Investing is an effective way to build Wealth. Making your Financial future stable helps you achieve your Financial Goals.
Today I am presenting three important lessons from the book RICH DAD’S GUIDE TO INVESTING by Robert Kiyosaki.
When Robert Kiyosaki was 9 years old, one day he was walking on the beach with his Rich dad. Then his Rich dad showed him a big luxurious bungalow and said that he had bought this bungalow. Robert was shocked because in those days his Rich dad was not actually that Rich and his income was less than that of his poor dad. Then he asked his Rich dad. How can you buy this bungalow when you don’t have that much Money? His Rich dad said, I can’t buy, but my business can. Here we learn our first and most important lesson.
Lesson number one : Increase your expenses and Decrease your income. Now you will say that you are saying the opposite. The world says the exact opposite of that. But this is the Main thing about this book. The author calls this point the most Important point in the final chapter of this book, because of which he has written this book.
Let me explain it to you in Detail. When Robert was young, he used to work for his Rich dad. He got only 10 cents an hour. Then one day he walked to his Rich dad to talk about increasing his salary. However, his Rich dad cut his salary rather than increase it. He said, giving salary to people means forcing them to think like Employees, and they don’t want Robert to think like an Employee.
Then you will tell me what the employees think. Every employee thinks that he should work hard in the office so that his salary will increase. Then he should reduce his Expenses so that he can save more, but his Rich dad used to advise Robert something else. He used to say that you should reduce your Income and increase your Expenses. This means that if you run a business, you have to withdraw as little Money as possible from it as income and invest the rest of the Money. Because if you withdraw more Money, you will first pay more Tax on it. Then you keep the remaining Money in such a place that it will not be able to grow properly. Like savings accounts or fixed deposits.
All successful companies are there. All those companies reinvest their Profits. From Jeff Bezos Amazon to Warren Buffett’s Berkshire Hathaway. These companies pay a minimum dividend and reinvest their entire amount either in their own business or in acquiring other companies. That is why the share prices of these companies have Increased manifold in the last few years. When you work, the salary you get is already taxed. Then you put the remaining savings in your bank or fixed deposit, which Earns you 8% interest and the average annual inflation rate in the US is 7.7%. So, if you think that this 8% that you are Earning from your bank is your income then you are kidding yourself. And increasing your expenditure means that you should spend in the right place.
One day his tax strategies told Robert something interesting. He was saying that whenever a Rich person is about to become a pauper, he commits one of these 3 mistakes.
Firstly, either he has bought an Expensive Jet, or an Expensive Boat, or an Expensive Car or he has gone on a World tour, or he has divorced his loyal wife and married a young girl. These three expenses can be easily controlled. When we talk about expenses, people usually think of vacation, dinner, and shopping, but the Rich dad is talking about such expenses. Which will help you to become successful. In order to avoid Paying taxes, you should invest in things that will keep you wealthy. Education, books, seminars, or any similar course. In addition, investing cash flow in the future, or finding an employee who can do monotonous work. This will ensure that you have more free time to work on other significant Projects. You should make such significant expenses as soon as possible. So much better for you because your knowledge compounds with time and it also grows.
Often people are poor because they are always afraid of Poverty. There is always a fear of poverty in their minds and that is why they reduce their expenses. Thinking that the Money would come in handy on his bad days. But the author advises us to keep our minds occupied with Positive thinking. Always think of growing your mind, even if you have to spend Money on it and the world’s most famous investor Warren Buffett also says the same. When he was asked what was the most Profitable investment in the world? So, he said, ” Invest in yourself as much as you can, Invest in your knowledge. “
Lesson number two is to acquire the three E’s. According to Robert’s Rich Dad, if you want to be a successful investor and become Rich and then stay Rich, you must acquire these three E’s. These three E’s are Education, Experience, and Excess Cash. With the help of these three E’s, you can take advantage of an opportunity that can make you Rich. Opportunities are always available and will be there but you don’t see them because you don’t have that perspective.
The first E is Education. Rich dad is not talking about school and college degrees here, he is talking about Financial knowledge. People often say that when they have a lot of Money, they will start investing. The truth is that even if such people get a lot of Money by mistake, they become poor again in a few years. This is because they continue to handle new Money with their old habits. But in real life, not everyone wins the lottery. Rich Dad is talking about this knowledge here whether you know how to run a business or not. How to start a business? And how do you run it? And most importantly, the knowledge of how to read the Financial statements of companies such as balance sheets and income statements.
Personally speaking, the turning point in my life was when I learned to read the Financial statements of companies. Otherwise, if you invest anywhere without education, it is Gambling.
The second E is Experience. Robert’s rich dad used to give him blank Financial statements in his childhood. Where he would ask them to fill out the column on the assets side themselves. They will get experience from it. He knew that the most effective way to understand ‘business’ and become a successful investor is to do it practically. Robert would add assets to that blank statement, learn from it, then add some more, learn from it, make mistakes and learn. Because his Rich dad wanted him to start learning as soon as possible in real life. And if you search on the play store or app store, you will find many games in which you can create a balance sheet and your assets by yourself.
The third E is Excess Cash. It is not necessary to worry about this E so much as about education and experience. This is because if you have proper education and experience, Money will follow you. When you have that much Cash, you will already know where to invest it so that it can grow further and create Financial security for you. When people finish their college education, they look for jobs instead of opportunities. Instead of Financial security, they look for job security. And all the Problems start there, which is why Less than 10% of the world’s people own More than 90% of the world’s Money. Because their education, experience, and excess cash always keep growing with them.
Lesson number three : Investing is not risky. Because you do not know about it, you perceive it as risky, so Robert asks us to act as Inside Investors. Let me ask you a question. How do people become Rich? Either they become successful in some business or invest Money in someone else’s business, but success does not happen overnight. Even if you buy a stock that can make you Very Rich, you still have to hold it for a few years. You must have a specific reason for holding it for those years. More than 99% of people, however, sell their stock out of fear of a slight drop in its price.
As an example, I made many mistakes in my early years. And there are many such lessons in investing that you have to learn by doing. But when you are running your own Company, you probably won’t just sell your own Company’s stock. Like Steve Jobs, he owns 45% of Apple’s stock. When the company suffers through hard times, these owners do not give up their shares. Because selling shares at such a time means selling them cheaply which is stupid. This is what people often do, but the author is suggesting us here. Investing will not be risky if you invest in your own business. If you buy a stock, treat it as your own company, and do as much research as you do before buying a house, or any other expensive item. And after doing that much research, you get all the inside information about it. Similarly, if you are investing in any such place, then you should have complete information about it, as the owner has.
So, friends, if you have read Robert Kiyosaki’s “Rich Dad Poor Dad” and his second book “Cashflow Quadrant”, then according to me there is nothing extra value to add to this book. You might not be able to Learn Investing from this book, but this book will definitely give you a New perspective to think about Investing.
Summary:
So, friends, these were the 3 most valuable lessons from this book that we learned today. So, let’s recall what we learned today. In Lesson One we studied “Increase your expenses and decrease your income.” This means purchasing assets that will give you Cash flow in the future. And if you do business, then you have to withdraw as little Money as possible from that as income and invest the rest of the Money.
In Lesson 2 we studied the 3 E’s. The first E is “Education”. In this, we learned about the education of finance. The second E is “Experience”. In this, we learned about the experience of business. Third E is “Excess Cash”. If you have the right education and experience, Money will automatically follow you.
In Lesson 3 we learned “Investing is not risky” if we invest with proper Financial knowledge.
Thanks for reading!!!! Until then, keep learning with Financever.