With 22 years my husband gave me the book Rich Dad Poor Dad from Robert Kiyosaki and it truly changed my life. Robert explains on how to spend your money “smart” in order to be financially free which enables you to live your dream life…
A different Approach about FINANCE
Robert tells in his famous book how his “Rich Dad” INVESTED his money in assets vs how his “Poor Dad” SPENT his money on liabilities…
Failure to teach us Finance at School
Our school system fails to explain and teach us one of the most important lessons of all: The teachings of MONEY and FINACE! They should teach us and our kids what assets vs liabilities are, the true value of money, how to spend money on assets and what brings you a return on your investment!
Instead they teach us things in order to become a good worker so we help create products/services and then we spend our hard earned money on the products/services of other goods. All without thinking if this was money spent on assets or liabilities as we do not know the difference or even what it is or the benefits or disadvantages…
Summary on Basic Finance as per Robert
- Income is money you get paid out because you worked for it aka your employment
- Expenses are things you need to pay such as bills, tax or purchases
- Assets are things that PUTS money INTO bank account WITHOUT going to work such as rental income, stock, or your business
- Liabilities are things that TAKES money OUT of your bank account because you owe it to so someone else (bank or companies) such as a mortgage for the house you live in.
The Poor Dad Formula
The “Poor Dad” spends all his hard earned money on things that will lose value over a period of time or that does not make him any money in return.
For example: The house he lives in does not make him any money and is therefore a liability! OR a new car as the moment your drive out of the garage it loses value! And either one of them are giving you a residual income!
The Rich Dad Formula
The “Rich Dad” spends MOST of his income on things that puts money back into his bank account without lifting a finger. Things like an investment property that gives you a rental income.
If you acquire enough assets you can eventually STOP WORKING because now you have an AUTOMATIC income- without needing to do anything for it 🙂
After reading the book I decided to be A “Rich Dad” and chose to invest in an investment property. So, for 7 years I saved as much of my income as I could for my first investment because it PAYS ME MONEY EVERY MONTH for which I do not need to work for in future. It’s NOT easy but well worth your time, effort and money!
This is how I am able to “live my dream life” and travel because of financial decisions I made. I have rental income in AUD and my expenses are in other currencies as I am travelling to countries that are cheaper than Sydney:
Your expenses need to be LOWER than your income
I hope that my experience helps you to make “Rich Dad” Choices and help enrich your life 🙂
A great Video summary:
If you want to know how I saved money check out Live your Dream Life Part 3: Six Minimalist ways to save money!
Source: This blog is inspired by the book Rich Dad Poor Dad from Robert Kiyosaki