Understanding Finance - Lessons from Rich Dad Poor Dad

Rich Dad Poor Dad by Robert Kiyosaki is one of the most important finance books I ever read. It helps you in understanding finance by treating personal finance as behavioral finance. It implies that changing your behavior and beliefs regarding money will have a profound change on your personal finances.

Rich Dad Poor Dad is written as if the title written as if the title should be - Understanding personal finance for dummies. Kiyosaki gives information in a way that is easy to understand and apply

The author parlays the financial knowledge he got from two different father figures into financial advice. the finance definition and major advice he gives is simply this.Buy assets not liabilities and increase your cash flow.

The major purpose of the book is to get us to change the way we think about our finances and get money to work for us as opposed to working for money.

I read the book as part of a group task in a book club and we were all challenged to see ourselves as entrepreneurs managing our personal finance not just as workers or salary men.

In Summary Rich Dad Poor Dad taught me the following two lessons which I am leveraging to get control of my personal finances.

1. What exactly an asset is.
2. Why Passive income is vital to get control of your finances
   

The book defined an asset simply as something that puts money in your pocket. A liability being something that takes money out. Letting go of emotional considerations, it means your car and house are liabilities and hubpages articles are assets.

He keeps insisting that the only financial advice you need is buy assets not liabilities. Buy liabilities only when the cash flow from the assets can cover them. To get the cash flow he recommends setting aside part of your income no matter how hard up you are and investing it. In addition you may want to consider an additional money source. which brings me to the second point, get an additional source of income especially one that gives passive income.

Passive income refers to your earnings for work that you did not break an immediate sweat for. work you had done previously but still earn income on.

The options for passive income differ from country to country but they exist everywhere. You can record albums if you are talented and earn royalties, or patent an invention, or build businesses and sell retaining a percentage to ensure you keep getting paid. you need to discover what you can do.

After reading the book, I evaluated my life. i like writing and I have affordable internet access. So i signed up for Hubpages, started writing articles and I am slowly but surely building passive income.