Book Summary of Rich Dad Poor Dad by Robert Kiyosaki
Introduction - Book Summary of Rich Dad Poor Dad
This book summary of Rich Dad Poor Dad is about Robert Kiyosaki’s two “Dads”. His own father who was a teacher who taught, “go to school and get a good job”, and his best friend Mike’s father, his Rich Dad, an entrepreneur, who taught him a different way to think about money.
Your parents taught you about life, money, and careers. Did they tell you to study hard and acquire a decent job too? Probably. Believe it or not, most parents and teachers give their kids bad advice because they themselves were given the same bad advice by their parents.
What did you learn about making money in school? Probably not much, if it’s like most schools. We’ve all been there; don’t worry. Most people don’t learn how to become and remain wealthy. Rich families hand down this knowledge to their kids.
Book Summary of Rich Dad Poor Dad Main Idea 1
Rich People Don't Work for Money
Robert and his childhood friend Mike wanted to be wealthy when they grew up. How they’d do it wasn’t clear. After failing to make money from recyling toothpaste tubes, the youngsters sought some advice. Their dads told them how to get rich.
Robert’s well-educated but Poor Dad said, “Go to school, study, and find a good job.” It’s common wisdom, yet it’s wrong. If you follow this advice, you’ll work your whole life to improve your wages, while the government, bill collectors, and your superiors take most of the reward.
Robert’s dad may have urged, “Join the rat race, the monotonous routine of working for everyone but yourself.” Most people still follow poor dad’s advice mostly out of fear of breaching society’s norms. We’re told a good career leads to money, so we work hard as kids and adults. Outcome? We’re escaping poverty, but not getting richer.
People that know how money is made, increased, and maintained don’t teach their kids that advice. Rich folks, like Mike’s dad, think about money in an entirely different way.
Mike’s dad recommended… nothing. He offered to teach Kiyosaki about money in exchange for 10 cents an hour of his time. After a few weeks of underpayment, Robert returned to his “wealthy” dad angry and ready to quit. “You’ve exploited me long enough, and you haven’t maintained your promise.” All those weeks, you taught me nothing about money!
His Rich Dad smiled as his first lesson sunk in. Robert Kiyosaki realized that life pushes you around if you let it. Working for money didn’t make him rich. Rich people don’t work for money like poor people do. How do the rich get rich if they don’t work for their money?
Book Summary of Rich Dad Poor Dad Main Idea 2
Learn About Finances and Invest In Assets
Rich people have their money work for them instead of working for their money . Instead of wasting all their money on frivolous things, they invest it. They let their assets make them money instead of working.
Rich Dad told the boys that the rich buy assets, while the poor buy liabilities, frequently thinking they’re buying assets. He said an asset is something that makes you money. Liabilities cost money. This distinction is crucial, but few get it correctly. Example:
Isn’t a house an asset? It’s one of your biggest liabilities. Buying a house means working your whole life to pay off a 30-year mortgage and property taxes. A mortgaged home hurts you in two ways. First, you’ll have a huge monthly payment over the following 360 months, which is a sign of a liability. Second, you could have invested those 360 payments in more profitable investments.
Rich dad told his two sons, “If you want to be rich, buy real assets.” You’ll never succeed if you buy liabilities. Rich dad said a poor person’s paycheck covers rent, taxes, and food. A middle-class person’s wage must pay similar expenses, plus mortgage, student loans, credit cards, and other debt.
What about the rich? Instead of a paycheck, their assets provide for them and leave them enough to invest again, such stocks, bonds, or rented real estate. Reinvesting increases their income, therefore the rich get richer.
If you keep your liabilities and expenses minimal, you can invest the rest in assets and put your money to work. Do it, and you’ll soon be rich.
Book Summary of Rich Dad Poor Dad Main Idea 3
Work To Make Money For Yourself, Not Your Boss
How can you buy assets if you don’t have a job? Money from heaven? Should I just quit my job?
