Rich Dad Poor Dad by Robert Kiyosaki: Summary and Notes

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One sentence summary: Rich Dad Poor Dad is a great place to start your financial literacy journey.

One paragraph summary: In Rich Dad Poor Dad Robert Kiyosaki will convince you of the need for financial literacy. He says that without it, you are walking into financial ruin, and it is all preventable. What’s amazing is that it doesn’t require knowing much.

Favorite quote from the author:

“To spend your life living in fear, never exploring your dreams, is cruel. To work hard for money, thinking that it will buy you things that will make you happy is also cruel. To wake up in the middle of the night terrified about paying bills is a horrible way to live. To live a life dictated by the size of a paycheck is not really living a life. Thinking that a job makes you secure is lying to yourself. That’s cruel, and that’s the trap I want you to avoid.”

My first book by Sam Harris was Rich Dad Poor Dad by Robert Kiyosaki was my first self-improvement book. I still remember walking the neighbourhood as a 12-year-old thinking, ‘I’m wiser than those guys, I'm going to do great things in life!” Many years later, it is still one of my favorites books. Kiyosaki really makes a strong case for financial literacy, no wonder he has managed to sell over 40 million copies!

Although I'm going to share the main takeaways from the book, I challenge you actually to buy it if you haven’t already. If you are a parent, it is even more important that you do that because every child should be taught financial literacy, and sadly, it doesn't happen at schools. Kiyosaki's book is a great place to start.

Main Takeaways From Rich Dad Poor Dad by Robert Kiyosaki

In this section, I will break down The 7 habits of effective people for you. They are:

  1. The rich don’t work for money

  2. Why financial literacy matters

  3. Mind your own business

  4. The power of corporations

  5. The rich invent money

  6. Work to learn don’t work for money

  7. The five reasons behind poverty

Lesson 1: The rich don't work for money

Most people work for money because they live in fear. They fear not paying their bills, fear losing their jobs, and fear what others will think of them if they have no money to spend. Kiyosaki says that working for money is a cruel way to live because it means you never get the chance to pursue your dreams. In other words, it means you will live a limited life in which you are always chasing after bills and desires.

There is another way to live and that involves not working for money but having money working for you. It starts by controlling your emotions and desires because without emotional control, you will move from one big paycheck to another, always chasing after material things.

Another important step towards financial freedom is taking full responsibility for everything in your life. Understand that the economy is not the problem, and neither is the government or your boss. The problem is the life you choose to live. If you change your attitude towards money, it will have a significant impact on your earnings potential. Learn to ask “how can I afford this? Rather than saying, “I can’t afford this.” By asking how can I afford it, you will put your brain to work.

Lesson 2: Why financial literacy matters

Kiyosaki says that money without financial intelligence is money soon gone. You need a strong foundation to build your financial future, and it often starts with understanding accounting and finance basics. You need to know the difference between an asset and a liability.

By choosing to buy a house rather than invest in assets, you forego the following things:

  1. You lose time during which other assets would have grown in value

  2. You lose additional capital given that maintaining a house also requires expenses

  3. You lose investment experience because often, the house takes all the money that you should be investing

Rather than buy a home, Kiyosaki says it is better to invest in bonds, shares, and stocks. That is what rich people do. They have assets that bring money.

“This pattern of treating your home as an investment, and the philosophy that a pay raise means you can buy a larger home or spend more, is the foundation of today’s debt-ridden society. Increased spending throws families into greater debt and into more financial uncertainty, even though they may be advancing in their jobs and receiving raises on a regular basis.”

Lesson 3: Mind your own business

You should know the business you are in, which means focusing on your assets, not on the profession. A person who identifies himself as a banker gives the false impression that they own the bank while they are just working for the bank. The point is, people forget to create a business for themselves and instead work for another person's business for the rest of their lives. That's the mistake of becoming what you study.

To develop financial security, you need to start minding your business and build an asset column that doesn't take away from you. One such asset is a business that runs itself. If you have to work in your business, it means you have a job. The E-myth Revisited also says the same thing. When your business is your sole source of income, it is even worse than being employed because it depends 100% on you. Fall sick, and you don't earn.

Kiyosaki isn't all against employment. He encourages it as long as you know what you are doing. The goal is to invest the money you get into your asset column. Find a business that you understand and put your money there. Kiyosaki is into startups and real estate. He invests in these areas because he understands them. He also advises people to think long-term when acquiring assets because the more you sell, the more the government takes from you.

Lesson 4: The power of corporations

Most people don't know this, but a corporation pays less as a proportion of taxes compared to the average employee. It is the reason the rich create corporations in the first place — to game the system. I recall something that Warren Buffet said, he pays less in taxes than his secretary. Why? Because his capital gains are taxed at a lower rate than his secretary pays on her salary.

To be rich, you must learn the ways of the rich and take advantage of the many tax loopholes that are available to the wealthy. For example, if you are buying real estate in the US, the government can't tax any sale as long as you use the money to purchase even more real estate.

Another thing that makes corporations great is that while employees get taxed and live on what’s left, corporations spend as much as they can before paying any taxes. By owning a corporation, you can turn your living expenses, i.e., meals, vacations, insurance payments, and so on, to corporate expenses, all with pre-tax dollars!

Lesson 5: The rich invent money

You can make money without really working for it. For example, in the stock market or forex exchanges, people mint millions without lifting a finger. It is only employees who are deceived into working for money. Kiyosaki shares his experience in real estate to illustrate his point. He bought a few properties and, without doing anything on them, sold them for a profit of $190,000, and that’s just one example.

All it takes to get rich is courage, but most people are afraid of trying. They think that by not trying, they are playing it safe but what they are actually doing is losing on the opportunities that come their way.

Excellent quote:

“Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.”

Kiyosaki identifies two types of investors: people who buy packaged investments like mutual funds and people who create investments. The latter assembles a deal in the same way a person makes a computer from sourced parts. There are three ways of being the second type of investor:

Lesson 6: Work to learn: Don’t work for money

When choosing a career, the goal should be to learn as much as possible in three areas: management of cash flow, management of systems, and management of people. You don’t want to specialize too much because the more you specialize, your career becomes riskier. A pilot earning $150,000 a year will find it hard to find a similar paying job in another profession. To protect his job, he has to unionize, but sadly, many employers don’t want their workers to join unions.

One of the most profitable skills that you can master is sales and marketing because the better you are at handling your fear of rejection, the easier your life becomes. It doesn’t matter what your career is, as long as you can communicate effectively with other people, doors will open for you.

Lesson 7: The five reasons behind poverty

There are five reasons why most people are poor. These are fear, cynicism, laziness, bad habits, and arrogance. Everyone hates to lose, even the most successful investors have this fear. What they have over poor people is a better fear management system.

“Failure inspires winners. And failure defeats losers. It is the biggest secret of winners. It’s the secret that losers do not know.”

To cure laziness, have a little greed. Greed gets a bad rap but is good because it motivates you to want more things in life. Finally, develop the habit of paying yourself first. Everyone else, including the government and bills, should come second. The first time I heard about paying yourself first was in The Richest Man in Babylon another classic on financial management.

Wrap Up

Books by Sam Harris are always fascinating, and Rich Dad Poor Dad is full of many life-changing lessons on personal finance. You may not agree with everything that Kiyosaki says about wealth and investment, but I tell you, he is right on most things, especially on the need for financial literacy.

Who would I recommend the Book To?

Rich Dad Poor Dad is a great book for anyone seeking to change their financial destiny.


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