Rich Dad Poor Dad (By Robert Kiyosaki) : Book Review

I must begin with a candid confession: I regret not having read "Rich Dad Poor Dad" years ago, especially during those times when I was lost in life and wasting my time instead of investing it in acquiring financial literacy. However, I'm glad that I finally got around to it. Despite having read numerous books on wealth-building and financial journey, this one simply blew my mind. Although I had come across many recommendations for it, the title itself never appealed to me. But boy, was I wrong! This book perfectly articulates the key habits that distinguish the rich from the poor, habits that the author learned from his two dads. The moral of the story is not to judge a book by its cover, or in this case, by its title.

While my ignorance may be inconsequential to you, the lessons I've learned from this book are not. So, let's dive straight in.

Key Takeaways:

1. The importance of financial literacy: Our education system is based on equipping us with the necessary skills to find a job and work for money, while neglecting the importance of financial knowledge. I don't think this is inherently wrong, but I agree with the author that financial literacy should be an integral part of our lives from childhood. This is how the author learned his wealth-building lessons early in life and developed habits that led to financial freedom. Financial literacy doesn't require a professional degree, but it does require a basic understanding of how to read financial statements, cash flows, and an awareness of laws and taxation systems.

2. "Do not work for money, let the money work for you": This statement may sound confusing (it did to me at first), but it's a powerful reminder that we should not be slaves to our paychecks. Instead, we should leverage our money to work for us. The poor work for money, while the rich make their money work for them. The poor are trapped in their jobs, paying bills and living paycheck to paycheck. By failing to develop basic savings and investing habits and accumulating liabilities, they remain vulnerable and tied to their jobs, which can be taken away at any time. When their paychecks stop, they lose their sense of direction and struggle to get back on their feet. In contrast, the rich save and invest wisely, building their assets so that they have a safety net during tough times. In other words, their money works for them and frees them from present and future vulnerabilities. If I were to buy a luxurious car today, what would I do? The easiest way out would be to take a bank loan and cut corners to pay EMIs for 5-7 years. But in doing so, I would increase my liabilities and vulnerabilities for something I can't afford today. This is how the poor act. Instead, I could invest patiently in assets like equities and real estate that would give me enough returns to buy my favourite BMW when I can actually afford it. That's how money works for you. "The difference between the rich and the poor/middle-class people is that the rich buy assets while the latter buy liabilities which they misinterpret as assets." That's my favourite lesson from the book.

3. Risk-reward equation: Another factor that distinguishes the rich from the poor is their ability to take risks and make bold bets. The author suggests that if you aspire to be wealthy, you should learn to take risks, challenge the status quo, and question the obvious. You should learn to identify opportunities that others miss. In the investment world, the risk-reward equation is straightforward: the higher the risk, the higher the reward. The author talks about how his financial literacy helped him identify opportunities in real estate investments, which he used to maximize his returns.

4. Pay Yourself First: This principle is not about being selfish, but rather it suggests that when you have a job, it's important to use your salary wisely. As soon as you receive your salary, set aside a small portion and invest it in building your assets. Use the rest to pay off your bills and expenses, and to indulge in your wants. Unfortunately, many poor people do the opposite, using whatever is left over for investing, or sometimes not even doing that.

5. The Power of Giving: Giving is a trait that distinguishes the rich from the poor. The poor often give only when they have something left over, while the rich give before they even have what they desire in life. The author shares an example in the book of smiling at strangers, and how this small act of kindness often results in a smile in return. The author has been sharing his knowledge on personal finance for many years and has never fallen short of the wisdom that people aspire to.

In summary, "Rich Dad Poor Dad" offers a unique perspective on personal finance and provides practical advice for improving your financial situation. I cannot stress enough the value I have gained from this book, and I intend to use its lessons wisely to build positive habits and live a fulfilling life. I strongly recommend reading it.