Rich Dad Poor Dad Summary and Best Lessons

Robert Kiyosaki, writer and life coach, is responsible for writing the best-selling self-help bestseller Rich Dad Poor Dad. Using one’s own good will and intention as a foundation, the book digs into the many components of financial success. As a result of its widespread acclaim, this book has gone through several printings and revisions, and it has even been made available in audio format. In addition to writing the book, Kiyosaki gives talks all over the world on the topics of creating money discussed there.

Introduction

The motto of Rich Dad, Poor Dad summarizes the book’s major message. The teachings that, in Kiyosaki’s opinion, wealthy parents impart to their offspring are the focus of his book. Kiyosaki argues that these teachings are priceless but that low- and middle-income parents do not have the resources to pass on to their children. Because of this, the book is a valuable resource for parents who want to teach their children about money and for people who were never exposed to the “learning” that Kiyosaki discusses.

Some reviewers have expressed dissatisfaction with Kiyosaki’s book because it does not provide definitive “get rich quick” solutions, despite the fact that Kiyosaki acknowledges that wealth creation is an inherently subjective undertaking and that there are no foolproof methods for acquiring riches. Instead, it revolves around a basic tenet: that both teaching and learning about wealth are useful in gaining financial literacy. Ultimately, the book serves as an illustration of how these teachings helped Kiyosaki personally, and how they may potentially benefit anybody whose mind and will are open to change.

Kiyosaki dispels the common misconception that one needs a six-figure salary to achieve financial success. Kiyosaki claims that everyone, not just business tycoons, can learn to invest and increase their wealth with the appropriate mentality. The idea that a home is an asset is another popular one that Kiyosaki challenges. He does this to help the reader have a better understanding of the concepts of “assets” and “liabilities,” and how they impact one’s ability to build wealth and achieve financial independence.

Teaching kids to be responsible with their money is a central theme of the book. Kiyosaki aims to demonstrate and educate parents on the need of instilling a financial education in their children as an integral part of their children’s development and a key to their children’s future financial success. In addition, Rich Dad Poor Dad offers several arguments for why parents shouldn’t count on formal education to instill in their children a lifelong appreciation for hard work and thrift. As Kiyosaki sees it, it is the responsibility of parents to teach their children these lessons. The priorities and emphasis of educational systems are elsewhere. Parents must take on the role of teachers in order to provide their children with a solid foundation in financial literacy.

Kiyosaki discusses the ways that may help one become wealthy, delving into the lessons he learnt about wealth along the way. Kiyosaki believes that “thinking like a rich person” is more closely related to “being rich.” The first of Kiyosaki’s three methods is the one employed by the wealthy already: starting and running their own businesses. They can save money on taxes by doing this compared to working for someone else to make a living. The second method Kiyosaki discusses is the secretive real estate investing techniques used by the wealthy to make huge profits with no risk and almost no resulting tax burden. In his third tactic, Kiyosaki discusses how the wealthy are able to teach and be taught, similar to the book’s own philosophy. The wealthy rely on advice and information from friends and those “in the know” when making stock market investments.

As Kiyosaki sees it, a change in perspective toward the power of belief may have a surprising impact on one’s financial well-being. Having the strength of mind to persevere is crucial if you want to realize your goals. You may become wealthy and set the example for your children by studying the financial lessons that the affluent have been educated by their parents and implementing them in your own life.

1. Those who are wealthy and those who are not have vastly different perspectives on the value of money.

Differences between the wealthy and the poor? Financial literacy is lacking in part because students are not exposed to the topic in the classroom. The home is the first and most important place for children to learn about financial responsibility. Thus, it is not uncommon for children to pick up and perpetuate the same negative behaviors that contributed to their parents’ poverty. The lack of instruction on monetary fundamentals is a major flaw in our educational system.

Robert Kiyosaki was blessed with two wonderful father figures. Both of them gave him advice on money and life that was completely opposite to what he expected.


His biological father was the one he called “poor dad.” Poor Dad had a Ph.D. from one of the best colleges in the country. He was secure in his middle-class status as a civil servant. To help his kid go ahead in life, poor elderly dad constantly stressed the need of an education. He valued work stability and generous perks above all else.


