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4 lessons from 'Rich Dad, Poor Dad' that changed the way I think about wealth

When I read "Rich Dad, Poor Dad" in my 20s, I took away four lessons on building wealth that I've carried with me through my life and career. 1. I learned that most people work for money, but the rich make money work for them

Talk to just about anyone about how to make money, and the conversation will inevitably gravitate toward jobs. That's not wrong thinking either, at least not early in your life. The first step toward building wealth is generating a basic income. If you have no assets, and no skills you can sell to the general public in exchange for money, a job is certainly the most convenient way to produce a cash flow.

But the difference between rich people and everyone else is that the rich don't stay in the job phase for very long. They realize early that to become rich, they need to become the people who hire others into jobs, and not a job holder. By contrast, the rest of us typically spend our lives in the job phase. And we're trapped once they believe that a job is the only way to earn money. That locks you into working for money for the rest of your life. 2. It's not how much money you make — it's how much you keep.

ne of the behaviors that most separates the rich — especially the self-made rich — from others is the emphasis on saving money.

One of the fundamental obstacles for most people is that budgetary priority goes to spending. Saving gets only what's left over. For example, let's say you have a net household income of $1,000 per month. After paying necessary expenses and a few luxuries, you have $50 left to put into savings.

That means only 5% of your net monthly income is going into savings. And in many households, even that amount is swallowed up by unexpected expenses. In others, the amount seems so insignificant the savings effort is abandoned entirely.

The situation is very different among the rich, particularly among those who aspire to become wealthy. Though financial planners may recommend saving and investing 10% or 15% of your income on a regular basis, the aspiring rich may save 30%, 40%, and even 50% or more of their income. 3. Rich people acquire assets, but others acquire liabilities they only think are assets

Typical assets acquired by the rich include stocks, bonds, investment funds, income-generating real estate, real estate investment trusts, and businesses. What all have in common is that they either have the ability to generate a steady income, increase in value, or both.

Over time, the growth in income-generating assets results in a higher income. Eventually, the income being produced by those assets may be sufficient for the owner to live comfortably without having to work anymore.

This is the exact opposite of what many people do. Embracing the consumer mindset of the media and advertising culture, they instead "invest" their money in personal possessions they believe to be assets. Probably the best example is the family home. Most people think of it as the biggest asset they have, and even devote a disproportionate percentage of their income both to acquiring and maintaining it.

But even while a house can build value over time, it's not an income-generating asset. Quite the opposite: It costs you money to keep it. It's really not an investment until and unless you sell it, take your cash, and invest it in something that will produce income. 4. Financial struggle often comes from a lifetime of working for someone else.

This isn't an attempt to demean anyone who spends their lives working for someone else. Instead, it's to emphasize doing so holds the very real potential for a lifetime of financial struggle for most people. The fundamental limiting factor with being an employee is that you're always trading time for money. And since you only have so much time to give to your employer, it creates an absolute limit to how much you can earn.

But that's only the most obvious limit. At a more basic level, you will always earn less than your effort produces. For example, though your work may generate $50 an hour in revenue to your employer, you may only earn $25 for each hour spent. It must be that way because your employer cannot afford to keep you on the payroll without making a profit on your work.

By contrast, if you made a decision to begin selling your skills either on a business-to-business basis or to the general public, you may find yourself easily earning $50 an hour. And as you grow in your skills and your capacity, that may gradually rise to $75 an hour, $100 an hour, and more.

When you're self-employed, there is no ceiling on what you can earn. The more you can earn, the more you can save and invest to gain real wealth.

Building wealth might take some big changes

These lessons from Robert Kiyosaki aren't meant to make you feel your situation is hopeless if you've been handling your finances the way the majority of people do. Rather, it's to give you an insight as to how rich people become rich. That involves major behavioral changes. But if you can embrace them as part of your financial routine, the entire monetary dynamic in your life will change for the better.

Even if you can't save and invest 50% of your income, set a more reasonable goal. 20% or 30% will take you longer to reach your goal, but it will get you there eventually. The point is, if you want to improve your financial situation in a meaningful way, you'll have to make more substantial changes in the way you see and handle money.

However, its easy to understand why financial freedom is important and what are the lifestyle changes required to do so but its hard to incorporate those changes in life. Sometimes due to unexpected expenditures and other times due to indulgence.

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