Dear daughter,
Today I want to introduce you to a fantastic book: Rich Dad Poor Dad by Robert Kiyosaki. This is one of my all-time favorites. It was a life-changer for me as it could be for you.
Below are some of the lessons you will find in the book:
- The Rich Don’t Work for Money
- Why Teach Financial Literacy?
- Mind Your Own Business
- The History of Taxes and the Power of Corporations
- Work to Learn—Don’t Work for Money
- Overcoming Obstacles
Let me give you a few details about each of the lessons.
The Rich Don’t Work for Money
In this lesson, the author shows how important is not for money.
The Rich Dad told the author that people’s lives are controlled by two fears: fear and greed.
The way it works is like this:
- People are afraid (fear) of being without money, therefore they work hard to get the next paycheck.
- Once they get the money, they forget for a while how much they are afraid of being without money, and greed kicks in. When greed starts, people start thinking about what they can buy with the money that can give them quick/instant gratification.
- And after that, a pattern is set.
- Rich dad said that the pattern is: “The pattern of get up, go to work, pay bills; get up, go to work, pay bills”. Then, when they get an increase in their paycheck, they start to spend more. And this my daughter, is what the author calls the “rat race”.
So, from my point of view, the lesson here is that people that work for money are, and will be, in the rat race.
Not a nice place to be.
Why Teach Financial Literacy?
This lesson is about learning how the financial world works.
Here, Kiyosaki talks about how people use debt in the wrong way, to buy liabilities.
Recently, I talked explained to you if a debt is good or bad, and some myths about debt. My goal was to start introducing you to financial literacy. Many people make big mistakes just because they don’t know what they are doing.
I wish for you to become financially literate. That is one of the reasons why I write to you.
So, be clear about what is an asset and what is a liability. In short, assets put money in your pocket, and liabilities take money out of your pocket.
The author also shows the negative impact of buying an expensive house instead of starting an investment portfolio. I also wrote some of the pros and cons to you in this letter.
In this lesson, there is also an explanation of why the rich get richer and the poor and middle get poorer.
The richer increase their assets. They buy assets that generate income, most of the time passive income, and with that income, they pay their expenses and decrease their liabilities.
The poor and middle class buy liabilities with their salary. The higher the salary, the more they spend on liabilities. The result? Their liabilities increase and the assets decrease, or they simply have no assets.
Do you get it?
What is going to be your next asset? Please tell me.
Mind Your Own Business
This lesson teaches you that you should focus on your assets.
Because that is your own business.
While other people focus on the nice things they want to buy: a bigger house, a brand-new car, new shoes, new clothing, the next vacation, the expensive whiskey. Sounds familiar?
When you mind your own business, you focus on creating assets. As a result, the income you will get from those assets will buy you all the nice things you might want. After you spend the money, the assets will keep making more money for you, and you can keep spending without creating liabilities for yourself.
The assets you should focus on, are the ones that do not require your presence or your time and still can give make money for you. If you have to work a lot or need to be present, then is not your business. It is just another job you got.
A great lesson my daughter!
Don’t generate more work for you. Create businesses, where someone else can work for you and you don’t need to be present for the business to generate profits.
The History of Taxes and the Power of Corporations
This lesson is about how corporations can benefit from tax deductions.
In summary, a corporation earns money, spends money, and pays tax on what is left.
A person, earn money, pay tax, and then spend what is left.
As an employee, the things you can deduct from your taxes are very limited.
However, a business or corporation can deduct everything that is a business expense.
Let me give you an example.
As the owner of a business, you can decide whether the business owner needs a car. So, the business buys a car, and the owner will use it for business purposes, and of course, for personal purposes.
Because the car was a business expense, it can be deducted from the profits. Here you bought a car for yourself, with money that was not taxed, legally. This is just one of the many examples you will find in the book.
However, if you buy a car with your money, that money was already taxed. Yes, the employee is required by law, to deduct tax before they give you your paycheck.
What do you think?
Work to Learn—Don’t Work for Money
This lesson emphasizes the fact that is better when you work to learn, that when you work for money.
Remember, when you work for money, you are usually, and will be, in the rat race.
When you work to learn, you will eventually become free.
You will be literate in the things that matter most to you. You will learn how things work in the real life. You will learn the difference between employee and employer.
All of that, and more, will allow you to create great wealth and live as you want.
So always remember, don’t work for money.
Yes, I know, now you work for money, and you need it. So, start with baby steps. Think and make a plan about how, on a daily basis, you will be working less for money, and creating more assets for yourself.
I truly believe this is the key to financial success.
Overcoming Obstacles
In this lesson, the author talks about failure.
I couldn’t describe it in a better way than the author:
- “Failure inspires winners”.
- “Failure defeats losers”.
Another quote that I like about this topic is this one:
- “Never confuse a single defeat with a final defeat”. F. Scott Fitzgerald.
Dear daughter, I hope you like what you learned in this summary. However, I can assure you that if you read the whole book, you will learn a lot more. The examples and situations that the author explains in the book are great and worth the time.
Love you, Dad.
I share the letters I write to my daughter so more people can benefit from them. If you want to buy this book, you can check it out on Amazon using this link.