He referred to Mike’s friend’s father as “wealthy dad.” Although Rich Dad only completed the fifth grade, he was already the master of a multimillion dollar firm in the Aloha State of Hawaii. He was the proud owner of a construction firm, as well as a warehouse, restaurant, and many small grocers. Although Rich Dad was a firm believer in education, especially financial knowledge, he did not advocate for the conventional job and investment path that most people take when trying to get rich.


Kiyosaki and his pal Mike had a desire for wealth even when they were 9 years old. They looked down on kids whose parents could afford to transport them to school in flashy vehicles. Due to their family’s financial situation, they were occasionally shunned by their peers. Kiyosaki’s dad spotted him and his brother one day making fake nickels out of empty toothpaste tubes. They wanted to “earn money,” after all. To the dismay of the two young men, he then informed them that Mike’s father was financially savvy. Mike was taken aback by this news because his father did not own a luxury vehicle or a mansion.


The Takeaway…”Poor Kiyosaki’s Dad,” despite his extensive education, was unable to teach his son the secrets to financial success. Nonetheless, Kiyosaki discovered a second guide in the form of the father of his closest friend (“Rich Dad”), who was also amassing a fortune.

2. Rich Dad did not preach, but rather used examples from his own life.

As long as the boys did his work, Rich Dad would show them the secrets of the financial world. He provided them with entry-level positions at one of his corner stores. Starting on the first Saturday of the month, the lads put in three hours of effort. The tasks involved in keeping the shop running well were quite monotonous. Kiyosaki was forced to skip out on some of his favorite softball games.

Even for a child in the 1950s, the rate of pay of 10 cents an hour was quite low. The hourly minimum wage in those days was 25 cents. Poor Dad was shocked to find that his kid was being paid significantly less. He believed his son was being taken advantage of and instructed him to resign without pay increase.


Even though he had been in his job for four weeks, Robert was still unhappy. Robert hadn’t heard from or seen his wealthy father in weeks, despite his promises to instruct the boys. Since he was getting paid so little, he was beginning to feel resentful. Accordingly, he informed Mike that he was leaving the company. Mike only chuckled and said that Rich Dad was prepared for this outcome. When Robert expressed his desire to leave, Rich Dad instructed Mike to have him contact him directly to discuss his resignation.


To that aim, Robert sought out Rich Dad in an effort to negotiate a salary increase. After Rich Dad failed to live up to his half of the bargain by not instructing his sons in the ways of the monetary world, he confronted him. After hearing this, Rich Dad questioned:


Rich dad wanted to know if “teaching” referred to giving a speech or lecture. Okay, I said in response. He smiled and said, “That’s how they educate you in school.” However, life is not a classroom, and if you ask me, the finest instructor is life itself. There is usually no two-way communication between you and life. The effect is more like being pushed about. Every prod is life shaking you awake. Tell them, “There’s something I want you to learn.

It was said by Rich Dad that he was not lecturing his sons but rather exposing them to real-life situations. Robert received a taste of the working life of the vast majority of people by being given the option to labor for inadequate compensation. Almost everyone has the constant impression that their income is insufficient. It doesn’t matter if their income doubles or triples; they’ll still be in the same predicament in the long run.

The Point Is Mostly That…

Robert’s “rich dad” promised that if he worked at his supermarket, Robert would gain valuable business experience. Robert eventually confronted Rich Dad because he was fed up with working for such low pay. Reality check number one: most individuals are mired in occupations they despise, for which they are paid too little.

3. Learn to recognize opportunities and capitalize on them.

Getting out from under the sway of emotions like fear and greed, according to Rich Dad, is crucial. Fear is the driving force behind the majority of people’s decisions to spend eight hours a day at a job they despise and the encouragement of their children to complete a degree that would guarantee them a stable future. People who have a lot of money frequently worry more about losing it all than they did when they had very little.

With no money in the bank, Robert went back to work. According to Rich Dad, it was crucial that the sons understand the realities of wealth. Robert disliked not getting paid, but he believed Rich Dad when he stated they would learn how to generate real money via this experience.


