April 25, 2008

Rich Dad, Poor Dad on Investments

Posted in financial decisions, investments at 11:14 pm by kimsan23

One of my blog readers suggested that i read this book. I did. It was very very interesting. I must admit that at first, it was hard for me to really understand how Kiyosaki’s system works. i mean, it’s very different from how my parent’s raised me. They always told me to study well so that I would get a good job and be able to save money.

I guess I agree with a lot of what the book tells us to do. After all, our biggest investment is really how we live our lives. We invest time and effort into providing ourselves with day-by-day needs. After reading, it got me thinking: “Am I making the right investments?”

One part that really struck me in that book was when he said to invest in assets, not liabilities. Come to think of it, whenever we buy something, we don’t really think about how owning that something will impact us financially. Normally, people would just buy something and think that the spending for or on that something stops after it is bought. Robert Kiyosaki had a point when he said that after you buy a house, that’s the only time you really realize what it means to own it. That is, realizing that there’s maintenance, repairs, improvements and real estate tax to plan for. Many people do not plan for those things. They buy a house and get surprised with all the other payments they need to make to keep that house.

According to his book, assets are things you buy that will make money for you. Some assets like stocks are risky business but if managed well, they will make money for you. Liabilities on the other hand are things you buy that make you spend more. A car, a house — things that need care and maintenance; processes which cost money. You may have the money to buy them, but can you maintain them? In my point of view, if managed and maintained well, your car or house can be treated as assets too. In the long run, if you need to sell or dispose of those things, you will get a good price for them if they are “good as new” and resell-able.

I plan to buy a house maybe in two or three years. This time however, I am planning for it so that it does not become a liability but rather, one of my major assets. Instead of just looking at it’s price, size, land area and location in relation to my workplace (for convenience) — it’s time to start looking at details like it’s real estate value and the possibilities of how it’s value will rise, stay stagnant or fall in the next few years, among others.

So if you’re planning to invest in property or any assets that may be of great value to you in the future, look at it from all sides and be patient. Window shop more and decide on the best deal according to the information that goes beyond it’s base price.

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8 Comments »

  1. arpee lazaro said,

    money is something that seems to have a mind of its own. discipline is the most important factor in saving money and because i don’t have the discipline (nor the money) i would rather invest my hard-earned pesos in real estate. hwag lang sana ma-landslide o malindol, hehehe.

    btw, thanks for visiting my site! will visit your site often. you have a treasure chest of money-making advice here!

  2. kimsan23 said,

    Nice to see you here Arpee! I visited your site and my gosh! I wanna see the places you’ve been to. I’m a foodie too you know!

  3. Fitz said,

    Reading RDPD was one of the defining moments of my life. It really had a big impact in me and how I carry my financial habits. Likewise, it taught me how to smartly differentiate what an asset and what a liability is.

    I used to think that everything I own were assets (because that’s what accounting says), but now I know that’s not true in the viewpoint of personal finance.

    Keep up the good work and more power to your blog.

  4. kimsan23 said,

    Hi Fitz! You have an amazing blog! The first time I saw it was when it was flashed on the screen at iBlog4. You give great advice. More continuing power to you!

  5. Richard said,

    Same thing happened with me.

    I realized how important financial education is and how critical it is for me to achieve my dreams.

    It’s great that more and more Filipinos are becoming aware of the book’s radical concepts.

  6. kimsan23 said,

    Hi Richard! Thanks for dropping by. I’m happy I got the chance to be, shall I say, financially inspired. I would not have started if I hadn’t attended a company learning session on personal finance. With regard to RDPD, that books rocks earthquakes!

  7. i can’t imagine why schools don’t give this as a recommended reading (thinking earning is what they’re in school for right? poor students…)

    in my point of view, not too many people are ready for this idea. ask them if they’ll do anything to become a millionaire and they’ll readily say YES, but the thing is, most of them just WON’T! these people are not ready to be wealthy.

    Assets and Liabilities are very hard to define, depends on WHO you ask, so be careful of who you ask, you might end up believing the wrong definition… in any case, i firmly believe that Kiyosaki’s definition is very simple to understand, an assets bring money IN and liabilities bring money OUT, period. But this is not a radical concept, it’s a common concept presented in a radical way…

  8. kimsan23 said,

    I guess some of the simplified finance explanations provided in RDPD could be mis-interpreted by a number of people who won’t really process the information after they read it. It’s radical but I do think that many of the concepts are practical and applicable to how I would like to exercise financial independence.


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