Personal Financial Planning - Book Report/Review Example

FINA - Personal Financial Planning - Book Report Introduction This paper represents a book report or book review of one famous book, "Rich Dad's CASHFLOW Quadrant", written by Robert T. Kiyosaki. This book is about Rich Dad’s guide to personal financial freedom. This book review represents a brief summary of the actual learning about personal finance planning from the book. This book provides different learning outcomes to the readers through three major part of this book. Part I shows an innovative cash flow quadrant analysis related to four categories of financial freedom. Part II says about bringing out the best in a person through some practical recommendations. Last part of this book says about seven most important steps to find financial freedom or financial fast track. This seven steps is the most important learning from this book related to personal finance. Part 1 First and most innovative learning from this book is the CASHFLOW Quadrant. Key objective of cash flow quadrant is to control on financial destiny to get financial freedom in future. It is consist of four letters i.e. ESBI which represents four different work categories with different financial freedom. ESBI represent Employee, Self-Employment, Business Owner and Investor. Key focus of author in this book to motivate the readers to reach to the I quadrant from E. key learning from this is that it is a choice to a human being that he or she can opt any of the four working categories as career to get different financial strength. But the author said that an employee can rich to B or I category i.e. can business man or investor to enjoy better financial freedom and can give time more to loved and belongings. There is substantial difference between industrial age thinking and information age thinking. First abbreviation refers to common human lives where people get educated to find a secure job for getting continuous flow of risk free income that is quite enough to live moderate standard of living. But, people can higher financial freedom with less physical work through information age thinking. Generally, traditional studies do not influence a student to become a businessman or investors with information age thinking. Therefore, it needs out of the box thinking to walk in different way to reach the monetary goal faster. A person can prefer to be in all the four quadrant of CASHFLOW quadrant at a time i.e. a person can work as an employee, provide consulting services, run a small consulting firm and invest in different equity or debt instrument and even in real estate. Peoples stick to one quadrant, have different monetary freedom and standard of life. People generally chose security over freedom but that results income from own hard work. But financial freedom comes easily if other people work hard for someone. Employees or a banker generally do not earn money, they enjoys benefits from their works. But, a business or a bank can generate money from the money only; it is not the benefits of hard working. This is the way to financial freedom. Part II People can chose one or multiple positions of cash flow quadrant but risk taken capabilities is the influential factor which determines the choice of a person. Money is a support to life. Therefore, current ways of earnings determines the future standard of living. One of the main objectives of personal finance is that a person needs to control the emotion and riskiness regarding losing money. Money can bring money with little innovation and smart work. Therefore, financial planning should have main objective to move quadrants towards the right one to earn more with less work with increase of age and decrease work capabilities. One person cannot enjoy the benefit of his or her hardworking throughout his life. At the later stages of life people need sufficient money inflow minimum or even no work. Therefore objective of personal finance should be assigning others to generate income for a person in his or her later stages of life. This means a person should shift to business from emplacement career to earn money without any hard work. Another way to secure the future money inflow is to rich to the last quadrant of cash flow quadrant model to become investors at aged life when a person can earn from the enough saved money throughout his or her working life. But with business only can provide enough money to risk adjusted investment. Income from salary decreases the risk taken capabilities of investment in risky instruments for higher return. Part III Financial planning for future cash inflow without hard work is easy. It requires to efficiently some important objectives. Author has focused on seven most necessary steps to find financial fast track. A person should develop financial statement and financial goal for next five years. The person should understand his or her position in any of the four quadrants in terms of current work category. Then he needs to prefer next suitable quadrant according to his choice. Reduction in current debt is very important for everyone to increase savings for future. Investment in risk adjusted instruments seems risky to a limited earning person. But, the necessary requirements for investment compared to benefits is not that much risky. Therefore, difference in risk and risky is most important to understand for risk adjusted investment (Kapoor, Dlabay & Hughes, p.35). A person should start learning knowledge for investment decision making through various mediums like business news papers, magazines, investment tutorials etc. A person needs to decide what kind of investor he or she is based on current income level, risk taken capabilities, investment knowledge and future requirements of return form investment. The person can seek knowledge from the experts for recommendation on investment planning. Disappointment is the complementary return from any expectation. So, a person should welcome negative outcomes to make it influential factor for better learning. A person needs to be optimist for future return with respect to possible risks. Self belief creates positive confidence in any financial decision making and also increase risk taken capabilities. Therefore, personal financial planning includes these necessary recommendations to follow and these can help a person to achieve financial freedom in future. Work Cited Kapoor, J., Dlabay, L. & Hughes, R.J. Personal Finance. McGraw Hill Publication. 2011. Print. Read More