According to Rich Dad, poor people learn to see opportunities since they don’t have money to spend. Yes, that’s what ended up happening. Robert and Mike found out one day that the grocery owner’s wife was throwing away all the old comic books. She discarded the books when she lopped off the covers. She stated she sent the covers back to the distributor for a refund. The guys approached the distributor and were told they could retain the back issues of the comics provided they did not resell them. That’s why they started amassing a trove of vintage comic books.


The lads then turned Mike’s basement into a comic book library. Children from the surrounding area paid only 10 cents to spend the afternoon reading as many comics as they desired. Comic books often cost ten cents, so this was a steal. Mike’s sister got a job as a librarian for a dollar a week. They received a weekly wage of $9.50. After three months of this, the library was finally forced to close due of noisy guests. Although the lesson did sink in.


The vast majority of workers are preoccupied with their immediate financial needs, and as a result, they never develop the ability to recognize a profitable business opportunity. An invaluable lesson had been imparted by Rich Dad. The two young men had been taught resourcefulness and ingenuity by being forced to labor for free.


The best part is that they earned money (passive income) from the library even when they weren’t there. They were free from the burden of having to work for the rest of their lives, a situation in which most people are trapped.


The Key Idea Is…


Rich Dad explained that if Robert worked for free, he would learn to see opportunities. Robert came up with a way to make money rather quickly. He built a comic book library out of the supermarket’s returned comic books, charging other youngsters to read from it.

4. People do not get rich by working, but by investing in things that generate money.

Adding more money to a poor position rarely helps. This is especially evident in lottery winners and those who come into a large sum of money through inheritance, only to find themselves in financial difficulty again within a few years.

Many middle-class and wealthy people nevertheless have trouble getting ahead financially because they invest or spend it carelessly. Even though they may have more disposable money, most people end up getting deeper into debt. Robert loved inexpensive playthings like a baseball glove when he was a youngster, but nowadays grownups have other priorities and would rather spend their money on automobiles or yachts. Many people with more resources fall into the same pitfalls as those with less. Because of this widespread misunderstanding, many young people come to Kiyosaki asking for advice on how to boost their income.


True wealth is the ability to live comfortably for an extended period of time without earning a living. Most people would agree that someone is not truly affluent if they have an expensive vehicle and house but are compelled to work even when they do not like to do so. Because of his success, Kiyosaki was able to leave his job at the age of 47 and retire. While he didn’t quit working, he certainly could have and saw his fortune increase even without doing so. Just how did he manage that? Having set his sights on accumulating and expanding his wealth.


The rich prefer to spend their money on assets rather than increase their labor output. When may anything be considered an asset, and how? How much money it makes or loses you is one criterion. (This is referred to as “cash flow” in the business world.) A automobile, for instance, is not an asset since it is expensive to operate and maintain and, worse, loses value over time.


An asset is something that can be sold for a profit. A liability is something that results in monetary loss. Among the best kinds of assets are:

• Stocks,
• Bonds,
• Income-producing property,
• Moneymaking activities that have little to no need for your actual presence.
• Royalty-paying intellectual property (like music, books, etc)

Lesson one, as Rich dad kept repeating it, is that the working class and the poor exist just to make ends meet. In the hands of the wealthy, money becomes an effective tool.

A lot of individuals get assets and obligations mixed up. For instance, Kiyosaki’s contentious claim that “your property is not an asset” is based on the fact that, although appreciating in value, a home doesn’t provide any income. Many people spend all their money on the most costly property they can afford, leaving them with no savings and no ability to participate in the real estate market. Those curious about the difference between assets and liabilities might benefit from watching this brief video by Kiyosaki.

Reduce your outgoings and your debts so that you may invest more of your capital. This is something that Rich Dad drilled into Kiyosaki’s head repeatedly. Earnings from your investments will provide you with the means to satisfy your wants and needs.

Whenever I feel the need for more living space, the first thing I do is invest in assets that will provide the income necessary to fund my new home.

To begin amassing riches, you need not launch a business. Actually, most new firms fail, which is why Kiyosaki does not advise it. As a Xerox employee, Kiyosaki got his start in the investment world in 1974. He was one of the company’s best sellers and earning a six-figure salary, yet he felt unfulfilled. He was desperate to get out of the rat race. By saving money and investing it wisely, he was able to replace his Xerox salary with the profits from his real estate assets after only three years.


(If you struggle to set aside cash on a regular basis, I suggest reading our analysis of the book Your Money or Your Life. Money is your life force, and this book will show you how to quit chasing pleasure via material possessions.


The Takeaway…In most cases, financial difficulties cannot be resolved by just increasing one’s salary. It’s easy to observe how many lottery winnings and athlete contracts quickly turn into empty bank accounts. Purchasing assets, such as stocks, bonds, certain types of real estate, etc., is the most effective strategy for amassing wealth.

5. Why real estate is a fantastic asset type? it serves as a solid base.

Kiyosaki always buys his first home on the modest side and works his way up to the larger ones. In the United States, there are significant tax breaks for making such an upgrade. A 1031 tax-deferred exchange allows you to avoid paying capital gains tax on the proceeds from the sale of real estate until you use them to acquire another property. This results in significant cost savings, allowing you to accelerate the development of your real estate portfolio.

Here’s how Kiyosaki turned a $5,000 investment down payment into $1 million:


He had settled in Portland, Oregon, in 1989. After the recent market meltdown, local real estate was not doing well. Frequently, he would jog past a residential area that was dotted with adorable gingerbread cottages. The area was littered with “for sale” signs.


When he was walking by one day, he decided to stop and have a chat with the homeowner. Owner was disheartened after having his home on the market for almost a year with no takers. After Kiyosaki offered to look around the property for free, he ended up buying it for $45,000 half an hour later. The owner was willing to take $20,000 less than asking price just to get rid of it. To put down merely $5,000, Kiyosaki was able to purchase the house.


This little home had a renter in it before long. The rent essentially covered Kiyosaki’s monthly mortgage payment. One year later, activity in the housing market improved. The California couple he sold the property to thought $95,000 was a deal because they had been paying more for their previous residence.


Later, he used a Section 1031 tax-deferred exchange to reinvest the $40,000 he had made on the sale of assets. He used the funds into the purchase of a larger apartment complex in a different section of Oregon, this one with 12 units. A few years later, he moved up to a larger apartment complex in the same area of Phoenix. Since the economy in Phoenix was slumping, he scored a bargain once more. Ultimately, he made $1.2 million from the sale of the Arizona home. This scenario can teach us several important things.


Crashing markets are a terrific time to stock up on assets at a bargain. Crashing markets are like going shopping at a major sale, in the eyes of seasoned investors. Nevertheless, when consumers hear about a crisis, they often stop investing out of fear, only to return to buy when prices have already rebounded.

According to Kiyosaki, it’s crucial to not overspend for a home. Paying too much up front frequently means losing out on future profits. He often uses the same quote over and over again, which is:

In business, like in life, the real money is made in the purchasing, not the selling.

The Key Takeaway…In the United States, utilizing a 1031 tax-deferred exchange while “trading up” to larger properties may greatly accelerate the growth of your real estate investment portfolio. When the market (whether real estate, equities, or whatever else) crashes, that’s when you should purchase.

6. Get a job so you may gain experience and knowledge, not only to get money.

Especially in your younger years, you should approach your job as a learning experience first and foremost. Kiyosaki was urged by his “Rich Dad” to gain knowledge from as many sources as possible. However, Kiyosaki’s poor father was of the opinion that his son should pursue more education in a limited subject in order to obtain a well-paying job with benefits at a large corporation.

Kiyosaki hopped from job to job so that he could expand his education. He joined Standard Oil’s tanker fleet after graduating from the United States Merchant Marine Academy in 1969. His educated, low-income father was overjoyed to hear that his son had found employment with a reputable, financially secure corporation. After only six months, though, Kiyosaki left to enlist in the Marine Corps. His poor father was both perplexed and disappointed by this choice.


Kiyosaki had joined Standard Oil not for a secure job, but rather to study about global trading. He eventually enlisted in the Marine Corps to hone his leadership skills. One of Rich Dad’s constant refrains is that leading people and managing their expectations is the most challenging aspect of running a business.


Learning how to sell and advertise yourself effectively is crucial. Regardless of your field, you will inevitably be tasked with promoting and selling a product or service. It might be the marketing of a product, an idea, or even oneself.


Kiyosaki joined Xerox after Vietnam to hone his sales skills. To combat his innate timidity, he enrolled in Xerox’s excellent sales training program. His father took a dim view of sales and was not pleased. After working there for a while, Kiyosaki was always among the company’s top five best salespeople. He left his job for a second time to start his own business importing wallets from Korea.


Because of his background in sales and commercial copywriting, Kiyosaki was able to achieve early success with his first book. That book had a catchy and provocative title—”If You Want to Be Rich and Happy, Don’t Go to School”—which was fantastic for sales and exposure. Kiyosaki quipped that the book would only sell 2 copies if titled “The Economics of Education,” as his publisher suggested.


After an interview with Kiyosaki, a reporter once asked him for advice on how to become a best-selling author. He suggested that she enroll in a sales training program that was well regarded. She felt insulted, claiming that she hadn’t earned a Master’s in English Literature to become a lowly salesman. When Robert saw what she had written, he corrected her: “Best-Selling Author” should have been “Best-Writing Author.” Kiyosaki says he’s a bad writer despite the fact that his books have sold millions of copies. Clearly, she understood.


The Takeaway…Make your career decisions with an eye on the lessons they can teach you. Kiyosaki joined the Marines to hone his leadership skills, worked for Standard Oil to hone his trading skills, and for Xerox to hone his sales skills. Learning how to sell and advertise yourself effectively is crucial. You’ll never stop having to sell anything, whether it’s a product, a concept, or even just yourself.

7. Fear, arrogance, and laziness are all internal barriers to financial success that we must overcome.

Have there been times when you knew you should do something but you didn’t? Even after acquiring more knowledge about personal finance, we all have internal roadblocks that prevent us from achieving financial success. A few examples of what Kiyosaki calls “inner blockages” are:

• fear,
• arrogance,
• laziness,
• damaging habits and
• cynicism

Fear is the first of these challenges. In today’s society, the fear of financial loss is widespread. To be sure, even Warren Buffet makes bad bets sometimes. While financial setbacks are never welcome, they are sometimes inevitable when trying to build wealth via investment.

Don’t pay attention to those who can’t get out of their own heads. There are always some who think the end of the world is near. The media perpetuate this false alarm because it draws viewers. To reiterate, smart investors never follow the herd. They make purchases while others are too terrified to do so.

(Unshakeable is the title of Tony Robbins’ book on handling one’s personal finances. He elucidates the regularity and predictability of market corrections and collapses. If you wish to get over your investment jitters, read our note on the book Unshakeable.

You may take precautions to minimize financial loss. In the stock market, for instance, a “stop” is a straightforward computer program that triggers an automated sale of a stock whenever its price falls below a certain threshold.

Most individuals will never get wealthy because they are too afraid to take risks. Winners have no fear of defeat. Of course, there will always be losers. You can’t achieve success without experiencing setbacks. Those who avoid taking risks are more likely to fail.

The second major barrier to prosperity is haughtiness. That’s the “What I don’t know doesn’t matter” mentality. It’s an inability to take in fresh information or reconsider one’s position. A common refrain from Rich Dad was that hubris cost him dearly every time. One may be both intelligent and conceited.

Investing is something that a lot of individuals get into without first knowing the ropes. This was a very expensive blunder.

Many homebuyers, for instance, ignore the possibility that they lack essential information before making a purchase. Kiyosaki first learned about the concept of “no money down” real estate purchases via a television commercial in 1973. He claims that the $385 course has resulted in at least $2 million in additional earnings.

Nobody ever asks Kiyosaki’s three rich buddies for financial advice. They only let those who want a help (a loan or a job) from them into their lives. Kiyosaki has also observed that his wealthy friends find financial discussions engaging. Many middle-class and lower-class people believe it is impolite to discuss money matters with others.

