Book Summary – Rich Dad Poor Dad: What The Rich Teach Their Kids About Money – That The Poor And Middle Class Do Not!

Why do the rich get richer, and the poor get poorer? Why do the educated middle class have a successful career, yet struggle with their financial commitments? In “Rich Dad Poor Dad”, Robert Kiyosaki shares what he learned about wealth from his “rich dad” and “poor dad”, the secrets that separate the Rich from the Poor and Middle Class, and how we can apply this to grow our wealth.  In this summary, we will give a synopsis of the 6 lessons on money, wealth and financial literacy in 3 parts.

Do get our complete book summary here or get a copy of the book here!

Rich Dad Poor Dad summary_Book summary bundle
Money and financial literacy are not taught in schools. Most people learn about money from their parents, and that’s partially why the rich get richer and the poor get poorer.

RICH DAD VS POOR DAD

Kiyosaki was fortunate to grow up with 2 fathers – one rich and one poor. By comparing and reflecting upon the different advice given by each dad, Kiyosaki was able to learn from both of them.
• “Poor Dad”. His father was a school teacher with good degrees and a Ph.D. Yet, despite earning a good salary, he struggled with debt and finances his whole life.
• “Rich Dad”. His best friend Mike’s father was a business owner who never finished eighth grade, but eventually became one of the richest men in Hawaii.

At the age of 9, Kiyosaki and Mike asked Rich Dad to teach them how to get rich. Rich Dad began their financial education through real-life lessons, for 30 years until Kiyosaki was 39 years old. In this book, Robert Kiyosaki shares his learning journey and the 6 fundamental lessons that he learned over these 30 years, namely:

• ‘It’s not how much money you make. It’s how much money you keep.’
• ‘The poor and the middle class work for money. The rich have money work for them.’
• ‘It’s not the smart who get ahead, but the bold.’
• ‘The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth.’
• ‘The rich focus on their asset columns while everyone else focuses on their income statements.’
• ‘People who avoid failure also avoid success.’

In this summary, we’ve condensed the lessons into 3 parts: don’t work for money, get financially educated and take charge of your wealth.

Part 1: Don’t Work For Money

There’s nothing wrong with working hard, but don’t work just for money. Here’s a quick overview of 3 related ideas in the book. Do get a copy of the book or our complete 13-page book summary for more details.

Rich Dad Poor Dad summary_don't work for money

Get out of the Rat Race

Most of us are controlled by our emotions of fear and desire for money. We work hard to earn money to pay our bills; the more we earn and spend, the harder we work and the more we fear losing our jobs. Even “rich people” who appear wealthy are often emotionally broke – They amass loads of money, only to end up with more fears of losing the money and status that they’ve earned.

Make money work for you

Money is an illusion. By applying your brains, you can make money work for you. In the book, Kiyosaki shared how he learned this lesson at the age of 9, after Rich Dad gave him a taste of “working life” and he opened his first comic book library with his best friend.

Work to Learn

In the long run, education is more valuable than money. Hence, Kiyosaki encourages us to work not just for money and security, but to learn. Focus on learning how to manage cash flows, systems and people, as well as improving your communication, sales and marketing skills, which are foundational to success in any area. In the book, Kiyosaki shares how he picked up various skills from a wide range of jobs, including overcoming his fear of sales and rejection. You can also get an outline of his key experiences from our full summary.

 

Part 2: Get Financially Educated

Growing assets are like planting a tree – you need to tend to it for years, until its roots are deep enough to provide shade and bear fruits for your enjoyment. Unfortunately, many people want to get rich quickly without learning about money. That’s like building a skyscraper with little or no foundation, and that’s why people lose millions as quickly as they acquire it.

Schools equip us with skills to work for money, but not to harness the power of money. Without financial skills, educated people may have a successful profession and a good salary, but they don’t keep the money they’ve earned, nor make the money work hard for them. Financial education requires real-life application and is a life-long process.

In the book / our complete 13-page summary, we cover many key ideas on financial education/ intelligence. Here’s a simple outline:

Learn about money

To increase your Financial IQ, you need to hone 4 areas of expertise: Accounting , Investing, Markets, and the Law. In the book / full summary, we explain these 4 technical skills and why they’re important.

Digest these powerful tips in minutes with our summary & infographic!

Focus on building your Asset Column (not Income Statement)

A large bulk of the book is dedicated to this concept. In the book / full summary, we break it down into a few related ideas: (a) why you should buy assets (not liabilities), how to differentiate between the two, (b) why your home is a liability and not an asset (if it doesn’t generate income), (c) why you should focus on your Asset Column, not Income Statement (and learn how to use cash-flow diagrams to visualize how your cash is being grown or depleted), (d) why you should focus on Wealth, not Net worth and (e) why you should work for yourself (including how to do so in a relatively risk-free way).

Essentially, the rich get richer through cash-generating assets, the poor get stuck with expenses and the poverty loop, and the middle class struggle when they buy liabilities that they think are assets. This diagram summarizes how the key components/ideas in the book come together to help you to grow your wealth. Rich Dad Poor Dad summary_financial education-grow your assets

In a nutshell: To get rich, grow your asset column. When it generates more than enough income to cover expenses, you’ll grow richer without putting in physical labour. Reinvest the balance into the asset column to form a virtuous cycle, or reward yourself with luxuries using the proceeds. You can get more details and examples in our full 13-page  summary.

 

Part 3: Take Charge of Your Wealth

In the book (and our complete summary), Kiyosaki shares the history of taxes, how the tax system was originally meant to penalize the rich, but ended up penalizing the poor and middle class. The rich can outsmart the tax system because of the earlier principles mentioned – they’ve learnt how money works, used their brains, time and resources to change things in their favour. One of the key tools they use to get around taxes is corporations:
• The income-tax rate of a corporation is less than the individual income-tax rates; and
• Certain expenses could be paid by a corporation with pre-tax dollars, reducing the taxable income for the rich.

In short, the Rich take charge of their wealth in 2 main ways:

Rich Dad Poor Dad summary_take-charge-of-your-wealth

The Rich Invent Money & Create Opportunities

Many people complain they have no opportunities, when they aren’t even actively looking, or fail to recognize a rare opportunity staring at them in the face. Others see great opportunities but have no money to leverage them. Financial intelligence is about creating more options for yourself – knowing how to improve your financial position, to make an opportunity work in your favour, or turn a problem into an opportunity.

In the book, Kiyosaki shares how he personally created opportunities for himself (in education and properties). Obviously, investments come with risk, and Kiyosaki was able to profit from them after years of practice. However, you can lower your risks with knowledge, wisdom and love of the game. The key is to take time to hone your financial intelligence, start small and scale up. To help you get started, Kiyosak covers 5 obstacles to overcome and 10 philosophies to help you unlock your financial genius. Get more details from our Rich Dad Poor Dad summary bundle) or read the book. 

Other Useful Details
in “Rich Dad Poor Dad”

Kiyosaki shares many interesting snippets of his learning experience with Rich Dad, as well as his personal stories and experience. He also provides many illustrated examples of cashflows, balance sheets, and income statements of the rich, poor and middle class, to help us understand core financial concepts. Besides the 10 philosophies to hone your financial genius, he also provides 10 to-do items for you to start applying the tips from the book.
For more details get a copy of the book or check out www.richdadworld.com.

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