Nope. No one is telling you to quit your job…yet. Kiyosaki is talking about the concept of “minding your own business.” It means producing money for yourself, not just your employer. Minding your own business means making money through assets instead of relying on promotions, bonuses, and raises to gain wealth.
In terms of personal finances, your occupation and business are different. Your occupation is the 40-hour-a-week job you do to pay bills, buy groceries, and cover other expenses. It grants you a title like “restaurant owner” or “sales manager” You invest in yourself to grow your assets and treat this personal asset growth as your own business.
Poor dad told him to acquire a secure, well-paying job. Rich dad told him to buy assets. He followed Rich Dad’s advice from a young age. Robert’s first business was renting comic books to local youngsters when he was 9. Later, when he grew up he did get a job. He worked long hours at Xerox and Standard Oil of California, but he kept his expenses and liabilities low, invested his money, and built a strong portfolio of income-producing assets.
So Kiyosaki learned to be self-reliant. His job paid his bills, but his assets made him affluent. Working for corporations and investing his profits encouraged him to think of his assets as employees: every dollar he invested made him money even while he slept. Nice, huh?
Adopt the same approach if you want to grow rich. Even with promotions and bonuses, your pay won’t make you rich. Salary can help you buy wealth-building investments.
Book Summary of Rich Dad Poor Dad Main Idea 4
The Rich Understand and Use the Tax and Legal Systems to Become Wealthy
Robert’s favorite story in school was Robin Hood and his Merry Men, who stole from the rich to give to the needy. His rich dad disagreed. Robin Hood appeared shady to him. Like Robin Hood, the government took from the rich to give to the poor. Rich dad said they both failed. Rich dad thought the middle class shouldered the tax burden, not the rich.
The wealthiest were too smart and well-equipped and deflected taxes with sophisticated tools and schemes. The wealthiest use corporations to avoid taxes. A firm is only taxed on what’s left after spending pre-tax cash. Individuals are taxed first and spend the rest. This is the key to keeping your money. Imagine being taxed just on what you don’t spend. Rich people can dodge taxes by hiding their assets using businesses.
But that’s not all corporations do for the wealthy. Forming a corporation reduces the amount you can lose if your business fails. Individuals who fail on loans must sell their belongings, declare bankruptcy, and follow other laws. What if a company collapses and can’t pay creditors? The owners lose their money, though. Nobody takes their stuff. No one reclaims homes. Corporations allow the wealthy to profit without taking risks.
The lesson? The rich stay one step ahead of systems designed to rein them in by knowing the tax code and legal system.
Book Summary of Rich Dad Poor Dad Main Idea 5
Most People Are Financially Illiterate
Rich Dad provided Robert and Mike access to the behind the scene view of his business operations while they were young. They attended his meetings with bankers, attorneys, and accountants to learn about running a profitable firm.
The guys immediately learnt a lot, but they soon ran into problems. Rich dad’s lessons made it hard for the kids to take school seriously. The concept that financial literacy was of paramount importance didn’t occur to anyone except rich dad. Children aren’t taught about saving or investing, so they don’t understand compound interest. Young people typically max out their credit cards, proving this.
This lack of financial instruction is a concern for today’s young and highly educated adults, who often make poor money decisions. 50% of Americans don’t have pensions. 75-80% of the rest have ineffective pensions.
Society has left us financially unprepared. Kiyosaki emphasizes financial literacy. You must take responsibility for your own financial health. Read! Start a financial plan.
Book Summary of Rich Dad Poor Dad Main Idea 6
Assess Your Finances, Create Financial Goals and Learn Everything You Can About Money
You can start building wealth at any age, but the sooner the better. If you start at 20, you’re more likely to become wealthy than at 30.
If you’re a beginner, follow these three steps.
- First, Take stock of your finances and set a budget.
- Then, Set financial goals.
- Third, Get the right financial education.
Let’s break these down. First, assess your financial situation. What kind of income can you expect from your current job now and in the future? What costs can you handle? Your dream Mercedes may not be affordable right now. Be honest! Don’t spend money you don’t have.
