What are some of the investing ideas in the book Rich Dad, Poor Dad and how does it relate to buying real estate? Robert Kiyosaki emphasizes in his book, Rich Dad Poor Dad, that you must work smarter, not harder. Many people believe that hard work is enough to build wealth, and that if you don’t have enough money, you simply need to work harder. This is one of the main investment methods and strategies revealed in Rich Dad Poor book by Kiyosaki.
Related to this, is another investing idea propounded by Kiyosaki, which is the general concept of leverage (that is, carefully choosing what you do to maximize effect) means that what you do is more critical than how you do it. Also, as you know, leverage is one of the key investing strategies in buying real estate and investment properties.
You can spend the rest of your life spinning your wheels to earn a steady salary and make someone else rich; or you can take risks - such as buying an investment property - and give yourself a chance to get rich.
According to Kiyosaki, the first step in getting rich is to pay yourself first. In conjunction with knowledge and the courage to take risks is the need to have a plan. For most people, the first phase of the plan will be saving money—something many of us struggle with. Yet Rich Dad’s approach challenges you to set a goal (say, $250 per month towards saving for a down payment of $10,000) and, every month, even before paying your bills, pay yourself first.
No matter what, put that committed chunk of money into a bank account and never touch it again, except for investing. People who only save what they have leftover after paying their bills and racking up their expenses NEVER build wealth. If you’re ever going to get out of the rat race, it is essential that you pay yourself first diligently, every month.
That doesn’t mean you should neglect your responsibilities. It simply means that your long-term well-being takes higher priority over your short-term ease of mind. If cash flow is down certain months, you’ll be forced to find other ways to make money so that you can meet your current responsibilities. Turn that pressure into creativity, motivation, and drive.
If you’re having a hard time putting aside money, you probably want take a long, hard look at your expenses and re-learn the definition of a liability and an expense.
Kiyosaki insists that the #1 rule—in fact, the ONLY rule, is:
“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket. This is all you really need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities.”
Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
Where most people encounter difficulties is in letting go of thinking of certain things as assets when they are, in actuality, liabilities. The idea that a home is an asset is particularly persistent. Kiyosaki points out the many ways in which a house, in the long run, always takes more money out of your pocket than it ever puts in (see Your Home Isn’t an Investment for specifics). He recommends that if you want a house, view it as the liability it really is, and seek to gain enough income-generating assets to pay for the house before you even buy it. You should always have more assets than liabilities.
Kiyosaki was taught by Rich Dad that your greatest asset is your mind. By that, he doesn’t mean formal education or IQ—he means financial aptitude. Many schools will teach you how to make money, but few will teach you how to spend it (i.e. invest it). Poor Dad knew made money, but he was never able to spend it wisely enough to establish a self-sustaining cashflow. Many people are in the same situation, and in desperate need of education.
Rich Dad taught Kiyosaki, more than anything, “If you want something, you first need to give.” If you want financial aptitude, help others gain it. This applies to everything, from jobs, to sales, to contacts and well-being. It’s the principle of reciprocity.
He points out that rich people aren’t always greedy, because people who have built wealth have done so by providing something that other people wanted. This was at the core of Rich Dad’s legacy, and it can be the core of yours. There are Rich Dads everywhere, quietly building their fortunes (you might even have a local Latin Dad). There’s no reason why you can’t be one, too.