I’ll Refer to This Book for the Rest of My Life

It costs $2.49 at Amazon.com.

But it’s the most valuable book they sell.

I discovered it in 2004 when my friend Samuel handed it to me and asked me to read it. Samuel used to work for Goldman Sachs in Australia as a private wealth manager. But he decided to leave his 6-figure salary and come to London to become an entrepreneur.

We both loved one thing: the stock market.

To my surprise, the book he gave me had very little to say about the stock market or how to trade it. And the title of the book was weird too.

However, this book changed my life dramatically in a way you’ll never believe.

Had I not read this book, I would probably still be sitting at my desk at the law firm leading a pathetic mediocre existence. I suddenly realised all the mistakes I had made in my life and all the opportunities I had in front of me.

“It’s fear that keeps most people working at a job.” the book explains, “The fear of not paying their bills. The fear of being fired. The fear of not having enough money. The fear of starting over. The poor and middle class WORK for money. The rich let money work for them.“

The book I am talking about is “Rich Dad Poor Dad” by Robert Kiyosaki.

Here are the Top 5 lessons you can learn from this book:

1. What exactly is Financial Freedom?

Many people have the wrong idea of what “financial freedom” means. For example, Kiyosaki explains that you don’t have to be a millionaire to be financially independent. It is much simpler than that.

Take a look at this important table below:

Let’s say you add up all your monthly expenses, including what you pay on your mortgage or rent. Let’s say that figure comes to $3,000.

Most people go and work 40 hours a week at a job in order to pay that $3,000. Now let’s say instead of a job, you had a passive income every month from your investments (real estate, shares or business) that was bringing you $3,000 every month.

Now you are financially free. Now you can continue doing your job only because you want to, NOT because you have to.

2. Why most people will NEVER become financially independent

Look at the above table again. Notice what the rich spend their money on, and what the poor and middle class spend on.

A lot of people think that getting a better paid job (like doctor or lawyer) will make you financially independent. WRONG. What actually happens is that once you get more money, your emotions kick in and logic goes out of the window.

When people get a higher salary or a raise, they usually use that extra income as an excuse to buy a bigger house, a luxury car and expensive holidays. They gather more destructive debt by buying things that depreciate in value. As a result the poor and middle class will ALWAYS stay poor and middle class. They never exit the rat race.

The rich on the other hand buy more valuable assets like real estate, quality stocks, gold and silver and invest in a business. This will make them richer.

3. Pay yourself first

Paying off all your debts does not necessarily make you financially free.

Imagine you had $30,000 of debts. You also have $30,000 in savings. You decide to pay off all your debts in one go, maybe because it makes you feel better to think you have no more debts.

The problem is this: you have chosen reducing your debt instead of growing your wealth.

Now imagine this scenario: instead of paying off all your debts in one go, you decide to pay your creditors the minimum every month to keep them happy. You then use your savings to invest in assets. Five years later you sell one of your assets for $100,000. You can now give $30,000 (plus interest) to your creditors and use the remainder for yourself.

The bottom line is: pay yourself FIRST!

4. Your home is NOT an asset

Ask most people in the street what their most valuable asset is. I guarantee they will either say their car (yes, their car!) or their home.

Kiyosaki explains that since you are the one who is paying for your home’s mortgage and bills, your home creates negative cash flow. Therefore it is NOT an asset.

An asset would be an investment property so that your tenants pay the mortgage and the bills – AND it gives you positive cash flow.

5. Education is an asset – but what kind of education?

Before you decide to set yourself financially free, first you must learn how to do that. If you do not, your mistakes will be costly.

Education is NOT about getting some rubbish degree from a university. I spent 4 years of my life studying law. How much financial independence do you think my law degree got me? NONE!

The best education is to sit and learn from a mentor. A mentor is not the same as a teacher. A teacher only teaches you how to achieve things. A mentor is someone who has already achieved success and can show you how to do it.

Did this article help you? What book helped you in your life? Leave me your comment below: