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Why do some people become rich while others don't? Robert Kiyosaki's book Rich Dad, Poo Dad takes us through a series of techniques that a person can adopt to become rich. The rich dad in the book refers to the father of the author's friend Mike, a wealthy businessman who despite not having studied beyond the eight grade in school became wealthy through investing wisely in revenue generating assets. The poor dad is the author's own father, who in spite of being well educated with a Ph.D. from Stanford did not prosper financially, only making enough to own a house and pay his bills and taxes.
When a younger Robert and his friend Mike tried to print fake currency as a means to get rich, they get aught by 'poor' dad who explains that it is an illegal activity. He then pushes Robert to get advice on how to get rich from Mike's dad and the tips that Robert learns from his mentor are what the book is really about. Some of the advice given in this book may not seem new. For example, it explains that just getting a fat paycheck does not guarantee that a person becomes rich.
An interesting concept introduced in this book is the differentiation between assets and liabilities. Unlike what is common parlance in conventional accounting practices, an asset is not really an asset if it consumes money and does not generate income. This throws into light the fact that those assets such as homes that we live in and cars are not really assets but liabilities as they use up cash and give nothing in return. In contrast, investments in stocks, shares, bonds or even rental properties are true assets as they generate revenue. Similarly, there is a differentiation between a business and a profession, the former being necessary for generating wealth. The book also stresses on the difference in attitudes and mindsets between the wealthy and the middle class towards money.
The real key to financial success and independence from debts according to the book is to make investments that will accumulate wealth. Of course, regular savings with compound interest will help in increasing wealth, but this would take many years. Making investments with a bit of risk are a better way to accumulate wealth quickly.
Whether you are looking to build your own wealth or get your kids started early on investing their way to wealth, Rich Dad, Poor Dad is an interesting read that helps a layman understand financial concepts of wealth generation in an easy to comprehend and amusing narrative style. Read it to learn what you haven't been doing to get rich.
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