In the previous chapter, I learned the importance of how money works. The third chapter focused on applying this knowledge in the real world. Furthermore, Rob emphasised interesting but often ignored advice: keep your day job and mind your business.
Robert explained the difference between a profession and one’s business. A profession is where you work for someone else and make them rich and a business is where you make the money work for you. Income that is generated with little or no effort AKA your assets.
Financial struggle is often the result of people working all their lives for someone else.
Not everyone can start a business. However, everyone can begin learning financial intelligence to make money work for them.
Robert reiterates once again the problem with focusing on our income column.
“I need a raise.”
“I’m going to work overtime.”
“Soon, I’ll start training so I can get a better job.”
These are common phrases Rob tends to hear. This sort of action can make you financially secure if you are investing in income-generating assets.
Some never ‘take the risk’ for fear of losing it all, so the pay check goes into a long-term savings account or to a broker who takes his fee after all is said and done.
Robert goes on to mention net worth. He cringes whenever people mention net worth because any assets that are sold, are taxed for any gains. Therefore, the government takes its share and in the end, their ‘net worth’ is worth less than one may think.
So, what’s the solution?
Keep expenses low, reduce liabilities and diligently build a base of solid assets.
My current action plan is – starting from ‘zero’ – to build my asset column. To generate more income, I have begun driving for Uber Eats, invested into Raiz (stocks) and started offering my services as a mental health writer to combine my passion for mental health with writing!
The hype within me is beginning to die down but I am still curious as ever to read more about Robert’s life, case studies and his financial accomplishments.
I’ve always been eager to learn, improve or master a skill, thought or idea. Reading this book has been one of the best decisions in my life so far.
In Lesson 1, I learned how different the mentality was between Rich Dad and Poor Dad. I resonated with Poor Dad and his mindset as I have always been focused on getting a better job to pay for my life and all the expenses.
Since starting my life-changing journey 5 years ago, I have had huge mental shifts in how I see myself and how I see money.
Being excited to read Lesson 2 would be an understatement.
This next chapter delved into the importance of financial literacy.
Financial literacy is the knowledge of how money works and finding ways to make it work for you.
Three decades later, I read about how Rob and Mike’s strong foundation of money management set them up for life: Rob could retire before 50 years of age, while Mike inherited Rich Dad’s business and took it from strength to strength.
Assets VS Liabilities.
Furthermore, we learn the difference between assets and liabilities. An asset generates income, whereas a liability becomes an expense and eats away at your income.
Robert included examples of the Cashflow pattern of an income statement, where an asset generates income. He also showed the Cashflow pattern of an income statement for people who own liabilities rather than assets.
Robert gets asked similar questions all the time: How can I start? What can I do to make millions like you?
His answer: If you want to be rich, spend your life building your asset column. If you want to be middle class or poor, spend your life buying liabilities that you think are assets.
One main takeaway is the notion that money does not solve all problems. Learning this over the years, I would agree.
Robert explained the general cycle of cashflow for young, newly-weds or graduates. A couple might move in together and instead of building assets, they use their income to pay for their rising expenses.
Income goes up, but so do their financial obligations.
There begins the cycle of the “rat race”. This drove home the importance of financial literacy and why having a strong foundation of money-management is crucial to success.
Main takeaway for me personally was Robert’s view on being a homeowner.
Rob explained 3 ways a homeowner is an employee:
You work for the company. You’re adding the the success and riches of the business owner. Even if you work harder, your earning is capped.
You work for the government. Your income is taxed heavily depending on your income threshold. Most of the working year and income go to tax before you even see the money.
You work for the bank. Once you’ve paid tax, you generally need to pay for your mortgage and/or credit-card debt.
Within the last few years, property has been an interesting topic of conversation between my boyfriend and me.
This view of a “homeowner being an employee” is not the same logic I’ve been exposed to. I’ve heard about cars being a liability – that makes sense. I always thought owning property would be a good way to ‘build wealth’ as so many other people have done this before me.
