Thousands upon thousands of people have read the book Rich Dad Poor Dad by Kiyosaki. The book discusses two different fathers. The first is the poor dad. This is the author’s biological father. The second is rich dad. This is actually the father of the author’s childhood friend.
The author’s biological father spent his entire life working, and trying to achieve the American dream (purchasing items), but was never able to find lasting wealth. His friend’s father, on the other hand, focused on working smart, invested his money in things that grew wealth, and was able accumulate enough wealth to live comfortably.
Kiyosaki learned many valuable things from his father. This includes work ethic, and how to treat others. However, he didn’t learn about how money works and how to become wealthy as opposed to simply earning enough money to get by.
Does this mean that people raised by a poor dad, have no chance at overcoming an approach to finances that keeps them in a cycle of work, earn, spend? Of course not.
You can absolutely make a fortune, even if you were raised by a poor dad.
First Learn About Money
There is no doubt that poor dad was a hard worker. His problem, and the problem that he passed on to his children, was a lack of financial literacy. He didn’t know how to manage his own finances beyond the cycle of earn, pay bills, spend the excess, and start over again.
If you want to do more with the money you earn, you have to take it upon yourself to learn how. To start with, you should take the time to learn about the differences between income, liabilities and assets. Then, you can learn about investment options and how you can increase your assets which will decrease your need to work, and increase your wealth. You can begin by taking a good financial management class, or by talking to a willing financial manager. Just be careful where you get your information, because much of the advice given on financial management comes from a place of fear. This advice might help you to retire with enough to live on, but it won’t help you to become wealthy.
Learn to Create Money Even When You Aren’t Working
The difference between rich dad and poor dad was that poor dad had to rely on his salary, because that was his only source of income. That meant job loss or layoff was devastating to him. Rich dad sought to create other streams of income, known as residual income that he could use to support himself and continue to grow his wealth. You can create residual income in a variety of ways, just be aware that passive income, another word for residual income, does require some work to earn and maintain.
Take Corporation Into Consideration
Whether it’s fair or not, the current tax structure is much friendlier to corporations than it is to individuals. There are also protections from liability for corporations as well. Because of this, you may want to consider creating a corporation under which you can earn at least a portion of your money. This may reduce your tax expenses. However, if you decide to this, you should do so under the advice of an attorney who focuses on incorporation.
Operate Like a Business
If you were raised by a poor dad, you may have received the message that it is okay to increase your expenses when you earn more money. While it is true that increased earnings means that you have more ability to cover more expenses, that isn’t the way to gain wealth.
When a business increases its income, it may increase expenses, but if it wants to increase wealth, it will focus on obtaining more assets. This is because money invested in expenses is money that is lost. However, money that is invested in assets results in an increase of wealth and income.
Rethink Everything You Know About Work Ethic
When poor dad worked, his sole focus was earning a paycheck that would pay his bills, and also allow him to purchase some luxuries for his family. When he received a raise or a promotion he did what many believe they should do which is reward himself and his family with what he saw as a better lifestyle. To him, that was the embodiment of work ethic. Work hard, and then get rewarded with raises and promotions. The problem is that he was never truly able to increase his wealth. He just got more stuff, which often meant more liability.
Now, poor dad wasn’t all wrong. His work provided security for his family and income. Both are necessary. He just didn’t look far enough into the future. You can take avoid this by being farsighted. Ask yourself, what can I do right now to increase the skills that I need to increase my earning potential so that I can begin obtaining assets and earning money through investments? This could be taking an extra class, volunteering for training, or working a second job. Just remember that your goal isn’t to make more money for more expenses now. It’s to establish a financial cushion and to learn the skills to advance into careers that provide you with more wealth gaining opportunities.
Use Your Financial Know How to Take Smart Risks And Make Money
Once you gain the financial literacy you need, and you learn various ways to create income and build assets, it is time to put all of this information to work. This can be the scary part. Wealthy people, at least the new money types, did not get rich by playing it safe. They became confident in their knowledge and made the decisions to take risks with their investments and their life choices to reach their goals.
Remember, when you make the decision to do this, you will hear negative feedback from a variety of sources. Don’t let their fear stop you from becoming the rich dad who can pass on the right knowledge to your kids.
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- Making a Fortune When You Were Raised by ‘Poor Dad’ - June 3, 2016