Rich Dad Poor Dad review summary

"Rich Dad Poor Dad"- this is a book that teaches you that the Rich don't work for money, but rather have money work for them. This is a book that takes you through a journey that will not only change your perspective about money but also empower you to take steps to make money work for you and ultimately help you become financially independent in life and away from the rat race.

Robert Kiyosaki outlines in his book that he has 2 dads- One, his biological father (poor dad) who like every one of us, went to college, got a degree, secured a well-paying job, etc. But his other dad (rich dad) did not follow the generic path. Even though he did not have a college degree, he still ended up making way more money than the poor dad! How did he manage to do that? This is exactly what Robert outlines in his books and we shall go through the 6 lessons.

Lesson #1: The Rich Don't Work For Money

As per the Rich Dad, money doesn't solve one's problem. Even people with high-paying jobs struggle with money problems because they do not know how to make money work for them. As soon as they get their paycheck, they become greedy and spend it all on all the things they could buy. And once the paycheck is over, they go back to work again for the next paycheck and they enter into a never-ending Rat Race.

If one needs to get out of this Rat Race, one needs to accept that money is running their lives and not vice versa.

"It's fear that keeps most people working at a job: the fear of not paying their bills, the fear of being fired, the fear of not having enough money, and the fear of starting over. That's the price of studying to learn a profession or trade, and then working for money. Most people become a slave to money- and then get angry at their boss".

Can one really get out of the Rat Race? Let's see for ourselves in the next few lessons.

Lesson #2: Why Teach Financial Literacy?

One of the major reasons why people struggle financially is primarily because they cannot distinguish between an asset and a liability. Rich people buy assets, but poor people buy liabilities and think they are assets. Assets put money in your pockets whereas liabilities take money out of your pocket. People treat buying a home on mortgage as an investment and this is the first step that creates a spiral of increasing liability as we upscale. Why so? The reason being buying a house involves incurring additional expenses like mortgage interest payments, taxes, maintenance. This money, if invested in income-generating assets like stocks, bonds, income-generating real estate, royalties, and any other passive income-generating assets, would have largely grown our assets over time and subsequently, our income as well.

Most of us spend our lives running behind our monthly salary, paying bills with it, and we believe most of our problems would go away only if we had more money. We work for money, rather than make money work for us, and thus, we get stuck in a trap. Any job is just a short-term solution to a long-term problem.

Lesson #3: Mind Your Own Business

Our current education system teaches us skills to get jobs and work under someone else and live our lives with wages. We first work for the owners of the company, then work for the government through taxes, and then finally for the bank that owns the mortgage. This is why people forget to mind their own business as they are busy minding someone else's business and making them money.

Start minding your own business- keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home. Keep expenses minimal, reduce liabilities and build assets day-in and day-out.

Poor people buy luxuries first but rich people buy luxuries last. First, they build their assets and then buy luxuries from the income they create from the assets. Poor people buy luxuries from sweat, blood, and children's inheritance. Build Assets first and buy luxuries last.

Lesson #4: The History of Taxes and the Power of Corporations

Taxation was adopted as a means of taking money from the rich and passing it down to the poor. The reality is that the rich are not taxed, rather it is the educated upper-income middle class who pays for the poor.

As the government started collecting taxes, they needed to spend the allotted funds or risk losing it in the next budget. The government used it to create more jobs and pensions, and it went to the rich via government grants to their companies. The government needs to spend all the money to be efficient. The business people on the other hand were applauded by investors for having excess money, which in turn shows increasing efficiency. As the cycle of growing government spending continued, the demand for money increased and the government now started to tax the middle and the poor class!

The rich people started using corporates because the tax rate of a corporation is less than the individual tax rate. The harder an individual works, the more tax it pays to the government. Rich Dad considers the taxman as the biggest bully and one must know the laws to avoid paying tax and also hire a specialist as they are worth their cost in saving money.

To achieve financial freedom, one needs to have Financial Intelligence or Financial IQ which is made up of 4 broad areas of expertise:

a) Accounting

b) Investing

c) Understanding markets

d) The law

The combination of the above-mentioned skills makes up basic financial intelligence and it will amplify your Financial IQ.

Lesson #5: The Rich Invent Money

Often in the real world, it's not the smart who get ahead, but the bold. Initially, land was wealth, followed by factories and production, and today, Information is wealth. If one doesn't keep up with the rapid changes, they will be left behind. Some people cling to old ideas not knowing it is their biggest liability. An idea that was an asset yesterday may not be the same today.

Financial intelligence means having more options and figuring out ways to create opportunities or alter situations in your favor. Luck is created- so create yours. One must take time to build on their financial intelligence but take advantage of any investment opportunity that comes in front of them. The author made tremendous money in real estate and in stocks but it came with practice and time. Opportunities are available everywhere but are often overlooked. Be on the lookout for such opportunities, raise money and organize smart people and hire people more intelligent than you.

Lesson #6: Work To Learn- Don't Work For Money

"Job security meant everything to my educated dad. Learning meant everything to my rich dad".

The author believes that there are talented people all around us who struggle financially and they are just one skill away from greatness. It is not to work hard, but rather the ability to SELL. Communication skills such as writing, speaking and negotiating are crucial to a life of success and the better you get at them, the easier life gets.

Rich dad believes that rather than specialize in a particular field, one should sought out new skills. Learn a little about a lot. Always be on the lookout to learn a second skill. The more specialized you become, the more trapped and dependent you become to that specialty. It is always good to groom onself and learn a lot about different areas of business.

The main management skills needed for success are 1) Management of Cash flow, 2) Management of Systems and 3) Management of people.

To be truly rich, we must be able to give as well as receive. Rich dad always gave money to charities, foundations, churches as he knew to receive money, he also had to give it. Poor dad said he'd give money only if he had extra.

After going these lessons, people may still face roadblocks to get started with their independence journey due to 5 reasons:

1. Fear

• Everyone has the fear of losing money but the primary difference between a rich person and a poor person is how they manage that fear. Building your asset column isn't a tough task, but it does take courage and the right attitude towards failure.

2. Overcoming Cynicism

• Be it self-doubt or doubt of the people surrounding us, we must not let it get an upper hand over us and we must try to take advantage of any opportunity that comes by us. One shouldn't be impacted by rumors and negativity for the experienced investors know that when everyone is afraid to act, the one who pulls the trigger finally gets rewarded.

3. Overcoming Laziness

• Change your mindset from "I can't afford it" to "How can I afford it?". Having a little greed in your life will make you desire better things in life and this is how you will get motivated to take care of your wealth and health.

4. Overcoming Bad Habits

• Poor dad always paid others first and himself last, but Rich Dad always paid himself first, even if he was short of money. In difficult times, this attitude of yours will lead you to come up with innovative ways and make you fiscally stronger.

5. Overcoming Arrogance

• Get your priority straight and always accept your forthcomings. Understand the gaps and work on them, either by yourself or with the help of a specialist.

Every person has 2 great gifts- mind and time and it is up to a person as to how he makes the most out of them. With each dollar a person earns, it is up to them as to how they plan to manage it- either spend it on liabilities and be poor or invest in your mind and build assets and make a great fortune for oneself. With each dollar, you get to decide whether you want to be rich, poor, or middle class. Your choices are what define your future and only you can make a change in your life, so choose wisely!

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