As I read further on, Rob mentions that his goal isn’t to stop people from buying property, but he is saying to invest wisely and choose homes that will generate enough income for you.
Wealth isn’t about all the material things you can buy, but it is measured by how long you can survive for if you stopped working at your job today.
Can I survive a month or a year if I stopped working? My answer is a resounding no.
However, it is just the beginning of my learning and this makes me very excited to see how financial literacy could change the course of my life.
After reading this chapter, I felt quite frantic to acquire income-generating assets. I forget to remind myself that this takes time.
It may take a year or three – or even longer – to find myself at this level of wealth. Patience will be essential – something I am trying to work on a lot!
As long as I am doing one task each day to get closer to my goals, I will achieve them.
Action I have taken & future plans*.
At the moment, I have begun investing in Raiz (investment app) and am planning to purchase stock in social media.
I have officially gotten approved for a second job, so I am hoping this will begin my journey to building my asset column.
It’s all so exciting!
My dream is to have assets pay for all expenses each month so any income I do receive, will be pure profit to go towards this blog, to re-invest or transferred to a personal savings account.
*My goals may change and I’m okay with that. We can always prepare for the best and worst moments in life but until it happens, or unless we take action, we won’t know how the future will be.
On to the third Lesson!
Have you read Lesson 2 yet? What did you resonate with most? What did you find challenging?
Hey everyone! My brother gave me this infamous book to read, so I wanted to document my thoughts, feelings and actions each chapter.
Since the beginning of the year (2019), life has felt a little lack-lustre. I needed a new focus. Something that would level-up my thinking. This book is exactly that!
If you’re interested in some golden nuggets of advice, join me on this journey of learning!
As you might imagine, the first chapter covers the beginning of Robert Kiyosaki’s journey to financial education and freedom.
It follows Rob and Mike’s journey (Rob’s childhood best friend) getting a job from Mike’s dad in exchange to learn how to make money. They earned 10 cents an hour. Later, they worked without pay.
Throughout the chapter, Robert examines his rich dad’s thoughts about work and money versus his poor dad’s thoughts toward work and money. I found this particularly fascinating. I’ve grown passionate about mindset and how powerful our minds can be when it comes to overcoming life’s barriers.
Fear & Greed.
Rich Dad emphasised the fact that we must be honest with how we feel if we were to change our thinking. He mentioned that all people are ruled by two emotions: fear and greed.
The fear of being without money is the force that gets us up in the morning and go to work. Then greed comes every time we get paid: we imagine all the things that money can buy. The pattern then continues.
If we can admit to ourselves how we really feel, we can then stop reacting emotionally and start to think logically. We can ‘free ourselves’ from this trap.
Something that stood out to me, was rich dad’s sentiments about why people think the way they think: because that’s all they know!
Parents pass down their knowledge from their own parents and so goes the cycle. It’s important to reflect on that for a moment. What values were you given as a child? Do you agree with them still or were there a few you discarded?
Similarly, those who go to school, are taught how to be a good worker, not how to manage money well.
Whether it’s our parents or society, we all have a different perspective about work ethic and finance.
“Being broke is temporary. Being poor is eternal.”
First, be aware of how you relate to money.
Change your perspective from fear, to opportunity.
Fear is an instinctual emotion to enable us to survive. Once we override this fear, our potential becomes endless.
I was taking on a blueprint for how I saw the world and myself from my family and from society.
From 22 years old onwards, I have been breaking these barriers and overcoming fears in all aspects of life.
I’ve been chipping away slowly. We can’t always jump in the deep-end. We must first learn to swim. That’s my approach at least!
My impression of this chapter was that a lot of people continue in this “rat race” of life and never question why they do the things they do. I could definitely relate to this as there was a portion of my life from 18 to around 22 years old where I was financially careless.
Rich dad offered jobs to Rob and Mike to teach them a lesson. I resonated with this as I have been blinded by this ‘race to get paid more and more’. Back then, this way of thinking paid for my necessities: rent, food and car expenses.
