Rich Dad Poor Dad Book Summary

Rich dad Poor Dad

INTRODUCTION

Robert Kiyosaki's Rich Dad Poor Dad is one of the best books for financial literacy. It challenges the way people think and manage their finances. It will help you to be more financially independent. It explains strategies of investment and wealth creating ideas which Robert has learned from his rich dad. Let's get started.

Robert had the privilege of learning from two fathers- one his biological father, whom he call his educated dad (poor dad) and the other his friend's father ie rich dad. Both of them were successful in their careers but there was a huge difference in their perspective about finances. Robert had a tough time initially to figure out whose advice to accept. But this also gave him an advantage of thinking , comparing and then choosing the best for himself.

His poor dad always wanted him to study hard, get good grades and find a safe and secure job in a big company. But rich dad wanted him to learn how money works. 

Poor dad- Don't take risks
Rich Dad- Learn to manage risk.

Poor dad- Pay yourself first.
Rich Dad- Pay yourself last.

Poor dad- I can't affort it.
Rich Dad- How can I afford it!

Robert Kiyosaki has narrated his story of starting a business at an early age of Nine, in partnership with his friend, Mike. Although the so called 'business' was over on the opening day, it made his dad (poor dad) proud. The educated dad asked both of them to learn the tricks of becoming rich from Mike's dad (Rich Dad). These two little lads arranged an official meeting with Rich Dad. He agreed to teach them but on a  condition that they will work for him.They both accepted the offer half heartedly and started working every Saturday. Robert used to buy comics from the money he got as salary by working in a convenient store.That was the only motivating factor in his newly found job. Soon they quit and Robert demanded a raise in salary. He argued with Rich Dad that he has not kept his promise to teach them. That was the time Rich Dad explained him that teaching by talking or lectures is done only in schools. In reality its your LIFE that teaches you.

" If you learn life's lessons, you will do well. If not, life will just push you around. People do two things. Some just let life push around them, others get angry and push back. But they  push back against their boss, their job or their husband or wife. They don't know that its life that's pushing."

"Most people want everyone else in the world to change but themselves. It's easier to change yourself than everyone else."

Robert started understanding that his Rich Dad is teaching him with some unique methods other than those taught in schools:

Lesson - 1  The poor and middle class work for Money. The rich have money work for them.

Most people do job to earn money and pay bills. As the salary increases, so do their monetary obligations,leaving very little for themselves. People do job because of fear of not paying bills , being fired , or starting over again. They are trapped in a Rat Race. They become slave to money. Money runs their life. There is a lack of financial literacy amongst them.

Gain financial intelligence and it will help you in long run. Learning how to have money work for you is a lifetime study.

Lesson - 2 Its not how much money you make. Its how much money you keep.

Most people struggle financially because they do not understand the difference between assets and liabilities. An asset puts money in the pocket and a liability takes money out of the pocket. Those who are financially intelligent buys asset and others buy liabilities. If you buy assets, it will generate more income and thereby making you wealthy. But if you buy a liability, it will push you into larger debts. 

So, its important to learn how to manage your funds. Focus on buying income generating assets such as real estate and stocks. A person can be highly educated, professionally successful and financially illiterate.

Rich Dad Poor Dad

Lesson - 3 Mind your own business.

There is a difference between a profession and a business. Even if  you are a professional you need to mind your own business. People in jobs make their employers rich by working day and night. It's their employer's business not their's.

Lesson - 4  The power of corporations

One of the best ways to escape taxes is through corporations. Income tax rate of corporation is less than the income tax rate of individuals. Being financially literate, rich people understand the concept of corporation. Financial knowledge is made up of four key areas:

• Accounting- Ability to read and understand the financial statements to identify the strengths and weaknesses of any business.
• Investing-The science of money making money.
• Understanding Markets- The concept of demand and supply.
• The law-Tax advantages and protections provided by corporations. 

Lesson - 5 The Rich invent the money.

To be a financial genius you need to be both technically sound and courageous. Its better to welcome a change rather than dreading it. Better to take risk and lose rather than playing it safe. Rich people often take calculated risks. They create more options for themselves.

Rich Dad Poor Dad

Rich people train their mind to understand financial statements, investment strategies and analysing good deals.

"Great opportunities are not seen with your eyes. They are seen with your mind."

As an investor, either you buy investment or you create investment. If you create investment, three skills must be developed first:

• Look out for an opportunity that everyone missed.
• Raise money
• Organise smart people.

Lesson – 6 Work to Learn, Don’t work for money.

Over the years doing same thing again and again people tend to get specialised. They become an expert. That’s why when they are out of job, they don’t have many options available to them. You need to know a little about many things. Learn other skills. Education is more valuable than money in long run. The more specialised you become, the more you are trapped and dependent on speciality.

There are three management skills needed for success:

• Management of cash flow
• Management of systems
• Management of people

Sometimes it may happen that a financially literate person fails to create wealth. This is because of following reasons:

• Fear - People always have a fear of losing the hard earned money.
• Cynicism- It must be overcome.
• Laziness-It should be avoided.
• Bad habits-Paying yourself last is a bad habit.
• Arrogance-Educate yourself about the subjects you don't have sufficient knowledge.

"For most people, the reason they don't win financially is because the pain of losing money is far greater than the joy of being rich."

Rich Dad Poor Dad

So, take a break from what you are doing, analyse your current situation and plan for future by taking small steps. Be financially literate.


Here are some thoughtful extracts from the book itself. Hope you will enjoy reading:

 " Proper physical exercise increases the chances for health and proper mental exercise increases the chances of wealth."

"Money comes and goes, but if you have the education about how money works, you gain the power over it and can begin building wealth."

"A job is really a short term solution to a long term problem" 

" Once a person stops searching for information and self knowledge, ignorance sets in."

"If people are prepared to be flexible, keep an open mind and learn, they will grow richer despite tough changes."

"Instead of trusting their inner wisdom, that genius inside, most people follow the crowd. They do things because everybody else does them." 

"An intelligent person hires people who are more intelligent than he is."

"Schools were designed to produce good employees, instead of employers." 

"Money has a way of making every decision emotional."

"Financial Intelligence is simply having more options"

"You want to know a little about a lot" 

"Workers work hard enough to not be fired. Owners pay just enough so that workers won't quit." 

 "Unless a person is used to changing, it's hard to change."

"Communication skills such as writing, speaking and negotiating are crucial to a life of success."

"The primary difference between a rich and poor person is how they manage fear."

"Winning means being unafraid to lose."

"Failure inspires winners. Failure defeats losers."

"Cynics critisize, and winners analyze."

"There is Gold everywhere. Most people are not trained to see it."

"Listening is more important than talking."