INVESTING FOR BEGINNERS UK - Rich Dad Poor Dad (How to invest) Robert Kiyosaki.
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In this video we review the popular book: Rich Dad’s guide to investing, by Robert Kiyosaki
Robert Kiyosaki is an American businessman and author.
Robert Kiyosaki’s original bestselling book ‘Rich Dad Poor Dad’ is about himself and his two dads, his real father (poor dad) and the father of his best friend (rich dad)—and the ways in which both men shaped his thoughts about money and investing.
This book provides the teachings from Robert’s Rich Dad.
In this review we will learn that the rich don’t invest in the same things as the poor and middle classes do.
why it’s better to invest your pre-tax earnings than save your taxed income; and why “get an education, work hard, save money” can be bad advice.
Robert Kiyosaki says;
“The philosophy of the rich and the poor is this: the rich invest their money and spend what is left. The poor spend their money and invest what is left.”
He also says;
“The wealthy buy luxuries last, while the poor and middle-class tend to buy luxuries first.
Maybe you've heard of the 80-20 rule, which states that 80 percent of our success comes from 20 percent of our efforts. But for money, the rule is 90-10, meaning 10 percent of people have 90 percent of the money.
The rule applies in many walks of life. Think about Hollywood stars, 10 percent of actors earn 90 percent of the money, whilst the remaining actors also have other jobs to get by. The same goes for athletes, musicians and, of course, investors.
So how can you break into that top 10 percent? Throughout the video, we'll find out what it takes to think like a rich investor.
“Get an education, work hard, save money. Then you’ll be fine.”
This sentence sums up the standard middle-class approach to financial security and its likely you were probably told something similar by your parents.
Robert Kiyosaki says;
“If you’re still doing what mommy and daddy said for you to do (go to school, get a job, and save money), you’re losing.”
This can be very limiting advice especially to children who may apply this throughout their lives, it will never make you rich. Rather, it will keep you in the 90 percent that only has 10 percent of the money.
So how do the rich become rich?
In most cases they don’t slave away at one job until retirement.
The rich, often purchase businesses and make investments.
Employees generally have less money to invest; that’s the way the modern-day tax system is set up.
For example, let’s say you want to save £1,000 from your salary. First you have to pay tax, so in order to save that £1,000, you’ll have to earn approximately £1,300.
After saving this £1000, let’s assume you put it somewhere safe and the average inflation rate is 2.5%.
In this example, Inflation would reduce the £1000 value every year, and after 20 years it would only have the purchasing power of £600.
Lets repeat that….. you earn £1300, you keep £1000 after tax, and then this money is only worth £600 in 20 years. Not a recipe to make you rich.
This example shows an employee who invests the same £1000, but instead of placing in a safe place, it generates a 10% return in the stock market. The result, after considering a 2.5% inflation rate, is that the £1000 now has the purchasing power of around £4000 after 20 years.
That’s a 660% difference.
Unfortunately, before taxes, which again lessens the likelihood of making you rich following this path alone.
In summary, it’s hard for an employee to become rich because they give so much money to the government.
Robert Kiyosaki suggests that people shy away from investing because the terminology sounds like a foreign language. But he believes that to get into the elusive 10 percent, you must invest in your financial education.
First off, Robert says it’s important to understand the difference between assets and liabilities.
The rich tend to hold assets
And the poor tend to hold liabilities.
Let’s take a common example. You’ve probably heard someone say, “My home is a great asset.” But throughout the Rich Dad literature the suggestion is made that something is only an asset when it generates positive cash flow.
Let’s assume your house is worth £200,000 with a £150,000 mortgage. Where
The house will likely appreciate over time, but during this process it’s taking money from your account each month and is therefore classed as a liability, according to Robert Kiyosaki.
“The more money you make the more money you spend; that’s why more money doesn’t make you rich – assets make you rich.”
Understanding assets and liabilities is only the first step. To successfully make the investments of the rich, like developing real estate
or buying into a business – you need to have a good understanding of financial terminology says Robert Kiyosaki.
If you want to buy shares in a growing business, you will need to understand whether it’s a good deal. To do this you need to understand value, be able to calculate and analyse measures like the debt-to-equity ratio, return on equity, cash-on-cash return and financial leverage.
“Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.”
spend time developing your financial education – it may be the best investment you ever make.
Robert Kiyosaki says, If you aren’t yet rich, become an inside investor; starting a business is an achievable route to wealth.
Many people think, “I could never start my own business.” But just 120 years ago, 85 percent of people were independent farmers or small shopkeepers. In other words, most people were business owners.
Robert suggests that anyone can start a business and become rich. Starting a business only requires a bit of creativity.
The author is a case in point. As a child, he created his first business from nothing. He saw that a local store was discarding old comic books and persuaded them to let him take the discards. He then opened a profitable comic library, charging school friends a 10-cent membership fee. From nothing but a good idea, he built an asset.
One reason many people hold back is time and money. There is no doubt a whole host of other excuses.
Robert Kiyosaki says;
“Excuses cost a dime and that’s why the poor can afford a lot of it.”
But it’s entirely possible to start a business part-time, and some of the world’s finest business leaders did just that.
Michael Dell started Dell Computers by working part-time in his university dorm room, and eventually got so rich that he decided to drop out.
Jeff Bezos started Amazon part-time, working out of a garage, imagine if he hadn’t had the courage to start things up in his spare time.
Testament to his small beginnings, he said;
“It’s hard to remember for you guys, but for me it’s like yesterday I was driving the packages to the post office myself and hoping one day we could afford a forklift.”
Robert Kiyosaki alludes that once you have a business, you have options, and it can be a road to riches that you’ll never experience as an employee.
What does it take to build a successful business?