How It changed my outlook
It was my junior year of college at Missouri State University. I was bogged down with public relations projects, communication theory papers, and hustling a part time gig at a law firm. I, like most of my friends, had less than $1,000 in my checking account–most of which was being spent at the notorious bar that sold 25-cent well drinks every weekend. I had the looming worries most college juniors begin to have, about narrowing down an internship, building my resume, and just making sure that my assignments were submitted on time.
I felt like despite all of this coursework, I wasn’t totally getting a taste of the real world and still had tons of questions about finding a job, marketing myself, and above all making money. It was around this time that a roommate lent me a book he’d just finished: Rich Dad Poor Dad by Robert Kiyosaki. You may have heard of it–or even read it yourself. Many financial authors and critics recommend this book among their top 5 books to improve financial literacy, and all of the insights in this 1997 NYT best-seller still ring true to this day. The book filled many of the gaps where I felt that academics were falling short.
Rich Dad Poor Dad
In short, Rich Dad Poor Dad tells the story of Kiyosaki as a boy growing up with two fathers, and how their financial decisions and habits helped shape his own as he grew up. As the title suggests, one father (his close friend’s father) was rich and the other father (his own) was poor. Kiyosaki compares and passes on the knowledge he gained from both fathers, with valuable insight into how everyone can build a life of wealth, financial independence, and freedom. Here are a few of the takeaways that have stuck with me ever since I first picked the book up:
“An asset puts money in your pocket. A liability takes money out of your pocket.”
I won’t lie, when I received my first paycheck from my first job right out of school, I couldn’t believe it. I was only making an entry level salary, but it was more money than I’d ever made at that point. Hourly and salaried jobs are still the primary means of incomes for the majority of Americans. But for these workers unfortunately, 53% live paycheck to paycheck. This can be for a number of reasons, but a huge chunk of the problem comes from a negative asset/liability ratio. While poor Dad would use his expendable income on liabilities like electronics, new cars, and other depreciating possessions, rich Dad used expendable income to invest in assets like the stock market, real estate, or even just parking it in a savings account.
This piece of advice from the book led me to put holiday bonuses and pay raises into my savings, or to deposit them into an Acorns investment account. I also began maxing out my 401(k) contributions to the “free” money from my employer. An asset can also be a personal business, which echoes the main point of the book: invest in yourself. When you make your money work for you, you build passive income that isn’t dependent on clocking in every day.
“The fear of being different prevents most people from seeking new ways to solve their problems.”
Do you ever get the feeling like you’re just grinding, and working and not much is changing? In Rich Dad Poor Dad, Kiyosaki makes the case that most people are stuck in the “rat race”–the repetitive, exhausting lifestyle which encourages self-defeating behavior. People stuck in the rat race let two main emotions dominate their decisions around money: fear and greed. The fear of breaking a comfortable routine dissuades most from making changes to their lives and exploring new income strategies. And greed is the force that causes most to blow their expendable income on liabilities. To take control of your financial future, you need to stop being afraid of being different. The book makes the case that a great way to do this is through a side hustle.
Everyone’s heard of the side hustle–an activity or hobby outside of your day job that generates income. Whether it’s driving for Uber, selling old belongings on eBay, or working a part-time job, a side hustle is an incredible tool to build financial independence. When you have an extra source of expendable income, you can continue to purchase assets without dipping into your primary source of income. Just remember the key to managing the money from your side hustle is to use your extra cash to break out of the rat race and eliminate financial fear and greed.
“If you work for money, you give the power to your employer. If money works for you, you keep the power and control it.”
Don’t get me wrong, having a steady job is necessary for most Americans. At this point in my own life, it’s absolutely necessary to make ends meet. One of the main drawbacks of working for an employer however, is that your employment isn’t always in your control. What happens if your company decides to make layoffs? What happens when the economy takes a downturn? Above all else, you’re spending your precious time–a lot of it–working to make someone else money. Do you ever imagine what you could devote your time to if you weren’t at work 8+ hours a day? In Rich Dad Poor Dad, Kiyosaki argues that there can be large risk in relying on an employer, and if you diversify your income and acquire assets, you can lessen the impact of a sudden consequence.
Keep in mind, this DOES NOT mean quit your dayjob. Your job is what pays the bills and puts food on the table. Your business, side hustle, or assets are what make you wealthy. When your money is in your control, you have the power to decide how much risk you’re willing to take. Ideally, you build your business and manage assets on the side, until this eventually becomes the main source of your income. This can be a long process, but if you do it correctly, you’ll attain financial freedom and put your money to work for you.
Pick up a copy of Rich Dad Poor Dad here.