It is not our intention to provide an extensive book review on the famous personal finance book, “Rich Dad, Poor Dad”, here. Rather, we are trying to extract several key concepts out from our reading, that we deemed extremely valuable and applicable to us, and then share with you, our readers.

Pay Yourself First

Rich Dad taught us to “pay yourself first.” But what does it mean? Does it really work? Before we answer those questions, let’s look at what we typically do now: We earn a paycheck from a W2 job, and then we use the proceed to pay for mortgage / rent, pay for the car, pay for mobile phones, pay for internet, pay for our toys, pay for this and this… (the list keeps going…) and then finally if we have any money left, we will consider investing. And honestly, that is a big “if” because often time there is no money left when we get there.

The concept of “pay yourself first” is, based on our real-life interpretation, after you pay for the basic survival essentials (e.g. mortgage, food, and internet per today’s society), the next thing you should do is to put some money to invest. And then after that, you spend the remaining proceeds on other things, like toys or movies… etc. “Pay yourself first” is a catchy phrase that means you should invest first.

Don’t Work for Money

The complete concept is “Don’t work for money, have money work for you.” It is the fundamental concept of, when we work a full time W2 job, we are working for money, and we are trading our (valuable) time for money. We are not saying we need to quit our job because that is “bad” per se, but instead we should be cognizant of the situation, and come up with a migration strategy so we can move towards “have money work for you” side. How do we do that? We invest. We purchase money generating assets. We use money to make more money.

Multiplier Effect

This is a very simple but yet powerful concept, if you appreciate what it is telling you behind the basic meaning. Think about it: Let’s say you are a highly skilled professional and you are capable to earn $500 an hour. What is the physical maximum you can earn in a day? $12,000 – it is simple math, $500 x 24 hours. When you work a job, you have a physical limitation (or cap) on your multiplier effect, which is 24.

But if you use money to money, you do not have any physical limitation at all, you can simply accelerate your multiplier by investing in more money. Yes, it can be a different topic on how you can “freely” get more money to deploy to your multiplying effect. But we are here to change our mindset, not to argue, so let’s embrace the power of unlimited multiplier effect.

(There is actually a real-life answer on how to have more money, we will save that for a subsequent blog post.)

Spare Time

Rich Dad said, and we para-phrase, “What defines you as a successful or failed person is what you do at your spare time.” Think about it, the world is created equally, each of us is being assigned 24 hours a day, no more or less. We all have our daily routines: work, chores, exercise, eat… whatever. But after the 8 hours of work, what sets people apart is what you do afterwards. You can choose to be a bump, sit in front of the TV and watch it until it is time to bed. You tell yourself, “I deserve to rest because I just had a hard 8-hour day at work.” While another person, perhaps straightly by mental toughness, or self motivation, decides to put in an extra 2-hour work to improve himself/herself. It can be studying the stock market, can be reading a self-help book, can be developing a website, it does not matter. What matters is in his/her “spare time,” s/he decides to do something extra for himself/herself.

As you can see, we are not simply re-typing what was being written on the book Rich Dad, Poor Dad. Instead, we digested the concepts, added our own interpretation, especially based on the current real-world situation, and provides motivational values on how we can leverage these time-tested concepts to improve ourselves. We hope you can gain something out of reading the book, just like we did. If you are interested to read the full content, pick up the book here.