What is the summary of Rich Dad Poor Dad?
Rich Dad Poor Dad, by Robert Kiyosaki, was first published in 1997 and quickly became a must-read for anyone interested in investing, money, or the global economy. The book has been translated into dozens of languages and sold all over the world, becoming the best-selling personal finance book of all time.
Rich Dad Poor Dad's overarching theme is how to use money as a tool for wealth development.
It debunks the myth that the wealthy are born wealthy, explains why your personal residence may not be an asset, defines the distinction between an asset and a liability, and much more.
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- 6 lessons about money that Robert Kiyosaki learned from his Rich Father and the mistakes that his Poor Father made.
- There are five obstacles to overcome before you can become and stay wealthy.
- Ten steps to developing your financial genius.
- To-do items that you can put into action right away.
Introduction Rich Dad Poor Dad Book
|summary of rich dad poor dad|
Chapter 1: The Rich Do Not Work for Money
Chapter 2: Why Teach Financial Literacy?
- Income is generated by assets.
- Assets increase in value.
- Assets can do both.
"Would you like to become wealthy?" When you truly understand what an asset is, you should focus your efforts on purchasing income-producing assets. Keep liabilities and expenses to a minimum. You'll increase the size of your asset column."
Chapter 3: Mind Your Own Business
This chapter contains two key messages:
- Pay off your debts first, and then begin investing in income-producing assets as soon as possible.
- Next, maintain your financial health by investing as much of your money as possible in assets and spending your time (rather than your paycheck).
“The primary reason the majority of the poor and middle class are fiscally conservative is that they have no financial foundation. They have to cling to their jobs and play it safe. They can’t afford to take risks.”
Chapter 4: The Evolution of Taxation and the Role of Corporations
It's important to remember that Kiyosaki wrote Rich Dad Poor Dad as a motivational book, not to provide expert financial or tax advice.
Kiyosaki, for example, writes about buying a Porsche and deducting the cost as a business expense with pre-tax dollars. Purchasing a high-end luxury car when a much less expensive make and model would suffice could lead to an IRS audit.
Leaving aside the Porsche, the points made in this chapter discuss how to play the investment game wisely. The wealthy understand the power of corporate structures and the tax code, and they use every legal means at their disposal to reduce their tax burden.
Contrast how most people pay taxes with how business owners and investors with corporations such as C Corps, S Corps, or LLCs pay taxes:
Corporate-structured business owners:
- Pay your taxes.
Employees of corporations include:
- Pay your taxes.
“For instance, a corporation can pay expenses before paying taxes, whereas an employee gets taxed first and must try to pay expenses on what is left. . . Corporations also offer legal protection from lawsuits. When someone sues a wealthy individual, they are often met with layers of legal protection and often find that the wealthy person actually owns nothing [in their own name]. They control everything, but [personally] own nothing.”
Chapter 5: The Rich Invent Money
Inventing money entails identifying opportunities or deals for which other people lack the necessary skill, knowledge, resources, or contacts.
Rich Dad Poor Dad describes two types of investors in Chapter 5:
- People who entrust their money to a developer or fund manager purchase investment packages. Most people invest in this manner, such as by purchasing ETF shares or putting money into a real estate crowdfunding venture.
- Professional investors manage their own investments, conduct market research to find deals that make sense, and then hire professionals to manage the day-to-day oversight. Professional investors share three characteristics:
- Identify opportunities that others have not discovered.
- Raise capital for investment.
- Collaborate with other smart people.
“Some people argue that there aren’t real estate bargains where they are, but there are prime opportunities everywhere that are overlooked. Most people aren’t trained financially to recognize the opportunities in front of them.”
Chapter 6: Work to Learn – Not to Make Money
Poor Dad was intelligent and well-educated, and he worked for money because job security was critical to him. Rich Dad made a million dollars by working to learn.
As Kiyosaki writes:
“I recommend to young people to seek work for what they will learn, more than what they will earn. Look down the road at what skills they want to acquire before choosing a specific profession and before getting trapped in the Rat Race.”
In fact, Kiyosaki did exactly that. After graduating from college, he joined the Marines and learned the essential business skills of leading and managing people. Kiyosaki joined Xerox after serving his country, overcame his fear of rejection to become one of the company's top five salespeople, and then left the corporate world to start his own business.
Rich Dad 6th Chapter Poor Dad then talks about the synergy of management skills required for business success:
- Management of cash flow.
- System administration.
- Management of people.
- Bad habits.
- Have a deep emotional reason or purpose for doing what you do, a mix of wants and dislikes.
- Understand the power of choice and choose what to do on a daily basis, including developing good habits and educating yourself.
- Choose your friends wisely by leveraging the power of association, and avoid listening to poor or scared people.
- Master the ability to learn quickly and devise a money-making formula.
- Pay yourself first by developing the ability to manage your cash flow, people, and personal time with self-discipline.
- Choose great team members and generously compensate them for their advice, because the more money they make, the more money you will make.
- "How quickly do I get my money back?" asks the question, focusing first on return of investment, then on return on investment.
- By focusing on self-discipline to direct money to create more, you can use money generated by assets you own to buy luxuries.
- Have a role model to look up to and use the power of their genius to your advantage.
- Recognize that if you want something, you must first give something.
Is Rich Dad Poor Dad a Good Book to Read?
- Provides an alternative viewpoint to the "common knowledge" found in most personal finance education.
- focuses on converting income into assets that generate even more income
- Controlling spending and expenses is encouraged.
- Explains why investors should prioritize real estate over other asset classes.
- Emphasizes the power of thought and the importance of lifelong learning.
- Discusses taking action rather than just thinking about it.
- The book's success examples are specific to Kiyosaki's situation and may be difficult to replicate.
- Some sections of the book are also lacking in detail, which may make applying the concepts discussed more difficult.
- People who prefer to follow the herd rather than think for themselves are frequently denigrated.
- Rich Dad Poor Dad is a motivational book, not a financial expert's book.