A Brief Summary and Review of Rich Dad, Poor Dad

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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Lessons Discovered:

  • 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

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summary of rich dad poor dad 
Robert Kiyosaki, the author of Rich Dad Poor Dad, grew up with two very influential fathers.

Kiyosaki's biological father was a highly intelligent and well-educated man named Poor Dad. Poor Dad believed that hard work and good grades would lead to a well-paying job. Nonetheless, despite these seemingly positive characteristics, Poor Dad did not fare well financially.

Kiyosaki's best friend's father was Rich Dad. He had a work ethic similar to Kiyosaki's real father, but with a twist. Rich Dad believed in financial education, understanding how money works, and making money work for you. Rich Dad, despite being an eighth-grade dropout, eventually became a millionaire by putting the power of money to work for him.

The book is written from Kiyosaki's point of view of how Rich Dad made money and the mistakes that Poor Dad made. The first six chapters of Rich Dad Poor Dad account for roughly two-thirds of the book and cover the six lessons that Kiyosaki learned from his Rich Father.

Chapter 1: The Rich Do Not Work for Money

People frequently misinterpret the title of this chapter, believing it to mean that the wealthy do not work. In reality, the inverse is true.

Rather than reading the chapter title as "The Rich Don't Work for Money," Kiyosaki means "The Rich Don't Work for Money." It's worth noting that by emphasizing the word "money," this section takes on a completely different meaning.

The truth is that the majority of wealthy people work extremely hard, but they do so in a different way than the majority of people. Rich people – and those who aspire to be rich – work and learn every day how to put their money to work for them. "The poor and middle class work for money," Rich Dad says. The wealthy have money working for them."

Kiyosaki also points out that having a regular job is only a temporary solution to the long-term problem (or challenge) of creating wealth and financial freedom:

"Fear is what keeps most people working: the fear of not being able to pay their bills, the fear of being fired, the fear of not having enough money, and the fear of having to start over." That is the cost of studying to become a professional or tradesperson and then working for a living. Most people become slaves to money – and then become enraged with their boss."

Chapter 2: Why Teach Financial Literacy?

The second chapter of Rich Dad Poor Dad discusses the distinction between an asset and a liability. The second chapter emphasizes that it is not about how much money you make, but about how much money you keep.

An asset is something that has value, generates income or appreciates in value, and has a market where it can be easily bought and sold:
  • Income is generated by assets.
  • Assets increase in value.
  • Assets can do both.
Liabilities, on the other hand, take money out of your pocket due to the costs associated with them. Kiyosaki's statement in Rich Dad Poor Dad was controversial when it was first published in 1997.

That's because a personal residence isn't considered an asset unless it appreciates enough to cover the costs of ownership. Rental property, on the other hand, is an asset because it can generate enough passive income to cover the costs of operating and financing the property.

According to Kiyosaki in Chapter 2 of Rich Dad Poor Dad:
"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). 

In Chapter 3 of Rich Dad Poor Dad, Kiyosaki observes that most people confuse their profession with their business. To put it another way, they spend their entire lives working in someone else's business and making other people rich.

This is one of my favorite quotes from this section:
“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:

  1. Earn.
  2. Spend.
  3. Pay your taxes.

Employees of corporations include:

  1. Earn.
  2. Pay your taxes.
  3. Spend.

Employees who work for someone else spend their money after taxes, whereas business owners earn and spend before taxes.

Accounting, Investment Strategy, Market Law, and Law are the four main components of what Kiyosaki refers to as "Financial IQ" in Chapter 4 of the book.

As Rich Dad Poor Dad points out, understanding the legal and tax advantages plays a significant role in accumulating long-term wealth:
“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:

  1. 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.
  2. 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.
Here's one of my favorite chapter closing thoughts:
“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. 

Overcoming Obstacles

Rich Dad's Chapter 7 Poor Dad begins by observing that "the primary difference between a rich and a poor person is how they manage fear."

Robert Kiyosaki isn't referring to the kind of apprehension that some people experience when going to the dentist or watching The Exorcist. In the book, "fear" refers to the fear of losing money and how to deal with it.
It is one of the five most significant impediments to financial independence that people face:
  1. Fear.
  2. Cynicism.
  3. Laziness.
  4. Bad habits.
  5. Arrogance.
These roadblocks – and the failure to overcome them – are the reasons why people who have studied and achieved financial literacy are still unable to develop assets that generate a lot of cash flow.

