You may think that money is not everything. After all, we have been ingrained since young that we can be successful by working hard and making adequate sacrifices. You know the usual: study hard, attend a prestigious university, find a full-time job. Only then are you going to be financially stable and successful. But how much truth does this hold?
We are so used to the notion of working a full-time job while saving money and eliminating debt being the right thing to do. I’m not saying that those ideas are wrong, but let’s be realistic; look at the current situation around you. We all know that the reality nowadays is strikingly different. It’s increasingly difficult for undergraduates to find jobs and pay back loans simultaneously.
Acquiring the amount of money you need for a decent living is a challenge, and it will be even more so for the next few years to come. Around the world, while wage growth is stagnant, the cost of living is skyrocketing, making it increasingly unaffordable for many people to buy things. In other words, their purchasing power decreases year by year. COVID-19 has exaggerated the situation further in which many people were put out of their jobs and had to rely on their savings or debt to sustain their living. Beyond that, we never know when the next shock is coming, which can ruin our current plans and force us to change our lifestyle.
The age-old saying goes: Money is the root of all evil; but if we look at things from the other side of the coin, owning money is not evil. Why? Because many people need that money.
Money—be it paper bills, coins, or bank credit—is a medium of exchange that can buy you things. If you do not have money, you cannot purchase anything. So having the money itself is not bad. The problem comes when you think about amassing wealth as an end goal rather than a means to overcome limitations, such as not being able to eat or stay warm, as well as helping other people in need.
The book Rich Dad Poor Dad cites several reasons why money is not evil and why “money is money”. It explains that it’s love that matters in our hearts, not material wealth; and the more we have of what we desire, the more our wants grow (which can be a good thing).
In this article, I will share what I have learned from reading the book Rich Dad Poor Dad, written by Robert Kiyosaki. I will look into the lessons from him to provide you with a clearer idea of what potential rewards you may be missing out on by sticking to the old ways and beliefs.
There’s nothing wrong with working for free.
It’s attainable to work for free especially if you intend to learn more about it and gain more valuable experience from the work itself. You are not exploiting the other person, you are simply providing what is asked of you.
However, you would have to make sure that what they’re offering you is worth your while. Work isn’t necessarily about money; we have to factor in the opportunity cost of performing the task. This means you should either be learning a skill or gaining experience from your work rather than just investing your time in return for remuneration.
Fear money— but in a good way.
Fear and greed work in tandem as a looming vicious cycle. Some people are afraid of the monetary power and the value of a dollar, and hence try to avoid it, while others seek it out greedily because they perceive that they cannot live without it.
There is no denying the necessity of money. It seems that we are now living in an era where wealth is valued more than anything else. Wealth has become a form of measurement for a person’s success and quality.
Fear of not having enough money is what drives people to work hard. It forces those who may not be financially well off to get off their feet and work their way out of the rut they are in. This, in and of itself, is a good thing.
Of course, there’s a fine line between working hard to earn more and being greedy. Greed is never good news: it prevents people from being content with what they have and will always leave them wanting more. For someone who is painted head to toe in greed, it doesn’t matter how much they own—they will never be satisfied. We work hard to thicken our wallets because if we do not do so, we fear others might be steps ahead of us. This ends up creating a vicious cycle that leads to dissatisfaction and lack of happiness in life.
To this end, the thirst for wealth might overwhelm us with negative emotions and stress, consuming our lives until it is all we care about when we get up in the morning and go to bed at night. The super-productive spirit we might have had at the workplace will start to diminish. Burnout kicks in and we slowly forget important things like our families and health.
While you might think that this fear is only visible among the working class, the same applies to the rich. The more we have of something, the more afraid we are of losing it; similarly, the more wealth a person garners, the tighter they cling onto it for fear of losing their social standing and outward appearances.
Therefore, a person, whether wealthy or not, should seek a balance between their fear of money and greed for money. Fear might drive people to work hard, but fear of money itself can bring about unhappiness in life.
Many people accept jobs with low pay, even though they deserve more.
Among many ailments that plague the mind, people fear not being able to pay the bills, being fired, or not having enough money. Fearful of their finances, these individuals are slaves to the thought of working. They work hard for years—maybe even decades—yet only succeed in earning the bare minimum to make ends meet.
Without a doubt, exhausting all your energy and effort on a job can be tiring; and after months of doing it while reaping the same reward, the job might become monotonous and you lose that effectiveness. After a while, it will become meaningless because you do not have enough time for anything else. In the end, working too hard for money will not reap you any benefits and might even take a toll on your mental health.
The rich don’t work for money.
Most people are paid to work over 40 hours a week. When these people receive their paycheck at the end of the month, they tend to spend a little on things that bring them joy and save the rest conservatively.
