Perhaps the main message of Rich Dad Poor Dad is to increase basic financial education. Maybe I should say financial education for the common man and woman. The reason I say this is because the principles taught in the book are very simple: fundamental personal finance. Some people may even say that what Kiyosaki teaches is dangerously simplistic.
I think those people are missing the point. While it’s true that if you want to accumulate significant wealth, you’ll need to study finance and business in greater depth, what I think “Rich Dad Poor Dad” and “Cash Flow Quadrant” teach well is a high-level view of how cash flows through your life. And one of the first things you need to do to start building wealth is to understand and take charge of your cash flow.
Once you understand how you create cash and understand the flow, you can start making simple or complex changes to accumulate more and more cash flows. And just like the water that flows in a glass begins to accumulate, your wealth will increase and eventually overflow with abundance.
Here are some of the key points on financial education in the book “Rich Dad”:
1) Your greatest “wealth” is not money. It is your state of mind, your way of thinking and your understanding: a proper (not necessarily conventional) upbringing. Once you learn how to make a lot of money, even if someone takes it all, you still have the knowledge to re-create it and more. Even more important, if you have deep financial knowledge, there is much less chance that you will lose it once you create it. The lesson: Invest your time and money studying how to create positive passive cash flow streams.
2) It’s not just about how much money you make, but how much you keep. As the cash flow comes in, you have to be careful not to spend it as fast or faster than you do. Monitoring and control of your finances.
3) Understand the difference between assets and liabilities. This is one of the most controversial points in the book. According to Kiyosaki, an asset puts cash in your pocket, a liability takes cash out of your pocket. These are not academically correct definitions, but they are very helpful in monitoring your cash flow.
4) To be rich, accumulate assets. Most people get into financial trouble by accumulating liabilities (especially credit card debt). The most common reason this happens is due to a lack of understanding, a lack of intelligence of what is happening with your cash flow pattern.
5) If you accumulate a lot of money, but you don’t have the intelligence to understand how to effectively manage your cash flow, an increase in money can accelerate the problem.
6) Here’s a point I’m still struggling with: Your house is not an asset. It may be an asset on your balance sheet, but because you’re taking money out of your pocket, it’s a liability. He’s not saying don’t buy a house. He’s saying don’t call him an asset when he’s actually a liability.
7) When you’re in the process of building your wealth, exercise financial discipline to maximize what you spend on cash-producing assets and minimize what you spend on cash-draining liabilities. Saving isn’t enough if you’re not buying cash-producing assets.
8) One point that is emphasized the most in your Cash Flow (highest recommendation) game is your definition of “stuff”. I love this term because it interrupts your buying pattern and helps you control your spending habits. Gossip is those material possessions that we spend our money on that are actually passive. Like that luxury because that’s really beyond your current means. Or that new TV you had to have. Or as simple as that new DVD. Buying assets at the time you should be buying assets is one of the main causes of financial problems.
9) He’s not saying don’t buy junk. The point is to buy assets before you buy junk. And then let the additional income generated by the assets pay for your odds and ends. Put first things first.
10) The poor, the middle class and the rich spend money. Where they ultimately end up depends on the intelligence and wisdom they develop and what they choose to accumulate. What you focus your thoughts on expands. If you focus on increasing your knowledge and assets, they will add up. If you focus on knickknacks and indiscriminate spending (even unconsciously), you will accumulate liabilities.
So what are some power affirmations to help condition your mind to automatically act on these ideas? I hope you notice one thing about these statements: many of them are very specific. They go way beyond platitudes like “I love myself.”
When creating and using affirmations, I am interested in focusing on the specific strategies and thought patterns that I need to have in order to achieve my goal. When was the last time you saw a claim that included tax accountants and bankers? But the truth is, you need these people on your team if you’re going to build massive wealth. Thus, you can also condition your mind so that they are in your life, that you feel comfortable dealing with them, and that they work for you.
Here are the new claims:
1) My financial intelligence now multiplies every day.
2) I own my money. I track and manage my cash flows.
3) I carefully accumulate cash-producing assets.
4) I pay myself first. And I use the cash I save to buy more and more assets.
5) Now I surround myself with expert financial advisers: tax accountants, real estate brokers, bankers, lawyers and investors. Featured advisors now work for me.
6) I study and fully understand the financial statements. When I study financial statements, I quickly understand the cash flow patterns behind the numbers.
7) I now have an outstanding balance sheet rich in cash-producing assets.
8) When spending money, I minimize frills and maximize assets.
9) I clearly understand the difference between assets and liabilities.
10) When I make a purchase, I ask myself “Am I turning cash into junk or cash-producing assets?” I choose assets.
11) My cash-producing assets now exceed my personal expenses and buy more cash-generating assets. Now I’m on the fast track of life.
One last point. As good as the book “Rich Dad Poor Dad” is, Robert Kiyosaki’s “Cashflow” game really helped clarify the most important concepts. I use the computer version. Given my time constraints with my business, I find it easier to set aside time for regular play. Even though it’s a simplistic view of how the world works and heavily biased towards real estate, I found it extremely educational. As a side note, I majored in business in college, but there’s very little I learned from my courses that I feel has increased my financial intelligence. That mostly comes from studying books like “Rich Dad Poor Dad” and “Think and Grow Rich.” Don’t underestimate the power of self education!!!