Financial Freedom by Rich Dad


Reading on my roof...a change of scenery during lock-down in Casablanca

front view

One of the assets in my real estate portfolio

I first read this book in 2011, and just finished it again. The book is basically Rich Dad Poor Dad 2, and describes how there are 4 types of people:

  • Employees (working for someone)
  • Self-employed (working for themselves)
  • Business owners (other people work for them)
  • Investors (their money works for them)

In order to be wealthy, you need to own assets (businesses or investments), so even if you start out as an employee or are self-employed, you need to use some of your income to buy assets, or you will ALWAYS be working to pay your bills.

Reading this book for a 2nd time was really encouraging, because I can see the financial progress I've made. When I read this book in 2011, I had 2 rental properties which were costing me money each month (Kiyosaki calls them 'alligators', because you have to feed them).  I was depending on long-term appreciation (rising prices) to make the investment a winner.  But month-to-month, they were actually liabilities since they were taking money OUT OF my pockets.  I didn't like hearing what he was saying, but I had to admit it was true.

I took the message to heart, and knew I needed to shift strategies.  Cash Flow Quadrant says "good debt is debt that someone else pays for you, and bad debt is debt that you paid for with your own sweat and blood.  That is why Rich Dad loved rental properties.  He would encourage me to buy rental property because 'the bank gives you the loan, but your tenant pays for it.'"

Fast forward a few years and I discovered the duplex-conversion strategy: Buy a house and add a 2nd unit so you have TWO tenants and collect TWO rents each month.  The houses cash flow nicely and become assets (money coming INTO your pockets each month).  I sold my 'alligators', and have put all my eggs into this basket.

One powerful quote for this era is from Erik Hoffer:
"In times of change...Learners inherit the earth, while the Learned find themselves beautifully equipped to deal with a world that no longer exists."

Reading great books is a start, but unless you apply the content and take ACTION, it's only useless information.