Rich Dad Poor Dad book summary/my notes
It helps with Learning Trading psychology and how financial literacy is important for one to become rich etc..
Note: Firstly, Excellent book and I recommend everyone to buy this book if you want to learn trading psychology. Rich Dad Poor Dad was first published in 1997, and has racked up sales of 32 million copies in more than 51 languages. Endorsed by many celebrities including Oprah Winfrey, this book stayed on the New York Times best-sellers list for six years.
Rich dad and poor dad book review : 4.5/5 (spot on)
Simple 6 Rules explained here
“The poor work for money. The rich have money work for them.”
The majority of us are employed and receive a recurring monthly salary. We put in long hours and hope for a raise soon. We make our payments and moan about how everyone around us, including our boss, needs to change. We don’t have ‘enough’ money, and we blame our problems on those in our lives. However, it’s possible that we are the problem, and we must change first rather than those around us.
2. “Financial literacy is necessary for success. Understand the difference between an asset and a liability.”
Assets and liabilities are concepts that you may want to believe you understand well. However, the truth is that many of us mistake liabilities for assets. Purchasing assets entails spending money on things that put cash in our pockets. Liabilities, on the other hand, deprive us of cash.
There are many of us who may be wildly successful in our professional fields, but lack basic financial knowledge.
“The key is that the rich buy assets, the poor have expenses, and the middle class buys liabilities, thinking they are assets.”
3.”Make your own business and make your own money, not for others. That is making money for yourself not others”
We are ‘minding’ someone else’s business when we are working as professionals. This suggests that we should be concentrating on our own affairs. You work as a professional to earn a salary that you consider your ‘income.’ In business, you’re looking to spend your money on assets that will generate revenue.
Assets like a mortgaged home or a loan-purchased car become liabilities when we lose our jobs due to restructuring or downsizing. Buying revenue-generating assets rather than liabilities or purely aesthetic items is an important part of running a successful business. Stocks, bonds, mutual funds, and real estate that generates a net positive income after deducting mortgage payments are examples of revenue-generating assets.
4.”Power of corporation or company in terms of taxation”
The following four steps make up financial IQ:
1. Have a basic understanding of what accounting is all about: If you plan to run your own business, learning the fundamentals of accounting will help you interpret financial statements.
2. Knowing how to make money or invest in it scientifically is essential.
3. Be familiar with financial market supply and demand dynamics.
4. Understand the law, especially in regards to how the law interprets the income of an individual versus the income of a corporation.
In Total, When you work for someone, you get paid, pay taxes, and then spend the money you have left over. However, when you take care of your own affairs, you earn money, spend it, and only then do you have to pay taxes.
5. The rich invent money. They find opportunities to make money from a well-trained mind.
The real currency we have is the money we have in our heads. A well-trained mind opens doors to great financial opportunities. When the mind is properly trained, it can spot opportunities that will eventually lead to financial gain.
We’ll be more willing to take risks and invest in new opportunities once we realise that the real money is in developing our financial intelligence.
6. Work to learn. We need to work to learn more, rather than earn more. Education is more valuable than money in the long run.
You can only learn so much if you stay in the same job for an extended period of time. Putting your faith in job security is a bad long-term plan. While it may be effective in the short term, it is advised that we work to learn more rather than earn more in the long term. In the long run, education is more valuable than money. Cash flow management, time management, and people management are all crucial for business success. The ability to communicate and sell are two other crucial life skills.
Now coming to next question. Why do the financially literate struggle?
However, being financially literate does not solve everything in life. Even those who are well-versed in financial matters may find it difficult to accumulate assets that generate income for a variety of reasons:
- Apprehension about financial ruin: It’s normal to be concerned about losing money. We’ve all got this phobia. What matters is how you respond to that fear. If your response to this fear is to play it “safe,” you’ll start fearing failure, which becomes a much bigger problem than fearing losing money. The unwillingness to take a risk prevents the financially literate person from taking advantage of opportunities to increase his or her assets. Failure should spur you on to greater success, not lead you to a place of refuge.
- Cynicism is ingrained in us from birth, and it can either serve as a positive force or a negative force. When our doubts take control of our lives, there will be a doomsday scenario for every action you take. A doomsday scenario will force you to let go of good investment opportunities as you listen to it more and more.
- Laziness: Do you have too much time on your hands to take care of your financial assets? Is this also true for your health? The truth is that you’re avoiding something you’d rather not face because you’re too busy, not because you’re too busy.
You must be a little greedy in order to overcome laziness. Gluttony helps you advance because it encourages you to continually demand more.
- Doing it right: Put your financial literacy skills at the top of your list of priorities. Don’t be the first to make a payment on your debt. A bad habit, because it puts others before yourself. Do not be pushed around by landlords, bill collectors, and the like.
- Arrogance: When your ego and ignorance come together, it’s a recipe for disaster. Arrogance is the name given to this deadly concoction. To avoid being exposed, do not fall for the snake oil sales pitch. Take the time to educate yourself instead.
- Don’t be afraid to act now. Take action to put your money to good use! Investigate brand-new concepts and seek out instructors who can assist you in learning something brand-new.
Money is a figment of our imagination, a fictitious concept. Making money is a science that requires creative thinking and the identification of opportunities that contribute to the creation of revenue-generating assets.
You’ll be better equipped to leverage insights to improve your financial IQ and build your wealth if you have a high level of financial IQ.
Now just get started …..
if you find any discrepancies from original book to my notes then please let me know in comments to correct it.