Robert Kiyosaki, the famous author of “Rich Dad Poor Dad,” has made a name for himself by challenging conventional financial wisdom. His bestselling book and subsequent works have inspired millions to rethink their approach to money, wealth, and financial education.
Kiyosaki’s teachings often contrast with what most of us learn in traditional educational settings, offering a fresh perspective on achieving financial freedom.
In this article, we’ll explore seven money secrets that Kiyosaki believes are crucial for financial success but are rarely taught in schools. These insights could revolutionize your approach to money and set you on a path to greater economic prosperity.
1. The Importance of Studying Money
One of Kiyosaki’s core principles is the need to understand money itself. While traditional education often focuses on theoretical aspects of economics and commerce, it rarely delves into the practical mechanics of how money works, flows, and can be generated. Kiyosaki emphasizes that truly grasping these concepts is fundamental to financial success.
Understanding money goes beyond balancing a checkbook or creating a basic budget. It involves comprehending the broader economic ecosystem, including how money circulates, the impact of monetary policies, and the various ways wealth can be created and multiplied. Kiyosaki often says, “Money is just an idea,” highlighting the importance of mental models in financial success.
This knowledge empowers individuals to make informed financial decisions, recognize opportunities, and navigate economic changes more effectively. By studying money, you can learn to see beyond the surface-level transactions and understand the underlying principles that drive financial success.
2. Beyond the 9-to-5: Exploring Entrepreneurship
Kiyosaki challenges the traditional notion that getting a good job is the key to financial security. Instead, he advocates for entrepreneurship as a more effective path to wealth. This doesn’t necessarily mean everyone should quit their job and start a business immediately, but rather that developing an entrepreneurial mindset can lead to more significant financial opportunities.
According to Kiyosaki, entrepreneurship is about creating systems that generate wealth rather than trading time for money in a traditional job. This could involve starting a business, investing in real estate, or creating passive income streams. The goal is to build something that continues to provide value and generate income, even when you’re not actively working.
Kiyosaki often says, “The richest people in the world build networks; everyone else is trained to look for work.” This quote encapsulates his belief in the power of entrepreneurship to create lasting wealth. By thinking like an entrepreneur, you can see opportunities for value creation all around you, potentially leading to more significant financial rewards than a traditional career path might offer.
3. Why Hard Work Alone Isn’t Enough
While hard work is often touted as the key to success, Kiyosaki argues it’s not enough. He emphasizes the importance of working smart, not just hard. This means focusing on activities that leverage your time and resources for maximum financial benefit.
Kiyosaki introduces the concept of making money work for you rather than you working for money. This involves creating or acquiring assets that generate passive income. Examples include rental properties, dividend-paying stocks, or businesses that can operate without your constant involvement.
“The poor and middle-class work for money. The rich have money to work for them,” Kiyosaki famously stated. This shift in perspective from active income (trading time for money) to passive income (creating systems that generate money) is crucial to building long-term wealth.
It’s not about avoiding hard work but rather ensuring that your efforts are directed towards activities with the potential for exponential returns.
4. Rethinking the Savings Mindset
Contrary to conventional financial advice, Kiyosaki believes saving money is ineffective for building wealth. While having an emergency fund is essential, parking large sums of money in low-interest savings accounts can erode your wealth over time due to inflation.
Instead, Kiyosaki advocates for putting money to work through strategic investments. This could mean investing in assets that appreciate over time, like real estate or stocks, or investing in yourself through education and skill development.
He also believes that holding precious metals like gold or silver will preserve buying power, unlike savings in fiat currencies. The key is to view money as a tool for creating more wealth rather than something to be hoarded.
Kiyosaki often says, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” This perspective encourages a more active approach to managing your finances, focusing on growth and wealth creation rather than mere preservation.
5. Leveraging Debt as a Financial Tool
Perhaps one of Kiyosaki’s most controversial teachings is his view on debt. While most financial advisors warn against debt, Kiyosaki considers it a powerful tool when used correctly. He distinguishes between “good debt” and “bad debt.
According to Kiyosaki, good debt is used to acquire assets that generate income or appreciation. For example, a loan to purchase a rental property that produces monthly income could be considered good debt. Bad debt, on the other hand, is debt incurred to buy liabilities or items that decrease in value, such as credit card debt for consumer goods.
“The rich use debt to leverage investments and grow cash flows. The poor use debt to buy things that make rich people richer,” Kiyosaki explains. This perspective on debt requires a significant shift in mindset for many people. It’s about seeing debt not as something to be feared but as a tool that, when used wisely, can accelerate wealth creation.
6. The Truth About Homeownership and Wealth
Kiyosaki challenges the belief that buying a house is always a good investment. He argues that for many people, their home is a liability rather than an asset. It typically takes money out of your pocket each month (through mortgage payments, taxes, maintenance, etc.) rather than putting money in.
While owning a home can be part of a sound financial strategy, Kiyosaki encourages people to think critically about whether homeownership aligns with their financial goals.
He suggests considering factors like the potential for appreciation, the cost of ownership versus renting, and whether the money tied up in a home could be better invested elsewhere.
“A house is a liability, not an asset because it takes money out of your pocket every month,” Kiyosaki often states. This doesn’t mean you shouldn’t buy a house, but rather that you should approach the decision with a clear understanding of its financial implications.
7. Diversifying Beyond Passive Stock Market Investing
While many financial advisors recommend passive investing in the stock market through index funds, Kiyosaki suggests this shouldn’t be the only strategy. He emphasizes the importance of financial education and active investing in various asset classes.
Kiyosaki encourages individuals to explore different investment vehicles, such as real estate, businesses, cash-flowing assets, and commodities. He believes that understanding various investment options can help one make more informed decisions and potentially achieve higher returns.
“The single most powerful asset we all have is our mind. If trained well, it can create enormous wealth,” Kiyosaki says. This underscores his belief in the importance of continuous financial education and the need to think critically about investment choices rather than simply following conventional wisdom.
Conclusion
Robert Kiyosaki’s financial philosophy challenges many traditional beliefs about money and wealth creation. You can gain a new perspective on your financial journey by understanding these seven “secrets” – studying money, embracing entrepreneurship, working smart, rethinking savings, leveraging debt, reassessing homeownership, and diversifying investments.
However, while Kiyosaki’s ideas are thought-provoking, they may not suit everyone’s financial situation. As with any financial advice, it’s crucial to research, consider your circumstances, and consult financial professionals before making significant decisions.
The key takeaway is the importance of financial education and thinking critically about money. By expanding your financial knowledge and challenging conventional wisdom, you can make more informed decisions and potentially open up new paths to economic success.
Start applying these principles today; you might be surprised at how they can transform your financial life.