Search

What is the value of the book "Rich Dad, Poor Dad?

bookeygetbooks
May 23, 2023
4 min read

"The value is so great. In the past 5 years, I have read it at least 5 times and I always revisit it every year. I strongly recommend it to financial novices! As for investment pros, it's just "common sense."

After reading some other financial books, I still think that "Rich Dad Poor Dad" is the most classic, maybe because I have a preconceived impression of it, after all, it is my enlightenment financial book.

This book conveys concepts of finance and investment through stories, which makes it more memorable, and the stories are real. The author's father is a poor dad, while his friend's father is a rich dad, so he has the opportunity to get completely different views on wealth.

I quickly skimmed through this book again in less than an hour.

Here are my reflections after finishing it: The most important thing mentioned in "Rich Dad Poor Dad" is to "increase assets" and "reduce liabilities."

In the book, he discusses three typical ways to "increase assets": working, starting a business, and investing.

For most people, working is the universal path and it is also a necessary path; even entrepreneurs cannot avoid working at the beginning, they're just working for themselves.

Improving one's ability to work is the most effective way to "increase assets." The so-called original accumulation is to improve professional abilities, interpersonal relationships, professional qualities, etc.

My personal plan is as follows: in the 25-35 age range, I will focus on improving my "working ability." I am currently self-employed, which is a type of working for myself, but I still need to improve my professional skills. The professional skills I currently need to develop are financial analysis and social media management.

During my spare time, I can develop my investment skills, such as index fund investment, financial planning techniques, asset allocation, etc.

Overall, during this stage, I have two main ways to "increase assets," which are "working" and "investing."

Next, from 35-40 years old, I hope that my "investment income" can fully cover my "daily expenses," which is the so-called state of financial freedom for most people.

The ultimate goal is that "investment income" not only exceeds "daily expenses" but also surpasses "income from working."

Next, let's talk about "reducing liabilities".

First of all, you must know what a liability is. According to the definition in the book "Rich Dad Poor Dad", anything that does not bring cash flow is a liability. For example, if you buy a house and need to pay a mortgage every month, it is a liability.

Of course, it doesn't mean that you cannot have liabilities, but rather you should "reduce liabilities". If you have enough ways to "increase assets", then naturally, you can also "increase liabilities".

What are some typical liabilities?

Cars, for most people, cause great financial loss, such as insurance, parking fees, and maintenance costs. Although they provide some convenience, the financial loss is not worth it, especially with the availability of subways and buses.

Therefore, one way to "reduce liabilities" is "Don’t buy a car".

Of course, nowadays, there are not only cars as consumer traps, but also luxury goods, expensive restaurants, etc. These things will tempt you to "increase liabilities".

While aggressively "increasing assets," if you're also crazily "increasing liabilities," you'll never achieve "financial freedom."

There is also something that most people consider as "liabilities" but I believe is an "asset". For example, if I borrow money from my friends and family to invest, and give them a 6% annual interest return, and for the past 5 years, I've consistently received around 10% investment returns, then I can earn a net profit of 4% interest return each year. This seems like a "liability," but for me, it is an "asset" because it brings me stable cash inflows each year.

Some people may think that life would be dull without material consumption.

"Reducing liabilities" does not mean "having no liabilities." Personally, my recent liabilities are books, which are my "liabilities" in life, but I can bear them and they only occupy a small proportion of my income.

The most important thing is to clarify what are "assets" and what are "liabilities," and make reasonable allocations. Don't think that buying a house means having an asset, or borrowing money means having a liability. And of course, borrowing money for investment that fails is also a kind of liability.

For ordinary people, it is not necessary to have sophisticated investment skills or take great risks in entrepreneurship. As long as you understand these concepts in life and figure out what you are doing on your career path, you can live a good life with increasing assets and reducing liabilities.

Finally, the book "Rich Dad Poor Dad" mentions that the core skills for getting rich are accounting, investing, marketing, and law. For those who say that this book is useless, ask yourself if you have mastered these four skills.

Let me recommend some books from beginner to ultimate level. Actually, I've read all the entry-level books recommended below, and they have had a significant impact on me.

1. Entry-level

Rich Dad Poor Dad

The Richest Man in Babylon

The Millionaire Next Door

Financial Freedom: A Proven Path to All the Money You Will Ever Need

The Automatic Millionaire

2. Intermediate level

Reading Financial Reports for Dummies

The Simplest Way to Invest

How to Read a Financial Report

3. Advanced level

The Most Important Thing Illuminated