Welcome to part 2 of the review of Kiyosaki’s key thoughts from ‘Rich Dad, Poor Dad’. In this article I am going to go through quotes from ‘Mind your own business’ and ‘The history of taxes and the power of corporations’.
Lesson 3: Mind your own business
“The rich focus on their asset columns while everyone else focuses on their income statements.”
A lot about this quote rings true. While I was working through debt repayment and building out a proper emergency fund, the income was really something on the forefront of m,y mind with my constant focus on increasing it while I was also maximising my debt repayments and then savings. However, this is no longer the case. While income is ALWAYS important, I have found that my focus has shifted to increasing my assets. Whether these assets are my retirement funds, stock portfolio or anything else, I give them more attention than my income as they become more interesting to manage.
“Financial struggle is often the result of people working all their life for someone else.”
I can’t agree with the face value of this statement. Yes, I agree that financial struggle is a very common thing. However, the reason it is present is not related to people being in employment. Instead it is rooted in someone not valuing their work enough to offer a high salary and often them not knowing how to change that. Low income, high cost of living, lack of knowledge and resulting inability to plan long term are the main reasons for a financial struggle.
However, if we step away from the face value and into the deeper meaning, this quote resonates. And it does so because it is rare for people in dead end, low paying and low satisfaction jobs to see what they are doing as something they are doing for themselves. On the other side of the spectrum there are passionate individuals exerting their mind and muscle in a work situation that they love – but not necessarily in a situation where they are their own boss. However, individuals who see their careers as meaningful and fulfilling, are likely to have a better earning trajectory than those who do not care.
“Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities.”
Aside from the sketchy definition of assets Kiyosaki uses, I’m ion agreement with this quote. So called side-hustle, a business outside of your main source of income should however be used to a specific goal. Don’t spend hours on end on something that won’t make you any money. And while you are making the extra money, have a plan for it – otherwise the activity can become meaningless and just burn you out.
Lesson 4: The history of taxes and the power of corporations
“My rich dad just played the game smart, and he did it through corporations-the biggest secret of the rich.”
Corporations are no longer a secret, I hope. While this quote is a very dramatic version of the reality, it is not incorrect in implying that becoming incorporated does help with optimising your tax strategy (unless you are in employment without any other income-generating activities outside of that employment). So if you have a small business, if you are a successful freelancer, if you’re trying to sell macrame on etsy…to optimise the amount of tax you pay (optimise=cut down), being incorporated might be worth considering.
“My rich dad did not see Robin Hood as a hero. He called Robin Hood a crook.”
Robbing rich to give to the poor sounds humble but why is it always a win-lose battle? Well…if Robin Hood taught the poor how to multiply their assets and become rich instead, the legend would be boring, wouldn’t it? I might like Robin Hood, but theft is theft and paired with it being put to questionable use does make him seem as a crook.
“If you work for money, you give the power to your employer.If money works for you, you keep the power and control it.”
The notions of power and control surface throughout the book in connection to money. Despite me personally not loving the association of money and power, unfortunately money is strongly associated with power over other people. One interesting observation I have from personal life is that the less broke you are, the more power you can claw back from your employer, people you would otherwise rely on and the government you live under. And the more in position you are to call your own shots, the better you might feel for it. Obviously not all of us are cut out to make the world our own, but for those that do indeed want the freedom and the responsibility that comes with it, be ready to reach out and get that power back.
“Each dollar in my asset column was a great employee, working hard to make more employees and buy the boss an new Porsche.”
Aside from Porsche making me think of a midlife crisis (it should not, vintage 911s are beautiful, fun cars), you should look at your money as your workers sometimes. And please, be a savvy employer, because if you put your workers to the wrong task, you might go bankrupt. This point of view does not apply to just people of wealth – this applies to everybody, including people with £100 in their account that needs to last for the whole month. Look very carefully at where you put your money and consider what this money needs to be doing. If it needs to be available in case of an emergency, put it into a savings account that you can access easily. If it needs to be multiplying, it will do a poor job just sitting in a 0.25%APR ISA and you’ll need to find it a better home.
In the next article in this series we’ll cover chapters 6 & 6 of the book. See you then!