Rich Dad Poor Dad, by Robert Kiyosaki, is an amazing investment of time on financial literacy and motivation for changing our destiny through systematic planning. The tagline on the cover is an overview of the book – what the rich teach their kids about money that the poor and middle class do not.
It advocates the importance of financial literacy, financial independence, and building wealth through investing in assets and real estate, starting and owning businesses, as well as increasing one’s financial intelligence (financial IQ) to improve one’s business and financial aptitude. According to Robert, the main reason why people struggle with financial problems is that they learn nothing about money and investments in schools. The result is that people learn to work at the service of money… but never learn to put money to work for them. “
Rich Dad Poor Dad Summary
Rich Dad Poor Dad is the story of two friends with two different kinds of fathers; one has a collection of degrees and diplomas and the other is a high school drop-out. When the overqualified father struggles financially his whole life as he just works for money. The school drop-out father will become one of the richest men in Hawaii as he learned how to make money work for him.
The rich dad in this book teaches two small boys some invaluable lessons about money through their own experiences.
2 paths diverged in a wood, and I
I took the one less traveled by,
And that has made all the difference.
– Robert Frost, The Road Not Taken
Lesson 1: The Rich Don’t Work For Money
Robert Kiyosaki created his first company at the age of 9.
At the age of 9, Robert Kiyosaki and his best friend Mike asked Mike’s father (Rich Dad) to teach them how to make money. After 3 weeks spent cleaning one of Mike’s Dad’s many stores for 10 cents a week, Kiyosaki couldn’t take it anymore and began to think about quitting. This is the moment that Rich Dad chose to give him his first lesson about money: some people leave their job because they are not being paid enough. Others see it as the opportunity to learn something new.
Rich Dad wanted to force them to imagine a way to create their own source of income. The inspiration came to them when they noticed that some comics were left lying around the shop. That’s all it took: they recovered them and opened a library for their classmates, making them pay an entrance fee: 10 cents for 2 hours of reading. Soon, they were making $9.50 per week, without having to worry about managing their library. Their first company had come into existence!
You are the image of your thought
– Rich Dad Poor Dad
Lesson 2: Why Teach Financial Literacy?
You don’t learn to become rich at school.
The gap which is currently widening between the richest and the poorest is not due to chance. The educational system, such as it is built today.
The current educational system does not teach about the basics of managing personal finances that have allowed the rich to build their wealth.
It is up to you to take responsibility to train yourself and to use this knowledge to acquire the assets that will allow you to generate income.
UNDERSTAND THE DIFFERENCE BETWEEN AN ASSET AND A LIABILITY
An asset is a title or contract that allows its owner to generate income. A liability, on the other hand, is to generate expenditure.
Here is why your principal residence is NOT an asset:
- You will work your whole life to pay back the mortgage you took out.
- Your maintenance costs represent a significant amount.
- You must pay property tax.
- Your principal residence may depreciate if the real estate market drops or if you buy at the top of the cycle.
- Rather than investing in an asset that earns you money regularly, you repay your monthly credit to the bank. In other words, the real owner of your home is the bank!
If you genuinely want to acquire your principal residence, you must first generate the income to finance your monthly repayments.
The main steps to get out of the rat race are:
- Understand the difference between an asset and a liability,
- Concentrate your efforts on purchasing assets that generate a steady income,
- Keep your spending and your debts to a minimum,
- Mind your own business!
Being an employee is a short-term solution to a long-term problem
– Rich Dad Poor Dad
Lesson 3: Mind Your Own Business!
Keep your current job but begin to think about your own Business.
Kiyosaki began his professional career by selling photocopiers for Xerox. Using his revenue, he invested in real estate. In the space of just 3 years, the revenue generated by his investments in real estate exceeded his salary.
He then decided to leave the company and to take care of his own business full-time.
Do not spend all your income. Build yourself a diversified portfolio of assets and you will spend later when these assets make you enough. This is the true definition of financial freedom.
A slave, even if he is paid a fortune, remains a slave
– Rich Dad Poor Dad
Lesson 4: The History of Taxes and the Power of Corporations
Income tax first came into being in England in 1874. In the United States, it was introduced in 1913. What was originally a plan to have the rich contribute to the growth and development of the Nation was later extended to the middle classes and the poor.
The rich have a secret weapon to protect themselves from, particularly heavy taxes. They invest in themselves first and pay others later.
Main components of Financial IQ:
- Accounting. You don’t have a choice. If you want to invest in the stock market, you will need to have a few basic notions of accounting to read the annual reports of the companies in which you want to invest.
- Investment strategy. This faculty is honed with experience. Chat with investors and observe how they behave. Attend seminars on the subject.
- Market law. Master the law of supply and demand. No company owner can succeed if s/he has not mastered this basic knowledge.
- Law. You must have a minimum amount of legal knowledge for your business to grow in the right way. Takes lessons if you have to!
What is the point of wanting to rise through the ranks of a company when you can own a company?
– Rich Dad Poor Dad
Lesson 5: The Rich Invent Money
Self-confidence associated with a high Financial IQ will be your safest bet when it comes to achieving financial freedom. Of course, you will need to save each month before investing. But this alone will not suffice.
Use your time wisely and find the best opportunities
Let’s take an example. At the beginning of the 1990s, the economy of Phoenix was at its lowest point. Houses that have been purchased for $100,000 were selling for $75,000. Kiyosaki used as his market public auctions of houses that had been repossessed and he acquired the same type of houses for $20,000. He went on to sell them for $60,000, thereby making a very comfortable profit.
After 6 months of acting in this way, he had made a total net income of $190,000 for just 30 hours of actual work!
Your ability to bounce back is what will bring you success, not your desire to succeed immediately.
– Rich Dad Poor Dad
Lesson 6: Work to Learn — Don’t Work for Money
Everyone should strive to learn as much as they can when they work, because it can transform your understanding of the world and perhaps build into methods of starting your own business and being self-employed.
3 essential skills for management:
- The cash flow management
- Management of systems (including time spent with family and friends!)
- People management
Conclusion
Rich Dad Poor Dad is an extraordinary book. This book transformed my vision of money and most especially my perception of wealth.
Nowadays, I am firmly convinced that you can learn how to become rich and that financial freedom is a realistic goal if you move towards it methodically and patiently.
My advice is that if you need to start your financial education with one book, begin with Rich Dad, Poor Dad and I guarantee you that you will not regret it.
author’s website – https://www.richdad.com/