3 lessons from the book “Rich Dad, Poor Dad”

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This was the first finance book that I read during my college days. Many seniors recommended this as a go-to book to get started with the concept of money. The book covers the conflicting advices on Money by author’s two dads, rich dad and poor dad. The Rich dad is a wealthy businessman, who owns many businesses. while the poor dad is a highly educated college professor.

The rich don’t work for money

Rich people have businesses that make money for them. If you talk to any average person about making money, he/she will want a job with a high salary. But, if you ask the same question to the rich who hold assets, will probably go out there is search for more assets and businesses that make money for them while they are sleeping.

The main difference between the rich and an average joe is that the rich knows that they need to hire other people into jobs. Once someone believes that the job is the only way to earn money, that completely locks you to work for money.

The Rich acquire assets and not liabilities

There is this very simple difference between asset and liability. An asset is something that adds value to your net worth and a liability is something that decreases value from your net worth. Rich people acquire assets that grow over time and make money while they are sleeping.

While an average joe acquires liabilities that they think are assets. Most people think that house is the biggest asset that they have. But, it isn’t. The house is not a cash generating asset as long as it is not used for renting. It requires money to maintain the house and thus it is a liability.

Teach yourself Financial literacy

Its not how much money you make, its about how much you keep. Never confuse making money to keeping money. Remember, those people who got lucky winning a lottery of millions of dollars but years down the line, they come back to the same financial level as they were before winning the lottery.

Those who know how money works always have an edge over those who don’t. If you understand finances and money, you will come to this realization that half of your spending is just liabilities. It is important to be financial literate to keep money that you have earned with hard work.

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