As I read each page, and each nugget of wisdom Rich Dad shared, I realised that I still have Poor Dad thoughts: afraid of not having ‘enough’ in case of an emergency. Thinking about jobs that will pay more money.
This year, this pressure to ‘earn’ became unbearable. Although it motivated me to find a volunteering role and that lead to a full-time contract, I was still operating from a place of deep fear.
On the other hand, as the year has progressed, I have started thrifting, flipping online and cutting down expenses so I can keep more than I spend.
The last 10 years (9 considering the unstable hours), I have worked mostly casual positions in hospitality and retail. I became inspired by these motivational speakers and YouTubers when they’d share their experiences. How they would save and what that would afford them – e.g. freedom, travel, security. Could I have this life? If I had this life, what would it mean?
Saving money would address two important needs for me: financial security and personal accomplishment. This would be my “why”.
Below, I share some tips I learned over the years to save money, no matter what income you’re earning.
Find your “why”, goal setting & approximate earnings.
What’s your reason to save? University payments? Buying a house? Attending a concert?Travelling? It could be similar to my goal of personal accomplishment and financial freedom. No matter what your “why” is, write it down somewhere or repeat it to yourself each day from here on out. When things get difficult – and it will – your “why” can serve as a reminder.
I set myself a goal of $5,000 over 12 months. This may seem like too much time to save this amount, but with my earnings (usually minimum wage or less = AUD$18-$20 or less per hour) it would be an accomplishment.
Discussing my goals with my boyfriend, we agreed that I would deposit savings into his account. That way, I wouldn’t have access to it. It would be like a slow-cooker — set it and forget it, except with money!
I spent a few months collating my approximate earnings over time. I made sure that working my minimum shifts, I could afford necessities of life: rent, phone bill, car payments, groceries. If all went south, I knew I could sell my car or phone and still survive on a skeleton wage.
Disclaimer: I understand that not everyone has access to this or that everyone has the same benefits within and outside of Australia.
Being on minimum wage and paying the amount of rent I was paying back then, meant that I qualified for Rent Assistance. If you’ve never heard of that, it is a small payment you can receive from the Australian government to help with rent. You must be eligible, apply and await approval before receiving this payment. For me, this made a huge difference.
Click the link below if you’d like more information.
During this time, things came up that I didn’t account for: family events, special holidays, not to mention winter and the dreaded flu… there were times where I’d put little to no savings away. I struggled to accept these normal occurrences like illness, drop in business at work and general life hiccups. Every second I wasn’t working, meant I wasn’t working toward my goals.
I needed to start expecting the unexpected – go back to basics: one of the reasons I started saving was for financial security. And when I got sick or if a family event came up, I could affordto pay for it.
And just like that, slowly but surely, financial security = check!
Every week, as soon as I got paid, I’d pay my rent and my bills. Without question. I’d then transfer money to my boyfriends’ account. This kept me accountable. If I asked for money, it would need to be under either of these conditions:
Would not put my savings into a 50% deficit.
Emergencies only! Meaning, illness, unexpected bill or special occasion.
Staying consistent was the biggest lesson for me. I was used to spending money without a care. Now I had this responsibility and accountability on my shoulders. I began to think about money differently. If I could achieve my goals, it would mean being a step closer to a future of financial stability.
Celebrate, track & automate.
Each month, I would ask Luke where I was at with my savings. These conversations were sometimes difficult to have because I’d be so disappointed in myself if I missed a payment or was $100-200 off my progress mark. Looking back, I wished I remembered that progress no matter how small, was still progress!
To track and plan expenses, you can draw up a monthly table, use an Excel spreadsheet or even create a table in Word. Predicting upcoming expenses including medical bills, birthdays, sentimental anniversaries or family holidays can really help you to achieve your goals.
Automation was new to me, but I utilised it without realising! I used my iPhone calendar to plan expenses every week, no matter what the event. I set my rent/bills on “recurring” for so I didn’t need to re-type it. I also automated my phone bill each month. Without lifting a finger, one of my bills were always paid. I no longer needed to worry about whether I missed a payment or think about when it was due.
