How to be Rich

3 June 2006

I read Rich Dad, Poor Dad many years ago and was taken in by what seemed to be good, simple advice on how to become rich.

I’ve since learnt that Robert Kyosaki’s ideas about how to become rich are just plain wrong, and his own claim to wealth is almost entirely fabricated. He is wealthy because of his books and seminars, not because he followed his own advice. His advice is that you need to buy property if you want to get rich.

There seems to be a spate of books around about how to get rich, and far too many of them seem to focus on property. Yes, you can make a lot of money out of property. The amazing thing about property is that a worthless piece of land by the sea, say, in the middle of nowhere can suddenly become immensely valuable and make the owner incredibly rich. But only if someone develops a successful tourist infrastructure in the region. Otherwise, the land remains (idyllic, but) worthless. You can also become rich by buying property in a growing economy. So long as you buy at the right time, after property has dropped in value or during a sluggish market.

Unfortunately, predicting when property values will rise or fall requires a lot of knowledge about the area and the economy. And property bubbles are notoriously difficult to understand. It takes a lot of guts and experience to buy and develop property. Not all of us can do it.

The only advice that I consider valuable from Rich Dad, Poor Dad is to avoid spending money on deteriorating assets. A new car, for instance, loses value the day you buy it. (Kyosaki doesn’t follow his own advice, by the way, when it comes to buying cars and watches.)

Some of the best advice I’ve received about becoming wealthy or building a business is as follows:

Rule No 1. Cashflow is King. Many people are asset rich but cash poor. With assets you can raise capital, but you always have to ensure that you can keep your business in business with enough cash.

Rule No 2. Network. Meet people who you can work with and develop alliances. Develop honest relationships with people who can refer you to others. The essence of networking is helping others and, by the principle of ‘paying it forward’, be able to find people who can help you.

Rule No 3. Leverage. You can’t do it all yourself. Find people who are good at what you can’t do well. And learn to delegate or outsource these activities. The art of management is being able to DO WORK THROUGH OTHERS. Learn to manage.

Rule No 4. Think Creatively. Keep your eyes open for opportunities and gaps in the market. Learn creative thinking techniques. Brainstorm with your friends and colleagues. Look at Paul Sloane’s Lateral Thinking Skills, Edward De Bono’s Thinking Course (the BBC edition) and Sur/Petition.

You don’t always need money to be ‘wealthy’. For a life-changing alternative perspective on wealth, read Jonathan Robinson’s Real Wealth.

Rule No 5. Learn to Organize Your Life. It’s not about managing your time, it’s about understanding where and how to focus your psychic/mental energy. Diet/exercise/recreation/rest play a part in this, but it’s also about deciding what’s important and where to ‘spend’ your energy. See Niel Fiore’s The Now Habit and David Allen’s Getting Things Done, and read Stephen Covey’s Seven Habits.

Rule No 6. Always ‘sharpen the saw’. It’s a lifelong process. Academic qualifications have little if any value in comparison to an attitude of continuous learning and personal development.

Rule No 7. Ask. But always understand how you can benefit your benefactor. Always look for ‘win-win’. Read Percy Ross’s Ask for the Moon and Get It.

Rule No 8. Persevere. As Winston Churchill famously said: “Never. Never. Never… give up!

One Response to “How to be Rich”

  1. Sean O'Reilly Says:

    I agree the many of these wealth gurus have made their money from seminars and selling information. A great book on wealth is “A Happy Pocket Full of Money”. The author explainns that most “wealth” is built though increasing your sense of pesonal value and bringing this “value” to others through networking (not network marketing). A key idea from this concept is that most wealthy people have an internal sense of value that translates into opportunities which they could not have predicted or planned for. The best way to become wealthy is by doing something that you are passionate about and for me it’s not through real estate.

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