Financial Advice from Rich Dad, Poor Dad

Most of the lessons taught in the Rich Dad Poor Dad book series are somehow unique. The book offers a new perspective on finance. In this article, we’ll take a look at some of those lessons to explain the rich dad’s philosophy.

1. Income is not a direct indicator of wealth.

In the book, Robert Kiyosaki explains that most people spend their lives trying to increase their income. He calls it the “rat race,” where anyone who has nine to five jobs works hard and ends up getting nothing. He believes the answer lies in spending behavior rather than income. People with a rich dad mentality invest a lot of the money they make. Therefore, they essentially turn cash flow into assets, which in turn generate even more cash flow. Those with the Poor Dad mentality, on the other hand, are using the increased cash flow to buy more debt. Other liabilities can be seen in the form of a bigger car, a bigger house, etc. Therefore, your cash flow dries up at this point. Robert Kiyosaki illustrates that a person doesn’t get richer by making more money by spending it all on liabilities and expenses. Instead, a person becomes rich by investing their money in assets that generate income. This concept has been explained in other books in the form of a concept called the savings rate. However, Robert Kiyosaki presents it in an easy-to-understand format.

2. How various social classes earn money

Robert Kiyosaki also discusses how various types of people make money. The poor dad mindset associates money with work. He believes this is why earning potential is limited. Finally, because there is a limit to the number of hours a person can work, their earning potential is limited. Entrepreneurs’ earning potential, on the other hand, is not limited by the number of hours worked. They can profit as much from the product they sell. Furthermore, investors can make an unlimited amount of money based on their invested funds at the same time. This is why Rich Dad Poor Dad author Robert Kiyosaki advises people to try to make the transition from employee to a business owner in their lives. This will assist people in maximizing their earnings potential.

3. First and foremost, pay yourself.

Robert Kiyosaki is a firm believer in the principle of paying yourself first. He devotes an entire chapter in his book to how wealthy people regularly allocate a portion of their income to savings before they begin spending any money. He shares the personal-finance gurus’ belief that if saving is not prioritized, it will never happen. This is why he also suggests deducting a portion of the paycheck before using the remaining funds to pay the monthly bills.

4. The Rich Benefit from Taxes

According to Robert Kiyosaki, becoming wealthy as a business owner is easier. This is due to the fact that their wealth is not tied to the number of hours they work, and they also get a better deal on their taxes. Rich dad, the poor dad explains how the tax system does not apply to everyone equally. The tax system benefits wealthy business owners. This is because business owners can deduct business expenses from their income before paying taxes. People who work jobs, on the other hand, do not have access to this facility. They must pay tax on their entire income, and the effective tax rates are typically higher.

This is consistent with Robert Kiyosaki’s teachings that the amount of money retained is more important than the amount of money earned. Robert Kiyosaki uses mathematical illustrations to demonstrate how taxes are the most expensive item in the life of the average person. He also explains that business owners and investors can avoid paying taxes, whereas employees must.

5. Investing Your Entire Fund

Robert Kiyosaki encourages people to aggressively invest all of their savings. He wants them to build a portfolio or generate passive income to supplement their regular income. He devotes many pages of his book to explaining how people who do not invest actually lose money. He explains how the savings interest rate provided by banks is actually much lower than the inflation rate. As a result, if the money is not used, it simply loses value. He also explains how Richard Nixon removed the world from the gold standard, which means that the government can now devalue money faster than it can be earned. His investment recommendations are thought to be extremely risky. This is why personal finance experts criticize Robert Kiyosaki.

The bottom line is that some of Robert Kiyosaki’s lessons are unique and valuable. This is why many people follow his advice, despite the fact that mainstream personal finance experts routinely dismiss him.