Fear

Losing money is an unavoidable part of the investing process, as is the fear that comes with it. Kiyosaki observes that he has never met a wealthy person who has never lost money, but he has met many poor people who have never lost a penny because they have never invested.

Fear in disguise paralyzes real estate investors who only act on a "sure thing." People who are unable to see the big picture and think big almost never succeed in investing or in life.

Cynicism

Everyone has doubts that affect their self-confidence, and it's easy to get caught up in the game of "What if?" especially when friends and family are constantly reminding you of your potential flaws.

Common "what if" fears shared by all real estate investors include the economy collapsing, interest rates rising, and tenants failing to pay their rent. While these are important factors to consider, it is critical not to let the cynicism of others take control of you. Otherwise, you risk becoming immobilized as opportunities slip by.

Laziness

It's easy to confuse being busy with actually accomplishing things that matter in today's interconnected world. According to Rich Dad Poor Dad, busy people are frequently the most lazy.

People who are overworked arrive early and leave late. They bring work home with them to finish at night and on weekends. Before they know it, the people and things that are most important to them have vanished.

Instead of succumbing to the lure of the rat race and mistaking action for achievement, successful real estate investors are proactive and prioritize themselves and their wealth.

Bad habits

Habits govern behavior. Most people, for example, pay their bills before they pay themselves. As a result, there is usually very little money left over at the end of the month for investing.

Paying yourself first, even if you don't have enough money to pay others, makes you financially, mentally, and fiscally stronger. It's a kind of reverse psychology, in a way.

When you make it a habit to pay yourself first, you are motivated by the fear of not being able to pay your creditors. As a result, you start looking for other sources of income, such as investment real estate.

Arrogance

Investors understand what makes them money. But it's what they don't know – and don't realize they don't know – that causes them to lose money. People who are truly arrogant believe that what they don't know doesn't matter.

Develop the ability to listen to what others have to say, especially when it comes to money and investing. If you discover that you are ignorant about a subject, educate yourself or seek the advice of an expert in the field.

Getting Started

Rich Dad Poor Dad tells us in Chapter 8 that "there is gold everywhere, most people are not trained to see it."

The world we live in contributes to our lack of vision and clarity. We're taught from a young age to work hard for others, spend the money we earn, and borrow more if we run out.


Unfortunately, people who choose to be part of the masses never take the time to cultivate their financial genius.

Real estate investing is a prime example. The average person can spend a week out in the field and come up empty-handed, whereas a trained investor can easily find four or five deals that make sense in a single day!

Here are the ten steps to developing your financial genius and discovering the gold that is already out there, waiting to be discovered:
  1. Have a deep emotional reason or purpose for doing what you do, a mix of wants and dislikes.
  2. Understand the power of choice and choose what to do on a daily basis, including developing good habits and educating yourself.
  3. Choose your friends wisely by leveraging the power of association, and avoid listening to poor or scared people.
  4. Master the ability to learn quickly and devise a money-making formula.
  5. Pay yourself first by developing the ability to manage your cash flow, people, and personal time with self-discipline.
  6. Choose great team members and generously compensate them for their advice, because the more money they make, the more money you will make.
  7. "How quickly do I get my money back?" asks the question, focusing first on return of investment, then on return on investment.
  8. By focusing on self-discipline to direct money to create more, you can use money generated by assets you own to buy luxuries.
  9. Have a role model to look up to and use the power of their genius to your advantage.
  10. Recognize that if you want something, you must first give something.

Is Rich Dad Poor Dad a Good Book to Read?

The goal of Rich Dad Poor Dad is to inspire you to chart your own path to financial independence.

While the book does not provide ready-made answers or a one-size-fits-all approach, it does provide an excellent framework for developing your own goals for building wealth through real estate investing.

Strengths

  • 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.
Weaknesses
  • 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.

Conclusion

If you had to pick one key takeaway from Rich Dad Poor Dad, it might be that wealthy people are not always born wealthy. To make money in the United States today, you don't have to go to work for someone else and join the rat race.

Even though Kiyosaki's first book, Rich Dad Poor Dad, was published nearly 25 years ago, the lessons he taught back then are still applicable today. Begin with financial education, then set your own personal goals to get started on the path to long-term wealth and financial freedom.

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