The Richest Engineer - Book Review

'The Richest Engineer' is a self-help book on personal finance written by Abhishek Kumar. Although the book is an amalgamation of various aspects covered in other books such as 'Rich Dad Poor Dad' and other articles in the net, it is presented very well in the form of a story. 

The story revolves around 2 young lads - Ajay, who is struggling financially due to poor investment decisions and Vinay, his friend, who leverages the financial advice his dad has shared with him. The young lads learn the art of personal financing from each other's experiences, letters from Vinay's dad and through interactions with their classmate Manisha, their football coach and other acquaintances. The term 'rich person' is loosely used to refer to financially successful people and the author has generalized the traits of rich people, to land the key message. The book should be a good refresher on personal finance for everyone and more useful for someone who is starting their career. The book discusses the  key concepts, mindset change and ethics required to be financially successful. Also be aware that the book was written 3 years ago and there were a few changes to facts mentioned in the book (post recent budgets) such as tax on dividend income, gains in stocks, etc., 

Below is a summary of my 'Kindle notes' on the book, which are key takeaways for me.

• In Indian movies directors depict poor and middle-class person as good guy and rich people as bad and evil in order to win the sentiment of the majority (who are poor). Hence people consider as a taboo if someone says I want to be rich, but in reality, money is essential for a happy life. In fact the notion that rich people become rich by getting money from poor people is incorrect. For instance, GDP of almost every country increases year on year. The value of entire set of properties in an area increase, when a new IT park comes-up in that area. So net worth is not something that is transferred from X to Y.
• Rich people have a few traits and those are key to be financially independent. 
• Poor people have victim mindset  & use it as excuse to blame it on others, fate, etc., which might temporarily make them feel good. However, what is needed is to own the problem and be self critical with growth mindset (rich).
• Rich people look at opportunities when presented with a problem space. Poor people focus on what can go wrong, which is a huge deterrent to start/ make progress. Although rich people don't have solutions to all problems, they start and find ways to overcome the problems they encounter. 
• Poor people stop learning and do same thing again and again. It is important to innovate and learn continuously. The author shares a story on how a wood-cutter who sharpens his axe before cutting every tree, reaps more rewards than others.
• Poor people talk about income or salary and loose track on how much is their net-worth. It is important to consider oneself as a 'company' tracking their financial portfolio and net-worth (asset - liability).
• Track net-worth every 3 months. 
• Take financial decisions and re-plan based on the assessment.
• Invest first, before you spend (and not the other-way around) => Keep aside at least x% of your gross income no matter how little you earn. Similar strategy for bonus and other increments you get => Consider your savings as % of your income and expenditure in absolute value, so you have control on expenditure.
• Every investment can be grouped into three classes - good, bad and ugly. An asset is good asset if it grows your income and it's intrinsic value also grows over a period of time, such as real-estate, rented house, gold, stock market, etc.,
• Assets such as own house (with long EMIs) are not good assets as it is not increasing your income & one has to spend towards recurring monthly EMIs, which is a liability. However, own house bought with a small % of your savings (say, 20-30% of ones portfolio) is not bad, given it's other non-tangible benefits such as 'feel good' factor, stability, etc., and that it's value grows over a period of time.
• Similar to a football game, one can win financially, if they can have a strong offense (increase income) and defense (lessen expenses). 
• For professionals, the strong offense  (income) has to be their primary job, which contributes significant part of ones income.To maximize the potential of ones income from their primary day job, below are key aspects.
• Work in the area/ job that you love the most => This translates into more energy and effort and helps you to deliver maximum impact.
• Be the best in your field to reap high rewards. For instance, 'jawed habib', hair dresser, earns more than many other business men, professionals or actors, because he is best in what he does.
• Maximize the opportunity space and diversify (within the context of your primary skill) => For instance, can you earn more by part-time teaching or technical blogging or writing books, in your primary area of expertise.
• Continuous learning and innovation => you can't expect growth doing the same thing again and again.
• Learn to play big => Higher risks reap higher rewards. There is no point in playing safe, if you are not using your full potential. 
• If you want to be rich, don't succumb to Diderot effect - buy only what is needed. It is an interesting story on a man who had to refurbish his entire house and wardrobe to match the bar of an expensive gifted dress. 
• 100 rupees saved is worth more by 30% than 100 rupees earned - thanks to taxes.
• Build strong passive income and portfolio that generates revenue and build assets. For instance, royalty, rental income, franchise, etc., that doesn't require your physical presence or time are good examples. This should form significant part of your income over a period of time to gain financial independence. 
• If you need to save on taxes, consider starting a company and invest through the company instead of as an individual. It makes a lot of difference as for corporate tax is computed on profit and not on absolute income. 
• Network with like minded people and avoid people with negative energy.
• Last but not least, once you become rich, pledge to give back to the society, in the likes of Bill Gates and Warren Buffet.

Overall, a very good book that can be read in real quick time. I really like the way the book is concluded - 'Only way to buy happiness is to give happiness'.