Tuesday, February 24, 2009

Rich Dad Poor Dad

As a kid i had always wondered some money questions- My parents were academics, they always stressed the importance of studies and always told me studying well alone leads one to betterment in life. But we lived in a place where we were mostly sorrounded by uneducated petty bussiness men. I did see my dad who was well educated and holding a high position in a multi national firm struggle sometimes to afford few luxuries while those uneducated families could easily afford it. I did ask my dad how come less educated can do all that- Dad simply used to say they are different from us, but finally we will be in a good position than them. I believed him.I did sense as i grew up there were many circumstances where those guys cannot even afford good education and there were days where they spent a fortune on dressing up buying goods. But we were going steady- a budgetted life. There were limits on what we can afford but always had enough for food and education.Finally when i was an adult, Those school drop out neighbour kids were earning more than me and their families still can afford all luxuries they wanted while i like my dad had a job with a decent steady income, same budgetted life.Ofcourse there were few other such families who were doing great during my childhood now very much in poverty. Nothing made sense to me ever-

Until finally i chanced upon this book "Rich Dad Poor Dad".

Here the Author Robert Kiyosaki explains what the rich teach their children that the poor[and the middle class likeus] do not. How the rich's attitude and world view make them and their children richer while the poor because of their thinking continue to remain poor.

Kiyosaki uses the metaphor of two dads, one is his highly educated dad and the other his friend's dad who is a school drop out. The former is a professor while the latter a business man.

He states how each of them go through lives and finally his dad whom he calls poor dad dies with unpaid bills while his friend's dad whom he calls rich dad died a millionaire. He also states how rich dad demonstrated the art of making money to him.

He says the Rich do not work for money, but let their money work for them.

They teach their children how to make money and grow it while talking money is taboo in many poor and middle class households. Its true. We as children were discouraged from talking about money.Loving money was a sin. In this book Kiyosaki stresses the importance of what a horrible dredge life becomes when we slave our lives for money, getting up everyday doing things we dont like to do otherwise. He paints a sorrow picture of the working class and encourages one to mind their own business.i.e start and run their own businesses. He teaches how to build assets to increase your income. He clearly explains how the poor families earn and spend on liabilities while the rich convert their income into assests that furthur increase their income. He does explain in simple words and diagrams what is a an asset and what is a liability.

He states how the businesses have this tax advantage as they are taxed on the after expenses profit. While salaried income is taxed at the source. How the salaried have to live with the fact that as their salaries go up, so are their expenses.

He classifies businesses,real estate, stocks and bonds and precious metals as assets.He also stresses how the rich have the tremendous potential of increasing their income manyfold as their precious time is all theirs, while the poor's income gets limited by the number of hours he can put in. He pictures how the rich use other people's expertise and money to invent their own money while the poor depend solely on their skills alone to generate income.

Throughout the book he again stresses not to work for money and let your money work for you.

He wants people to know how to increase the passive income[income generated from the assets] to cover one's expenses. This he calls "exiting the rat race", once this stage is reached we nolonger have to slog our hours for money instead we will be in a position as all our time is ours.

Its quiet an encouraging read.Inspirational , yet there are few loopholes. I do not agree with people dropping out of school to start businesses- unless they are intelligent beings who can use the educated experts to run their businesses, they sure have a very high chances of failing.

I agree whole heartedly that the curse of the poor is that they do not build assets.Their ambition gets killed as they slog through long hours to earn a living. While the rich have all their time to find creative ways of making more and more money.

Moral: Work towards your financial freedom. Dont depend on job to save your life.Build your own businesses and be in control of your time. Always think in terms of "How can i afford it" instead of saying "i cant afford it".

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