Being lazy is a third challenge. Kiyosaki suggests greed as a remedy for laziness. Sometimes Dad would tell his son, “We can’t afford anything,” or worse, “Do you realize how much your mother and I do for you?” when the kid asked for something. Conversely, his rich father instilled in him the habit of asking, “How can I afford it?” in order to spur ambition and originality.

The Point Is Mostly That…

Understand that financial setbacks are inevitable and learn to embrace them as part of the learning process rather than letting them hold you back. Gaining wealth might make you arrogant, so overcome this feeling by continually expanding your knowledge. Fight laziness with greed, coming up with inventive solutions on how to pay for your desired stuff.

8. There are several advantages to forming a business, including the potential to reduce your tax liability.

Taxes were formerly levied solely on the wealthy. Because of this loophole, the government was able to sell them to us. Historically, taxes have typically been enacted as a stopgap measure, typically to fund a war. To help pay for World War 1, Canada, instituted a combination of income and sales taxes. However, even after the war ended, the taxes remained in place. Only the top two percent of Canadians in terms of wealth were required to pay income tax in the early decades of that country’s system. The average worker now has to work four to six months a year merely to pay their income taxes.

Meanwhile, the wealthy are able to legally pay less in taxes by using their financial expertise. In reality, governments pass a plethora of tax rules meant to entice company owners and investors to generate additional employment opportunities and construction projects. As a result of these regulations, they incur lower tax liability. In spite of having more income than Poor Dad, Rich Dad assured his son that he still paid fewer taxes. The medical, legal, and dental professions are among the worst hit by tax increases. Keep in mind that true affluence is not earned but rather inherited.


Tax advantages are only one of the numerous perks that corporations provide. Anybody may form a company; all it takes is a packet of forms filled out by an attorney and filed with the appropriate authorities. Even so, there are positive aspects to being an independent business. For instance:


A ordinary worker’s taxes come out of their paycheck before any other payments. Companies can deduct their operating costs first, and then pay taxes on the remainder.


Another benefit of forming a company is the added security it provides. Your house and other personal possessions are safe from seizure in the event of a lawsuit.


(However, in certain cases, forming a corporation will result in you being subject to double taxation, in the form of both corporate and individual income tax.)


For information on forming your own businesses, Robert Kiyosaki suggests reading Garrett Sutton’s books.


The Key takeaway rich utilize their financial acumen to lawfully avoid paying their fair share of taxes. For instance, the very rich feel little impact from income tax increases. By forming a personal company, you may shield assets like your house from creditors and (in some cases) reduce your tax liability.

9. Put your own financial needs before those of others, even if it hurts.

The term “paying yourself first” refers to the practice of investing before making any other purchases or payments. Put away ten percent of your income before you pay rent, the mortgage, or taxes, as an example. The Richest Man in Babylon, a real classic of personal finance literature, is responsible for popularizing this piece of advice.

It’s common wisdom, yet few really put it into practice. After all other expenditures have been covered, they will start saving and investing. While this makes sense in theory, in practice it means that most months there is no extra cash to put toward bills.


Even if it’s a struggle, Rich Dad argued, you should “pay yourself first.” He didn’t care if his accountants and attorneys thought he was insane or reckless for acting this way. No matter how pressing the bills or taxes were, he always made sure to put some money away to invest in assets first. Nor did he ever use his funds to buy anything. He felt tremendous stress because of this. To him, this stress represented the greatest incentive to improve his financial skills. This practice will force you to be more innovative in your approach to making money, similar to how lifting weights at the gym forces you to get stronger.


Keep your credit card debt to a minimum. Because of this, prioritizing your own financial needs is considerably simpler. If you don’t rack up a lot of debt and cut back on frivolous spending, your monthly payments will be manageable. This allows you to put aside funds more readily invest in assets. Spend the money you get from selling your possessions on a nicer automobile or home later on.


The takeaway is that Rich Dad prioritized investing above paying necessary expenses and taxes. Even though his bookkeepers thought he was insane, he kept at it and eventually became more successful at producing money, much like how working out at the gym makes one stronger.

As a kid, Kiyosaki says, he struggled to understand the concept of money. While he and his family were struggling mightily, his closest friend’s dad was rolling in the wealth. He attributes his success to this multifaceted perspective and claims to have written this book to share his insights with the world.