06 tips to become a millionaire – the rich dad way
Want to become a millionaire, but don’t know how to?. worry not, let me give you 6 tips from the book Rich dad Poor Dad, which explains the secrets of rich and mistakes of poor.
Robert Kiyosaki, author of Rich Dad Poor Dad, refers to two fathers, his father is poor as he went to school, earned good grades, obtained his PhD and after various years of service, retired due to differences with Government. Second father, his friend’s father, who is a businessman. This book is based on advice’s given by the ‘rich’ father to the author.
06 tips to become a millionaire – The 06 secrets of rich
- Rich don’t work for Money
- Learn financial literacy
- Mind your own business
- The History of taxes and power of corporations
- Rich Invest Money
- Work to Learn – Don’t work for money!!!
SECRET 1: RICH DON’T WORK FOR MONEY
People quit jobs because jobs don’t pay well. Rich work (in jobs) to learn and not for money. Rich dad got his own son and the author to work for a very small pay in a retail store. At one time, due to small pay, both boys were ready to quit the job and Rich father told them that this is exactly why people quite job and a prospective businessman don’t. Rich Dad’s lesson: Learn the business where you do your job so that you can start your own business later. As a result of this thinking, both boys took thought about business and reviewed the available resource base. They started a comic book library, renting books and earning more money than their job of retail store.
SECRET 2: LEARN FINANCIAL LITERACY
Most people buy a house at mortgage and consider it to be an asset. However, in businessman’s vocabulary, it’s actually a liability because the house is not earning anything. The house is eating up resources of the person who has bought it on mortgage.
In school, people are taught to earn good grades, get good jobs and be good employees. Generally, financial literacy component is not taught. Therefore, people with job generally struggle to meet their day to day expenses, middle class purchase liabilities considering it to be an asset (e.g. a house bought on mortgage or a car on lease!) while rich people construct a sound asset base which generates income for purchase of other assets.
Rich dad taught author to buy house once there is another asset which generates enough cash flow to enable the person buy a house. What are the assets of rich people? Those includes: Real Estate, apartments generating rents and businesses being managed by managers and generating cash. A person can start with stocks, bond and mutual funds but these are not at all a substitute of a business which generates cash flows. Rich Dad’ lesson: Learn the difference between an asset and a liability and think how to create income generating assets.
SECRET 3: MIND YOUR OWN BUSINESS
Rich Dad’s lesson: Along with your day job, start some business side by side. Don’t spend all your salary. Save some amount on a monthly basis and think about an idea which can be turned to profitable business later. Business of Mc Donald’s owner is not selling ham burgers but to have real estate. If ham burgers don’t sell, there is enough property to be sold, if required.
SECRET 4: THE HISTORY OF TAXES AND CORPORATIONS
Salaried people earn their salary, pay taxes and then spend from whatever amount is left. Rich people earn, their companies pay all their expenses including taxes and then they have enough amounts to spend, as all their expenses are paid before paying any tax.
Author advises to talk to businessmen and investment bankers to learn businesses. Reading and understanding of financial statements is a must to understand how a business operates. Rich dad’s lesson: how rich people protect themselves from heavy taxes? Their secret: Corporations!
SECRET 5: THE RICH INVEST MONEY
A person can invest money either through experts i.e. investment bankers, stock brokers etc. or can go for self-created investment by identifying an opportunity, raising capital and finding expert people to manage the business. Rich Dad’s lesson: Learn how to manage risk. An Investment is not risky. Not knowing how to manage an investment is risky
SECRET 6: WORK TO LEARN AND NOT FOR MONEY
One should learn to manage cash flows, systems and people. Continuous learning is the key. Learn how to sell.
Rich dad’s lesson – What to do? Action plan
- Assess your present situation: If you keep on doing what you are doing since quite some time, you will get the same results what you are getting. To get new results, do something different.
- Try to find some new idea – how will you create and income generating asset?
- Take action, after finding new some new idea. Practical tip: Find Mentor. Try to find some person who has achieved what you want to achieve. Ask tips from him / her.
- Try to invest in real estate when market is down. Make offers. Don’t sit and wait for opportunity to come.
- Learn from lessons of successful people.
Themes in Rich Dad, Poor Dad
One theme that’s apparent in this book is that for an individual to be wealthy, he must aim to own the system or means of production, rather than work for another individual. The author stresses that there is obviously something confining about being an employee; it shuts the mind to other possibilities and it stunts initiative.
Financial intelligence is THE most powerful asset. By studying the precepts of accounting and investing, the author believes that individuals will be able to see the difference between an asset and a liability; in fact it is the more concrete application of learning what’s right and what’s wrong. Generating a string of expenses is wrong, building assets is right.
Unlike individuals who earn and then pay taxes on what they earn, corporations earn, spend what they want to spend, and pay taxes on what’s left. Corporations, therefore, hold a certain degree of power. The rich know how to use this power, the poor don’t.
The author also believes that true luxuries are experienced when they are the outward manifestations of intelligent investing and asset building. He cites the example of his wife purchasing a Mercedes Benz because it was the car she liked and worked hard to be able to purchase it. The author cautions however about keeping up with the Joneses and getting into debt because of this human frailty.
Fear, laziness, cynicism and arrogance are to be blamed for most of human inaction. Act, Manage Risk, Think Big, Think Business, Don’t Be Afraid To Try and Fail.
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Disclaimer : Contents in this article reflects own interpretation of the author based on the book rich dad, poor dad.