The rich people we see do not work as hard as us because they have the means to live a luxurious lifestyle. They can afford to be lazy—a luxury of its own. The affluent live a life of luxury and success without the fear of ever being poor. They also spend less time worrying about their finances because they rest assured they have enough money to see the rest of their lives through.
The wealthy are not made rich simply because they receive higher wages. They prosper by holding on to the property they have. None of the wealthiest people on the Forbes list amassed their fortunes solely through their salaries.
The takeaway is to have money that makes you more money. When you have enough wealth for it to self-multiply, you won’t have to work as hard anymore.
Achieving financial independence early on is crucial.
For people who fall out of the upper-class income bracket, this may be the only way to ensure they can afford what they want and need. Financial independence comes from a variety of resources. Still, the most common source is through working on a job and spending less than you make.
Many people dislike the idea of making money because they believe only the rich would do that, adding that the rich are greedy and only care about themselves. This is a popular misconception held by many, and a misconstrued one at that.
Financial independence is a fundamental goal because it means you don’t have to be dependent on a job for your livelihood. Ideally, you can live off the extra income generated from your money. You make more money doing nothing than you would by spending it. Achieving financial independence doesn’t mean you have to get rich, but it does mean you have to have enough money saved that you don’t have to rely on a minimum wage job.
The basic steps to achieve financial independence include:
- Figuring out how much money you need per year.
- Calculating how much in assets you need to generate a return after taxes and expenses.
- Acquiring those assets.
This brings me to the next point:
Buy assets, not liabilities.
How do you make your money work for you?
The key is to buy things that can earn you income instead of purchasing stuff that will cost you more in the long run and increase your debt. If something can generate you money in the long run, that’s an asset; otherwise, it’s a liability.
This is obvious, but it’s important to note. Some investments that look like assets are liabilities in guises.
“How about real estate? Isn’t a house an excellent investment?”
It depends on how you deal with it. If you buy a much more expensive house than you can afford, you are clobbering yourself with a huge liability. You’re mortgaging your future income stream and your freedom (you have to work to pay off the mortgage, so you don’t have as much time for the other things you wouldn’t mind doing).
In Robert Kiyosaki’s view, this is the most common mistake people make. His reason? You don’t get rental income on your house while having to pay for expenses such as mortgage and upkeep. This is why many are stuck in the rat race. While the house may be appreciating, it isn’t helping you pay month-to-month expenses and liabilities.
Another takeaway is to not purchase items immediately after earning more. Not only do most of your purchased luxuries fail to generate income, but they also depreciate with each tick of the clock.
Exercise caution in your purchasing activities as spending impulsively can increase your debt further, forcing you into a deeper hole.
Of course, Robert Kiyosaki isn’t saying that you should not enjoy yourself. You can still purchase lovely items and have a wonderful life. You’ll feel like you’ve earned your luxuries if you buy them with the money from your assets. The rich don’t buy luxuries until they have enough cash to pay for them.
Buying assets is an integral part of your strategy for building wealth. It is a good idea to wage assets as insurance against possible situations that may destroy your wealth. Not all assets are created equal, though, so it is best to understand the value of each.
What are some examples of assets, you ask? If you buy stocks, bonds, real estate that can be rented out, or anything you create that can be sold later on, you have an asset. Think of each dollar you spend as if it were an employee working for 24 hours a day to make you more money.
Pro tip: Avoid dipping into your savings or investments. You can do this by brainstorming creative ways to come up with the money and taking steps to protect your assets.
Good debt vs. bad debt.
The word “debt” has two different connotations. It’s a term employed either when you have no money to pay your bills, or when you view it as a way to trap you into a financial mess. Either way, people tend to have a negative association with the word and try to avoid it at all costs.
The thing is, there is good debt and bad debt.
Good debt means that you use the money to purchase assets that will make you more money in the future; bad debt means that you use the money to acquire assets that will not make you more money or return the initial investment.
People make a common mistake when they think about financial independence, which is diving into debt without a clear idea of what to do with it. This prevents many people from entering the middle class because of how expensive it can become.
Pay yourself first.
Most people tend to pay their bills first before saving whatever money is left. Usually, they end up with almost no savings, unless they have been extremely frugal from the beginning.
Rich Dad, as Robert would call him (not Robert’s real dad, by the way), did this the other way around: he bought assets first and paid his bills later. His reasoning behind his move is the bill collectors’ threat becomes his primary motivation to creatively find ways to make more money. In contrast, paying yourself last gives little to no pressure to generate more money for yourself.
Money is not evil. It’s just that the old way of approaching money doesn’t apply in today’s world anymore. All in all, the way we view money reflects how we obtain it. Rich Dad, Poor Dad‘s approach goes very much against most people’s conventional wisdom about money, but it works.
Of course, everyone will be putting this book away on their shelves and absorbing different lessons when they are done with it. For me, the main point I have learned is how we should think differently and open up our minds when it comes to financial problem-solving.