, his both fathers viewed money made it easier for Robert, to choose what kind of life he wanted to lead. A Rich life. The book commences with a note saying that Schools seldom prepare children for the real-world and one of the most dangerous advice that a parent can give to his kid is “Go to School, get good grades and look for a safe, secure Job.” Money makes the mare go and although we realize it at a very early stage of our lives we come to understand its full import only when a fair share of our income starts reaching the government coffers. How much of financial education has your school imparted to you? (Apart from simple Interest and compound Interest.) Not much. Most of us learn about handling money from our parents. Even I did. So who is it that your parents pay out to?

When you are working, the money that your employer pays to you, works for him first, next when you received your salary the money works for the government in the form of taxes, then when you pay out your mortgage the money starts working for the bank, when you pay your expenses it is again working for someone else. When is your money working for you? Rarely or never.

I know you are going to argue with me like “My company doesn’t pay me well”, “I don’t get enough Salary even though I have a post-graduation degree and a doctorate”, “I wasn’t born with a silver spoon in my mouth like others”, “I have a big family and bigger responsibilities”, “I have to pay my debts” & the best one “What do you know?”.

The Rich are rich coz they have a solid understanding of how money works and how to keep it working for them & their generations to come. Most of the rich folks who are termed as “Old Money” put their mouth where the money is. How many of these folks have you seen go bankrupt when compared with the “New Monies” the ones who have had a windfall and are enjoying the riches. But within a short span of time they are broke and are living on the streets.

A formal education from Stanford, Harvard, IIM is not an indication of your genius or greatness. It’s a definition of you being cast into the mould set by the corporate world. Look at some exceptionally rich & successful people like Steve Jobs, Bill Gates who were college dropouts and still made it super- big. We might be tempted to believe that they got lucky, but they were very educated in the fields in which they shined and contributed. They knew what they wanted to be educated in. I agree not all of us can become them. We commoners seek more traditional routes.

Our fundamental problem lies with our antiquated education system. They focus more on our scholastic skills and prepare us for standard jobs in the corporates, producing bean-counters. Pls tell me that you have used trigonometry, history, literature in your jobs. I have not. I think that along with “Financial Education” the modern schools needs courses more on the lines of, “Creative thinking”, “When & where to Imagine”, “Stop Rote-ing”, “You are not in a competition” & “Be Yourself”.

In his book, from a very young age Robert read and understood his fathers’ attitudes towards money. One was always in a mode that said There-is-nothing-one-can-do-about-it. The other one was more of a What-can-I-do-about-it type. The rules by which the rich play are different that the rest of the 95%. There is not a hint of victimhood in its voice.

The story begins with Robert and his best friend Mike, deciding to get rich at an age of 9 with both of them being very close to casting nickels out of lead & literally minting money. After comprehending the futility and illegality of their work, both of them decided to work in Mike’s father’s warehouses. Within the first few weeks of their initiation into the job, the boys displayed traits of typical employees of “I’m being paid Peanuts”, “I’ve Worked overtime”, “I deserve this raise”, “My boss is a jerk”, “I Quit!”. After this drama Rich dad began his formal training and the lessons began to unfold. It has taken more than a decade or two, for the author to implement the below. He didn’t build his empire in one day and neither can we (unless we have rich billionaire fathers). Here are the lessons.

Lesson No. 1-> It’s fear that keeps most people working. Fear of losing their jobs, fear of not paying their bills, the fear of starting over, fear of a steady income not flowing in. Your employer will pay you only so much so that you won’t quit and an employee will ask for a hike only so much that the employer doesn’t fire him. The Rich completely avoid this loop. They don’t work for Money. They make money work for them.

Lesson No. 2-> Emotions of fear and greed have the entire mankind under its control. The moment we are able to master these emotions, half the battle against money is won. The pattern of fear and greed is vicious, one breeding the other. First the fear of money makes us work, then when we have money, the greed to own and buy things and then again the fear to make more money to maintain those incremental aspirations and greed, pushes us to march to work. The Rich learn to control, observe and make these emotions their trusted allies. They don’t react to their emotions.

Lesson No. 3-> It’s not how much money you make, it’s how much you keep & how many generations you keep. Hence financial literacy is an absolute must. Once this foundation of financial education is laid, it becomes easier to survive the vicissitudes of life. One of the basic things to understand is the difference between an asset and a liability. The author’s simple definition is “Anything that puts money IN your pocket is an asset; anything that takes it OUT is a liability.” Your mortgage, customer loans, credit cards are all liabilities which go out in the form of your monthly expenses. Asset means stocks, bonds, real estate, intellectual property which add to your income in the form of dividends, interest, rental income, and royalties. The rich focus on keeping their liabilities down and tune more into increasing their income through their assets so that their expenses are covered by their income from these assets.

Lesson No. 4-> Mind your own business. We have financial struggles since we work for someone else all our lives. Working for oneself brings in a complete transformation in the way we view the world and money, in short, our own business makes us more financially astute. The author encourages one to maintain their day job but try having a night job or weekend job which allows you to develop skills other than the one required at your job.

Lesson No. 5-> Understand Taxes. The number one expense for most folks is taxes. One is taxed when one earns, when one spends, when one saves and even when one dies. What history suggests is that taxes came into existence only to be levied on the rich so that their money could be redistributed/ recirculated amongst the poor & the middle class. Modern day taxes suggest that a major burden of the taxes is paid only by the middle class and more so by the upper middle class. The rich took help of their accountants, attorneys and the corporation to win more contracts from the government and reduce this tax effect. There are several advantages that a corporation gets that an individual doesn’t

Lesson No. 6-> Build your Financial IQ. The 4 pillars of your Financial IQ are Accounting, Investing, Markets and Law which translates into the ability to read financial statements, experimenting with the science and art of money making, figuring out the supply-demand dynamics of the market and being on the right side of the law.

Lesson No.7-> Work to learn, don’t work for money. Our job and education all prepare us for specialization in one field. Specialization is dangerous especially if you plan on making money since it limits your view and understanding of the larger world. Try taking jobs that expose you to new fields and you get to learn skills, skill like selling, negotiating, et al.

The author also completely understands that most of us are set in our ways and we will face obstacles both internal and external which will hamper us from reaching the goal of financial independence. Some of them are fear, cynicism, inertia, laziness. But just imagine a day when we don’t have to go to work, get up in the morning, don’t have to worry about meeting the impending deadline at office, sweat about paying your bills and concentrate on the assignments that truly matters to us. How many such days have you had in the last month?

By this time you have some drift of the concept that I have been trying to tell here. This book is a must read for all those who want to learn about money and the role of human behavior. (Behavior finance) .There are a lot of things that I would like to say but that would call for another blog. Although it has been years since I have read this book, I am a long way from my financial independence but it has provided me a vital lesson about myself as to why am I holding on to my job & behave in a certain way. But I’m taking baby steps towards this goal and maybe someday I’ll be on the other side of the bridge and wonder what the race was all about.