Rich dad poor dad is one of the most famous books written about personal finances. An introductory book to the world of finances and final freedom that will make you question all of your ideas and beliefs about money as well as the way in which we are educated.

This book contradicts the traditional idea and way of living that people have adopted for thousands of years: be a good student to go to a good university, get a stable and secure job and spend your salary on taxes, bills, debts…

This book was written by Robert Kiyosaki, a successful entrepreneur, and businessman. He is the founder of the company Rich Dad, a platform where he teaches about personal finances to people from all over the world.

Rich people don´t work to obtain money.

“Poor and middle-class people work for money. Rich people make money work for them.”

As we talked about in the previous article 4 ways to create passive income, the key to achieving financial freedom was to make money work for us. Why? Mainly for one reason:

When we exchange our time for money (the traditional way of earning money for thousands of years), a limit is created as to the amount of money we can earn.

But when we unlink these two factors, those limits disappear. And the new factor that determines how much money we are able to earn, depends on our intelligence, ingenuity, and education.

Learn the difference between assets and liabilities

Learning the difference between an asset and a liability is crucial if you want to achieve your financial freedom.

In this world, there are two ways to spend money: buying assets or liabilities.

You may be wondering what the difference is between these two.

Well, the truth is that the difference between these two categories is quite simple. An asset is something that puts money in your pocket. A liability is something that takes money out of your pocket.

“The rich buy assets, the poor only incur expenses, the middle class buys liabilities that they think are assets”.

To understand this better, I’ll give you an example.

A mortgage is a liability because every month it takes money out of your pocket. A Netflix subscription is a liability because it takes money out of your pocket. A loan is a liability because it takes money out of your pocket.

You may be wondering what the difference is between liabilities and expenses. Well, liabilities are a type of expense, but a more constant and permanent one.

An asset, on the other hand, is something that puts money in your pocket. It’s a form of income that doesn’t depend on your time (also known as passive income). Like the rent, you charge for a real estate property you have, for example.

“What defines what is an asset or a liability is not the words, but the numbers.”

“If you want to be rich, you need to spend your life buying assets.”

The secret to obtaining your financial independence is to spend your money buying assets and creating passive income streams.

Financial education is your biggest asset

“The only real asset you have is your mind.”

Most people think that having more money will solve their money problems and they will be able to pay their bills and debts.

But the truth is that, if you give more money to people, they will only acquire more debt.

Earning more money doesn’t solve the problem. Learning how to manage and spend your money does.

The reality is that no matter how much you earn or stop earning if you don’t know how to handle money, there is no divine force that can help you. That’s why people who win the lottery are poorer than they were after they spent all the money.

When we win too much money all at once, we start thinking about all the things we can and want to buy for ourselves. But in reality what we are doing is creating more debt than we had, leaving us poorer than we were. “Money that came flying, flies away the same way.”

Learning to work for money is easier than learning to make money work for you. Especially when the vast majority is motivated by fear. Fear of not being able to pay their bills, fear of being fired, fear of not having enough money, fear of starting again…

Those are the consequences of working for money, you become a slave to your salary and fears.

This leads me to the 4th idea:

There are two predominant emotions that control people´s lives- fear and greed.

First of all fear of not having money, motivates us to work hard and once we obtain our salary, greed and avarice make us think of all the wonderful things that we can buy.

These two emotions and this mental path create a pattern. The pattern that governs our life: get up, go to work, pay bills, get up the next day to go to work to pay more bills…

Fear keeps us in this trap that involves working to earn money and waiting for the fear to go away… But it never does.

Greed or desire makes us want more and better things, which is normal. The problem is that many people believe that money will bring them happiness, so they work for money. But the truth is that the happiness that money brings is short-lived.

People don’t realize how short-lived the happiness that money brings is, instead they think the problem is that they don’t have enough money to make that feeling of happiness, comfort, and security last longer. So as a consequence people keep working for money in the hope of getting more money and extending those emotions.

“Emotions are what make us human. The word emotion means energy in motion. You must be honest about them and use them, along with your mind, for your own benefit, not against you.”

The vast majority of people let these emotions control their lives and their decisions.

“Even if you become rich, if you do not learn to manage these emotions you will only have become well-paid slaves”.

What determines whether a person is considered rich or poor?

Surely you say the answer is money. But what really determines whether a person is rich or poor is their mindset.

Having large amounts of money doesn´t automatically mean that you are rich. We believe that being rich eliminates the fear of being poor. But money is somehow an amplifier. An amplifier of our way of thinking and our feelings towards it.

Having more money does not eliminate the fear of being poor, on the contrary, it amplifies it.

“I can´t afford that” v.s. “What do I have to do to afford this luxury?”

Can you spot the difference between these two sentences?

Well, the first one is an affirmation, one that tells our brain that we cannot afford the thing we want. When we tell this affirmation to our mind, the brain stops working and accepts that idea as our reality.

But the second one is a question and not just a simple question. Asking ourselves what do we need to do in order to afford something that we want, forces our brain to work, to think of ways in which we can obtain what we want.

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