Then, create financial goals. In five years say you can have that Mercedes if you set a goal and develop a plan. Kim Kiyosaki delayed four years to buy a Mercedes with apartment development earnings.
Next, increase your financial savvy. This is an investment in your intellect, your greatest asset. Spend wisely.
If you fear rejection, try network marketing. You won’t make much money, but you’ll learn sales skills and self-confidence. In your leisure time, you can study finance. Read finance books, attend seminars, and network with professionals.
Take stock of your existing circumstances, create financial goals, and then build your financial intelligence. If you establish your finances on these, you will become wealthy. And get that Mercedes.
Book Summary of Rich Dad Poor Dad Main Idea 7
Rich People Create Wealth Through Knowledge and Taking Chances
If you want to improve your financial situation, you must adjust your spending habits. You also need to learn to take chances. In the actual world, the brave often succeed, not the smart. Rich people take risks, call it chutzpah, courage, or daring.
Why? If you don’t overcome fear, you’ll miss amazing possibilities. Because they fear the opinions of others, studious and clever people often struggle financially. Fear of loss prohibits them from investing in stocks or other assets. They don’t realize success requires guts. Financial savvy requires both knowledge and courage.
Rich people can “create” money using financial cleverness. They can see opportunities, respond to them, and follow through. From the outside, it appears they’re lucky, but they’re creating their own luck.
First, taking chances means not always being balanced and safe with your money, which is what you do with bank checking and savings accounts. Try stocks or bonds instead of being safe. While riskier than bank accounts, these can generate substantially more wealth. This can happen quickly with stocks.
If you don’t want to invest in the stock market, there are other options. Take property or tax liens. Tax lien certificates have interest rates between 8% to 30%, compared to 0.21 percent for the average American savings account in 2013.
Bigger reward equals higher risk. With stocks, you could lose your whole investment. You won’t make huge returns if you don’t take the risk. Taking bigger chances and managing the hazards they provide is vital to make more money. Rich dad would want it.
Book Summary of Rich Dad Poor Dad Main Idea 8
Learning is More Important Then Earning
We’ve learnt that money should work for you, about financial knowledge, and about being courageous. Rich dad has one more valuable lesson. Robert got a steady, well-paying career after college. His educated but destitute dad saw it as a dream come true. Poor dad believed a steady career and hard labor were the only ways to get rich.
Not Rich Dad or Robert. He resigned his job after six months and joined the Marine Corps to fly. His Poor Dad was confused, while his Rich Dad was proud.
Why? Because he understood Robert’s actions, not because he promoted irresponsibility. He wasn’t attempting to make money; he was learning. He wanted a career that would create personal growth. His rich dad taught him that being well-rounded was key to making money. Robert worked to learn, not simply earn. His assets were for making money.
His Poor Dad was confused. Robert’s actions was the reverse of what made money, he thought. He was smart, well-educated, and had a PhD. Life taught him that specialization, not a broad skill set, led to wealth.
In academia, as you progress and learn more, your focus narrows. Doctors are eager to specialize in orthopedics or pediatrics after graduation. Some people, usually employees, may benefit from specialization but to create wealth it is better to have a broad base of knowledge. Poor Dad was very well educated. Rich Dad didn’t even finish the 8th grade but he considered learning a lifelong responsibility. He encouraged Robert and Mike to work in several of his business’s departments. They’ve worked in restaurants, construction, sales, marketing, accounts, and reservations.
The goal wasn’t to place them in a specific area to spend their careers, but to provide them the skills and knowledge to become wealthy. Work to learn, not only to earn.
Final Summary
- Rich people don’t work for their money. Staying in the rat race will enrich someone, but it won’t be you.
- Invest in real assets.
- Learn about finances.
- Keep your day job, decrease your expenses, and have your side business earn money.
- Rich people know the tax system inside and out, so they can keep their money.
- Making money takes chutzpah, but if you have it, you can “create” money in practically any situation.
- Work to learn and study broadly.
