Question

Write an original essay about a book, TV show, article, song or movie that taught you a lesson about money or changed your understanding about money.

Answer 1

A book which changed my understanding and perspective about money is a book called “Rich Dad Poor Dad”. The author of the book is Mr. Robert Kiyosaki.

Before reading the book I used to manage my income and my expenses like any other average person. I would get my salary at the end of each month and then plan my monthly expenses for basic necessities (like food, groceries, supplies etc.), rental expenses, EMIs (I have a car loan) and recreational activities (movies, dinners, concerts etc.). Whatever savings was left was kept in my savings account. I usually tried to save around 5% of my monthly earnings each month.

After reading the book my whole perspective towards money changed. I realized the importance of investing in assets and the need to improve my financial intelligence. I realized that saving 5% every month is not just enough and will not help me in future to meet my objectives and to ensure that I am financially independent. In future I will need to buy my house, get married, send my children to school and then college, save for health care expenses for my family etc. The book taught me that even though I am not earning a high amount of salary I can still meet my future objectives by being smart with my money.

The most important lesson that I learned from the book is the need to keep on acquiring assets, instead of liabilities. I realized the need to use my money in such a way that in future I will not be working for money but money earned by me will be working for me. Ever since I have read the book I have cut down on my non-essential expenses so that I can put aside at least 10% of my earnings in equity funds each month. Investments in equities are risky but I am investing in mutual funds. Moreover I am looking at those mutual funds only that invest mainly in blue chip stocks and large cap stocks. This has helped me to keep my risk exposure at minimum levels. The power of compounding has kicked in as far as my savings is concerned and within 5 years after reading the book I have built a substantial asset base for me in the form of my investments in mutual funds, in bank deposits and in certain bonds as well. I keep earning a good amount of money in the form of dividends as well as interest from these investment assets and the dividend and interest income helps me to take care of my non-essential expenses.

In future I plan to invest in real estate and in commodities as well. I have decided to allocate a part of my annual bonuses for these purposes and hence I will be, in 10 years’ time, be able to buy my own house without the need of taking any loan.