According to Robert Kiyosaki, there’s a fundamental difference between the relationship that rich people and poor people have toward money. The author claims that people with high financial literacy, even when they suffer hardship, never remain in this tough spot for long. In other words and using modern-day slang – it’s a skill issue.
So, if that’s the case, what do these skills constitute?
Well, here are the top six rules you can find in his iconic book Rich Dad, Poor Dad, that could come in quite handy.
1. Learn the difference between assets and liabilities
The first thing you need to do is make money work for you. According to Kiyosaki, every single dollar that you own needs to be an employee working toward earning you a new Lamborghini.
This is a huge mindset shift from what the majority of people have, and it starts with understanding two terms.
You need to learn the difference between assets and liabilities. Assets are investments that make you money, while liabilities cost you on a regular basis.
So, you have to start increasing your assets and reducing your liabilities. This was never easier than it is today, when all you have to do is find an investment platform, deposit some funds, and you can get started in a matter of minutes. Just look at the list of top apps ranked in order to choose the right one for you – Kane Pepi says a key factor when choosing an app is the range of assets it has available for investment.
Reducing liabilities is a bit harder. It requires harder decisions and austerity. Still, it’s more than worth it.
2. Separate money-making and thrill-seeking
A lot of people make the mistake of believing that money-making has to be exciting. Sure, gaining and losing money will make your adrenaline pumping, but that’s not what it’s for. Same as gambling is not a money-making activity but a form of entertainment instead.
When you want to make money, you place an investment; when you want to feel alive, you go to a Bitcoin casino. This sounds so simple, but you would be surprised at just how many people get it all wrong. The separation is a lot harder to make in your head than you think.
In his book, Kiyosaki talks a lot about how rich people have a specific mindset. Do rich people gamble? Of course, they do; however, they gamble for fun. Even if they do make money this way, it’s on skill-based games like poker, not roulette or slots.
3. Don’t be afraid of debt
Debt gets a lot of bad credit, some of it completely justified. After all, it’s possible for someone who’s not careful to embark on a debt spiral, getting into a worse and worse financial state with each passing month. Some people dislike the idea of paying back more than they get to spend, while there are also those who feel the extreme psychological pressure of being in-depth.
According to the author, you must dispel all of these fears; the sooner, the better.
First of all, it’s beyond doubt that debt is the staple of the modern economy. Without it, a lot of startups wouldn’t have the initial funding.
An individual or an entrepreneur can leverage debt for investment opportunities, tax benefits, or even to facilitate essential purchases (which will save money in the long run).
Just imagine an upgrade to your home that will reduce your monthly expenses by $100. Getting it a year early will save you $1,200, which is why it might be worth buying it using debt money. This is also an example of how reducing your liabilities works.
4. Learn how to sell
In conversation with his writer friend, Kiyosaki made a suggestion that, in order to further her career, she should enroll in a sales course. When she seemed puzzled by it, he flipped the book that was on the table in front of them and pointed out that the author is described as best-selling, not best-writing.
Sales is the staple of the business world. This is what will gatekeep your ability to monetize all your other skills. In fact, this is the only thing that’s worth learning, no matter what your other talents or occupation are.
So, start looking for learning materials in the form of books or online courses.
Being a good salesperson is a skill that is beneficial for your personal life, as well. Being able to sell an idea is generally an incredible trait. You can sell your partner the idea of getting a new dog or sell your friends the idea of going on a holiday to a place of your own choosing.
5. Create multiple streams of income
Increasing your financial resilience should be one of your primary objectives, and one of the best ways to do so is to create multiple streams of income. This way, if one of the markets goes down, you lose one job, or an accident incapacitates one of your properties, you’re not left without an income.
There are a lot of ways you can do this, but it’s not enough for these streams of income to be diverse; they need to be passive, as well. Why? Well, because you can only take so many jobs until you have no more energy, time in your day, or social life.
There are a lot of ways you can create a passive stream of income, buying a rental property being just one of them. You could also pick something less expensive and buy intellectual property, instead. You could even create intellectual property and live off royalties. Sure, this takes active labor to produce, but once it’s on the market, you just collect income without investing any effort.
6. Choose the right mentors
Lastly, in his book, the author values knowledge over income. In his mind, it’s worth working in a low-paying job (even in a job where you’re not paid at all), as long as you’re acquiring skills that you’ll later be able to monetise.
Nonetheless, this is a system that’s so easy to abuse. Some employers could use this as an excuse not to pay you or pay you less. This wouldn’t be a problem if you were actually to acquire those skills, but by the very nature of this arrangement, it’s likely that they won’t teach you a thing (partly out of fear of losing you).
In order for all of this to work, you actually have to choose the right mentors. First of all, in the age of the internet, there’s nothing easier than researching someone’s reputation. Lastly, you should leverage your own opinion of a person as a significant determining factor.
The right mindset is your most important asset
Having a healthy relationship toward money and understanding sales, investment, income, assets, and liabilities will benefit you more than any influx of cash. This is why some people lose their lottery winnings in a matter of years, and some always bounce back. Mindset is the determining factor. The sooner you understand this, the better. Kiyosaki’s book might foster this mindset shift, so you should definitely give it a shot.
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