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

Rich Dad Poor Dad - Book summary

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 this book, 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 free Rich Dad Poor Dad summary, we will give a synopsis of the 6 lessons on money, wealth and financial literacy in 3 parts.

Rich Dad vs Poor Dad

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.

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.  You can check out the complete 13-page 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 complete 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.

Our complete 13-page summary covers 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. Our full summary explains these 4 technical skills and why they’re important.

Focus on building your Asset Column (not Income Statement)

A large bulk of the book is dedicated to this concept. Our full summary breaks 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, 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.

Getting the Most from Rich Dad Poor Dad

Ready to take charge of your wealth and financial education? Get more detailed insights, examples and practical tips from our complete book summary which includes an infographic, a 13-page text summary, and a 22-minute audio summary.

Rich Dad Poor Dad summary - book summary bundle

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, you can purchase the book here or visit www.richdadworld.com.

Want to further develop your financial intelligence? Find out how first-generation millionaires accumulate their wealth in The Millionaire Next Door summary. Or, learn how you can master The Psychology of Money or get on The Millionaire FastLane through business!

About the Author of Rich Dad Poor Dad

Rich Dad Poor Dad: What The Rich Teach Their Kids About Money – That The Poor And Middle Class Do Not! is written by Robert Toru Kiyosaki– an American businessman, investor, self-help author, educator, motivational speaker, activist, financial commentator, and radio personality. Kiyosaki is the founder of the Rich Dad Company, a private financial education company that provides personal finance and business education to people through books, videos, games, seminars, blogs, coaching, and workshops. He is also the creator of the Cashflow board and software games to educate adults and children business and financial concepts. Besides Rich Dad Poor Dad, Kiyosaki also authored more than 26 books, and established several financial literacy programs. In 2005, he was inducted into the Amazon.com Hall of Fame as one of the top 25 bestselling authors.

Rich Dad Poor Dad Quotes

“There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”

“The poor and the middle class work for money. The rich have money work for them.”

“Fear pushes you out the door, and desire calls to you. That’s the trap.”

“If you don’t first handle fear and desire, and you get rich, you’ll only be a highly paid slave.”

“In the long run, it’s not how much money you make. It’s how much you keep, and how many generations keep it.”

“The rich focus on their asset columns, while everyone else focuses on their income statements.”

“If you work for money, you give the power to your employer. If money works for you, you keep the power and control it.”

“Education is more valuable than money, in the long run.”

“Instead of climbing the corporate ladder, why not own the ladder?”

“When it comes to money, love, happiness, sales, and contacts, all one needs to remember is to give first.”

Click here to download Rich Dad Poor Dad book summary and infographic

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