Last week I introduced a series on a book that has had a formative impact on my view of finance: Robert Kiyosaki’s Rich Dad Poor Dad. He makes his points through a narrative about his two dads. His “poor dad” was his biological father, a hardworking man who held a job and worked for wages his entire career. His “rich dad” was his best friend’s father, a successful entrepreneur who operated several businesses.
His first lesson is “The Rich Don’t Work for Money.” What? I know.
Kiyosaki is fond of provocative statements and chapter headings, but his underlying points tend to be valid and useful. I would call this “The Proper Prospective About Money.” See, the point is “the Rich,” as he refers to them, have their money work for them rather than working for money. But how?
This perspective on money is to value assets over income. I’ve known many entrepreneurs who were only the 3rd for 4th highest paid in their companies. They understood they were building their businesses into assets that would last long beyond the salaries paid to staff.
Don’t misunderstand me: There is nothing wrong with income! We all rely on it, even “the Rich.” With the proper perspective, however, income and savings can be invested intentionally to build assets over time.
Oh! What is an asset? Kiyosaki’s definition: an asset is something that generates more net cash flow to the owner that it takes in. So assets are cash generators, i.e. income generators.
When you own income generating assets, your need to work for income is reduced. Again this is so simple, but how many of us, especially business owners, have lost sight of this simple principal? Many business owners are in the category of “owning their own job,” but they are distracted from building a company that will be an independent income generator.
The proper perspective on money, assets over income, can revolutionize the way you run your business or manage your finances.
Rich Dad Poor Dad is an easy read. Pick up a copy! I will be reviewing other lessons from the book in more detail in the coming weeks, and I look forward to reading your comments. And as always, for more reading recommendations, or to discuss other entrepreneurial tips and tools, contact Harvard Grace Corporation at email@example.com.