Passive income is on every investor’s agenda today. At a time when inflation is constantly rising and it is becoming difficult to depend only on a salary, more and more people are looking for a second source of income. And, this is the reason why ‘Rich Dad Poor Dad’ author and famous investment guru Robert Kiyosaki says that passive income is the key to financial freedom.
But the big question is: can Kiyosaki’s passive income rules be equally effective in a country like India? Let’s understand.
Robert Kiyosaki’s investment journey
Kiyosaki is one of the world’s most famous investment gurus today. His book ‘Rich Dad Poor Dad’ changed the thinking of millions of people, but his own journey was not that easy. He too made the same mistakes that ordinary investors make and learned from these mistakes to form his principles.
Early life and the story of ‘two fathers’
Kiyosaki was born in Hawaii in 1947. His biological father (whom he calls ‘Poor Dad’) was an educated government officer. He valued a job and a secure life. On the other hand, his friend’s father (‘Rich Dad’) was a businessman and always said that money should work for you, not you for money.
These two money approaches became the foundation of Kiyosaki’s life. One path follows the stability of a job, the other embraces the risks and rewards of entrepreneurship and investment.
Marine Corps and first failures of Kiyosaki’s life
Kiyosaki briefly served in the US Marine Corps before entering the business and investment world. He tried his luck with several businesses, but most failed. The failures taught him that ideas alone don’t make money, but proper financial education and an understanding of cash flow are necessary.
Real estate started the change for Kiyosaki
In the 1980s, Kiyosaki began investing in real estate. He experienced passive income for the first time from rental properties. He realized that even after quitting his job, money could come in month after month, if one invests in right assets.
This experience became the foundation of his first rule (Assets vs. Liabilities).
Rich Dad Company and the mission of financial education
In 1997, he wrote the book ‘Rich Dad Poor Dad’, which was first published on a small scale, but later became a global bestseller. This book explained in simple language how rich people look at money differently.
After this, he launched Rich Dad Company and Cashflow Board Game, so that people can learn investment and financial education. Today his company spreads financial education around the world through seminars, trainings and online courses.
Kiyosaki’s journey has not been free from controversies. Many times his companies got into financial crisis. Critics say that his books are too “simplistic” and do not apply to all investors.
But Kiyosaki always says, “I teach how to change your thinking. You have to do the real work.” His biggest mantra is – “You should not work for money, but money should work for you.”
Kiyosaki’s 3 rules for passive income
Kiyosaki often suggests three basic rules for creating passive income. Let us understand these in detail and see how useful they are in India.
1. Kiyosaki’s first rule: Buy assets, not liabilities
Kiyosaki says: “The biggest difference between the rich and the poor is that the rich buy assets, the poor and the middle class buy liabilities.”
Asset means: Something that puts money in your pocket.
Liability means: Something that takes money out of your pocket.
Indian context:
Suppose, you bought a car. If it is being used only for daily commuting to office, then it is a liability because petrol, servicing and EMI will empty your pocket.
But if someone buys a car and earns Rs 20,000 – Rs 25,000 every month by using it in taxi service, then it becomes an asset.
Similarly, dividends from mutual funds or stock market, rent from real estate, or stable returns from REITs and gold ETFs – these are all assets.
Many people in India still consider buying a big house as an investment. But when the EMI and maintenance itself empty your pocket, then that house becomes a liability, not an asset.
2. Kiyosaki’s second rule: Focus on cash flow, not net worth
People often ask – “What is your net worth?” But Kiyosaki says – “the real game is cash flow”.
Cash flow means: How much stable income comes into your account every month, which can meet your expenses and also help you save.
The first and most popular way to create cash flow is rental income from real estate. If you buy a house or shop and rent it out, you can earn a steady monthly income. Apart from this, investors can also earn income in the form of dividends without owning property through options like REITs (Real Estate Investment Trusts).
The second option is dividend-paying shares. One can invest in big companies to ensure dividend payments regularly. Also, this cash flow can be created by investing in dividend yield funds.
The third way is SIP and SWP. Investors can gradually build capital through SIP in mutual funds and later get pension-like income by withdrawing a fixed amount every month through SWP (Systematic Withdrawal Plan).
The fourth way is small business or side hustle. In today’s digital age, additional income can also be generated from activities like online store, YouTube channel, blog or digital course.
3. Kiyosaki’s third rule: The biggest investment is financial education
Kiyosaki says that the biggest reason for losing money is ignorance.
The Rich Dad Poor Dad author is right because in countries like America, children are taught financial literacy at the school level itself, while in India most people still limit themselves to FDs, gold and insurance in the name of investment.
However, now the situation is changing rapidly. Investor awareness programmes, as well as social media and fintech apps – all together are taking financial education to the people.
When you understand the difference between asset and liability, only then can you avoid wrong investments. When you know tax rules and pension plans, only then can you increase passive income. And when you understand the balance between risk and return, only then can your investment journey last long.
This is the reason why this third rule of Kiyosaki is most important for a country like India. There is education here, but lack of financial education is still a big challenge. Unless every family understands how to manage money and invest it in the right place, financial freedom will remain incomplete.
Practicality of Kiyosaki’s rules in India
Looking at the economic and social situation of India, the effect of Kiyosaki’s three rules is seen in different ways:
Positive side:
The Indian middle class has now become more serious about investing than they were before. New modes of investing have emerged and the government is also emphasising on financial literacy and retirement planning.
Challenges:
If we talk about the real challenges for Indians, rental yields are quite low. In residential real estate, they usually do not exceed 2–3%. In the commercial segment, yields are comparatively better. However, overall rental returns are not very attractive, and if the property is funded through debt, the investor may actually end up in the negative.
Summing up…
Robert Kiyosaki’s thinking reminds us that depending only on a salary or job is not enough. Passive income is the only way to real financial independence.
Disclaimer:
FinancialExpress.com does not endorse any specific investment instruments. Readers are encouraged to make their own informed decisions, as any losses incurred will be their sole responsibility.