Earlier this year I read the book Rich Dad Poor Dad by Robert Kiyosaki. The book has been a bestseller for over 15 years now so some would say I’m a little behind the times, but nonetheless better late than never as it was a good read.
Firstly, I think the book should come with a warning that ‘this book will make you hate your job!’. I read it. Then I convinced my husband to read it. We were both left feeling like we’d been wasting our time working hard at our careers for over a decade… but then we realised that’s not true and all is not lost… and I’ll explain why.
The main points made in the book are that the rich find ways to make their money work for them, instead of the other way around (working for money). Kiyosaki also discusses how ‘financial literacy’ and gaining an understanding of money does not take place in the formal education system, it takes place in the home, and this is why the rich stay rich and the poor stay poor, because that is all that they know.
Make your money work for you
The book explains that the conventional route for most people is to study hard at school, with the aim of securing a ‘good job’, then spend a lifetime working hard in order to attain pay-rises. We become dependent on our employers as we build our lives and spend most of our income on consumption and debt (mortgages etc). The poor and the middle class trade their time for money in this way, they get stuck in the ‘rat race’ because as their incomes rise, so does their consumption (nicer cars, clothes and holidays) and they become more indebted (bigger house, bigger mortgage).
Isn’t that what we all do I hear you ask? No. The rich send their money out into the world and expect it to bring back more money! Obviously there is a knack to this. Kiyosaki states that fundamentally it’s all about understanding a liability and an asset. The difference being defined as an asset is something that generates cash for you. Take property for example. If you invest in a rental property, and the monthly rent is more than the monthly costs, you are ticking over a nice profit. You aren’t trading your time to achieve this monthly income, so this is an income-generating asset. There are plenty of other ways to invest in income generating assets e.g. business investments, stocks… the aim is to build up assets, whilst minimising liabilities (a liability includes, you might be surprised to hear, your mortgage on the house you live in)
He argues we must educate ourselves (and in turn educate our children) on financial literacy – he refers to this as ‘mind our own business’. This doesn’t mean that we all start studying accountancy qualifications or quitting our jobs and becoming self-employed. It’s about learning the options and opportunities for managing our money. We need not to be impatient in our journey to riches, but we must learn to build foundations and those foundations will ultimately enable us to have multiple streams of income, without a dependency on our pay cheque. We must invest in ourselves, whether it’s reading books, attending seminars, training courses, memberships to training or professional communities… if it’s true that we ‘are what we learn’ then we need to think about that!
On the whole, the book made me think. A lot. It made me think about work, money and decisions made in life. It made me realise that I should think more about the long term when it comes to money and investments. It made me think about putting on hold looking for our next, slightly bigger, house when we can afford it… or our next, newer (and if my husband has his say, sportier!) car, because is that really what we should be spending our money on… the answer is no. We should look to invest in assets that bring back an income to us, and use that income to spoil ourselves from time to time.
It also made me realise the importance of looking beyond employment in order to generate an income. In fact, it was my reading this book that encouraged me to become a member of SFM/Digital Experts Academy. I decided to invest in myself and my learning outside of work… not something that I’ve done since university. I decided to learn how to set-up my own business, no longer working for ‘the man’ but working for myself, and most importantly (since I still had my full-time job), I learnt how to generate a relatively passive income from my business. I hope Kiyosaki would be proud!
Perhaps one downside to the book is that there is a heavy focus on real estate investment. These are not necessarily investments that are easy for beginners. Also, whilst there is a lot of general negativity towards traditional employment, we all need to earn our money somewhere in order to make investments in the first place!
Rich Dad Poor Dad isn’t a get rich quick recipe – it’s an excellent book to get you thinking about financial literacy, and a way to challenge your thinking about work and money.