Rich Dad Poor Dad Book Summary
A lot of us know what the rat race is, but when asked, how would you define it?
Some would say it’s the endless routine of work you do for everyone but your own self. Meaning you put in all the sweat, while it’s the bill collectors, the government, and your boss who take the bulk of the reward.
We often talk of the rat race as a system everyone is part of while simultaneously talking of it as an abhorred thing. So why do we still become a part of it?
Because of the fear of society’s disapproval.
Let’s take the example of the saying, “Study in school, work hard, and get a well-paid job.”
Even to this day this mantra is still being drilled through our heads despite its being outdated. Before, someone was bound to get a job after college, work in one company for many years, then retire with a great pension. Today, however, that isn’t a guaranteed pass from a life of poverty and financial struggle.
The truth of the matter is, you can study well, get accepted in a great school, graduate, and get hired by a good company and never achieve financial growth. Why? Because you are stuck in the rat race. It is your bosses who become rich and not you.
Nonetheless, we still follow the mantra above from fear of going against expectations that have been planted in our brain since we are born. The end result is that while we may avoid poverty, we’re not getting any richer.
We don’t leave the “rat race” and grow wealthy because we fear the disapproval of society.
Greed And Fear Can Lead Financially Ignorant People To Do Irrational Actions
Two basic emotions come up when money is involved – greed and fear. This goes for everyone, may you be rich or poor. When you have money, you’re likely to think about new things you can buy. That is greed. And if you don’t have money, you worry that you could never own enough. That is fear.
People who don’t know how to manage their money are prone to getting influenced by their emotions in their decisions.
Example, after a promotion and an increase in pay, you have the option to put the extra money in bonds or stocks, which could lead to more money in the future, or you could make yourself happy now by buying new things like a house or a car.
If you don’t know much about money, your emotion starts to kick in.
You fear you will lose the money so much that it prevents you from putting it in stocks or assets because you think of the risks, ignoring the fact that it will bring you riches in the long-term.
While greed makes you spend your salary increase on better living, like buying a larger house, or a more physical and safe option than buying stocks in a company.
It must be noted though that this increase means a higher mortgage, bigger bills, and cancels off your raise in the first place.
This is how greed and fear take over the financially ignorant from becoming rich in the long run.
How can you fight these strong emotions?
By learning more about financial know-how like risk, investment, and debt. This will put you in a better place to decide wisely despite the fear and greed.
A lot of people believe that to be rich only requires talent and capability. The truth is, there are many people who are exactly that, but are poor. What they lack is financial knowledge, an advanced skill for subjects like investing, accounting, and many more.
The sad truth is we are brought up without this knowledge. The system of our schools educate people in many subjects, but financial literacy isn’t included.
Kids aren’t taught how to save and invest, and because of this, they don’t know about things like compound interest. This is clear even today when kids in high school spend all their credit.
This poor financial intelligence is a big problem for the youth today and also educated adults who make horrendous money decisions.
Politicians are often seen as the smartest, most educated people in a society, but the reason why countries have national debt is because these politicians do not have enough financial knowledge.
Not only politicians, but also ordinary people can also be very bad with money. This can be seen in retirement planning. Take the United States as an example. Fifty percent of the US workforce don’t have pensions, and 75-80 percent have bad pensions.
This has left society with poor financial knowledge, and it is up to us to learn about financial matters ourselves.
When we end up looking for riches in a time of dire economic change, it becomes more and more important to get a great knowledge of finance.
We don’t get training for financial literacy despite being important for our personal prosperity as well society’s.
The Building Blocks of Wealth Are Financial Self-Education
At any time in your life, you can begin your journey to wealth. The golden rule is the earlier you start, like in your 20s, you are more likely to be rich than beginning at 30.
Not considering age, another best practice is to start by appraising your assets, setting goals, and acquiring the resources needed to attain them.
Look at your present financial standing now. With your present job, what salary can you expect now and in the long run, and what purchases can you handle sustainably? You may discover that the new Mercedes you’ve been eyeing isn’t within your reach.
After this assessment, you are able to have practical financial goals. You may say that you want that fancy new car in your parking lot within five years.
After this step, you can start to build your financial literacy. Make this your investment to the best asset you have: your brain.
You can achieve this in many ways, but the best approach is to shift your focus. Don’t look at what you earn, but what you learn.
Example, attending a networking company can conquer your fear of rejection. While a good salary is not within reach, you will acquire lots of sales skills and confidence which can be useful for you in the future.
You can also work on your financial education in your free time. Put yourself in a finance class and a seminar, read many books about the subject, and network with a lot of experts.
Basing your financial foundation on these kinds of building blocks will give you a big chance to becoming extremely rich one day.
The building blocks of wealth are financial self-education and a practical appraisal of one’s finances.
To Be Rich, You Must Take Risks
Einstein defined insanity as doing one thing over and over again and expecting a different outcome. With this logic, if you want to change your current financial state, you would need to start managing your money in a different way.
Now that you know what the Rich Dad Poor Dad book is all about, let’s take a deep dive into the biggest key insights and how you can apply them to get the results you truly want in your life.