If you’re able to, automate one or all necessary payments. Even if you’re living paycheck to paycheck, knowing that one of your bills will never be pending can ease one stress off your shoulders. If you can’t automate payments, automate the organisation of your expenses. Set reminders on “recurring” so eventually it won’t be a surprise when a bill comes up and it’ll become a habit. We all have responsibilities, it just depends how we carry them out!
Save within your means.
A famous phrase is to “live within your means” and that’s good advice but I think it frames your mindset to be rigid. You may have to see the doctor and pay for medication — which could mean you can only put away $50 or less into savings. So what? You’re still making the best effort. Save within your means.
Here’s an Example of My Weekly Expenses*:
**Job 1 and 3 were my main sources of income. It also fluctuated depending on whether we were low on staff, if there was a function/birthday on or if there was a live act that weekend.
Snapshot of my crazy life: I worked days, nights, weekends… I’m actually surprised how many jobs I took on just to get through at times. 7:30am start at the first job, 1-5pm at another job and then 9pm-4am at the third job. Being young, I had the energy and the motivation – that worked for me!
Please remember that if you’re spreading yourself too thin and become stressed, irritated or start losing sleep — STOP WHAT YOU’RE DOING AND RE-EVALUATE. There’s no point in suffering and negatively affecting your mental or physical health.
Some people benefit in pushing through self-imposed, rigid rules. Some don’t. Find what works for you and stick to it!
Fight the boredom.
Another thing I struggled with was the feeling of boredom. After a few months of saving, the feeling of doing something new had worn off. I wanted to go back to my old life of shopping and going out until the early hours of the morning.
If your budget is tight, find free things to do – go for walks in a new neighbourhood, find a new trail, re-watch old movies, play board games, visit friends or have them visit you. If you have access to internet, there are so many platforms for expression, and passing the time: YouTube, Twitter, Blogger, WordPress, Quora, Tumblr and so forth.
This journey was not glamorous by any means! Although you better believe that if I happened to work 28-30 hour weeks, I would live it up! It’s all about balance. You can’t keep yourself cooped up at home with a mindset of “I can’t”. You can, it’s about finding a new way of doing the things you love and enjoy whilst on a budget.
Create extra income.
As you know, a job that is casual in nature means it’s mind-numbing to predict how much income you’ll earn the following week.
However! It doesn’t make your goal impossible.
I would pick up extra shifts by scrolling through a local Facebook group where employers/managers were looking for staff to fill hours with last minute notice.
Another way I’d pick up shifts was to build rapport with other stores in the same company. In many instances, I was able to work at multiple locations to make up my hours. It did require travel whether it be public transport or paying for my car expenses but it was worth it for the extra dollars in my pocket! I would often take public transport to save on petrol. I figured that if I had the spare time, I’d rather spend it travelling to my next shift!
Lastly, I would flip items online. Whether it be clothes, furniture or luggage – I was selling it for extra income. I would warn that it can be slow, so it requires patience!
In this day and age, income possibilities are vast.
Remember that you’re doing the best you can.
Throughout this time of saving, I often felt like I wasn’t doing enough. But looking back, I know I was just being hard on myself.
A year later, I managed to save approximately $4,400. I predicted with the hours I was getting from two jobs, I’d at least reach $5,000 by the end of the month. Unfortunately, my hours were cut by 70% due to the decline in business (perks of a casual job, amirite?). Nevertheless, I saved a decent amount!
I was so proud of myself for getting to that point.
It can take time for us to reach the next step in our career, land a job with stable hours or find a place that pays us the equivalent for the work we do. So don’t give up. Give it your focus, patience and dedication!
I hope these tips have helped motivate you to save for your next trip or for a rainy day.
If you can save on minimum/below minimum wage, you will always have the ability, discipline and patience to work towards financial freedom as you move into higher income.
What tips have you found helpful when living paycheck to paycheck?