Rich Dad Poor Dad is a book written by best-selling author and writer, Robert T. Kiyosaki —a self-made businessman, author, investor, and public speaker.
The author’s success, his achievements, popularity weren’t as easy as you would think, as he jumped from one job offer to the other for many years until the late 90’s when he finally came to limelight after publishing Rich Dad Poor Dad (the #1 finance book of all time).
This article is both a review and summary of Rich Dad Poor Dad, as well as a discussion of the top 10 lessons that author Robert Kiyosaki teaches within its pages.
The Author, Robert Kiyosaki
As a brief background on the author, Robert Kiyosaki graduated from high school in 1965. Afterward, he joined the U.S. Merchant Marine Academy where he graduated in 1969 as a 2nd lieutenant in the U.S. Marine Corps and as a deck officer. Not long afterward, he started his career as an employee in Standard Oil’s tanker for six months before he later resigned and decided to participate in the Marine Corps where he served as a helicopter gunship pilot during the Vietnam War.
Kiyosaki also enrolled in a two-year MBA program at the University of Hawaii while he still was in the military.
From there, he left the U.S. Marine Corps and started working for Xerox Corporation, before he started his own firm, which was a success. While he has experienced professional set-backs during his lifetime, including filing for a business bankruptcy in 1980 and in 2012, he also also had major successes in both business and real estate investing.
From being bankrupt and broke to becoming a multimillionaire, this book shares the lessons Robert learned from his friend’s dad (his “rich dad”) and how these lessons compare to what he was taught by his own dad (his “poor dad”).
Review of Rich Dad Poor Dad
In my opinion, Rich Dad Poor Dad is the single best book that you can read about personal finance. This is because it advocates for the importance of financial literacy and wealth creation through getting your money to work for you, instead of you working for it..
Importantly, the focus of the book is on MINDSET, not on investment tactics or vehicles.
For people who critique the book, their most common compliant is that it doesn’t teach investment tactics. For example, financial blogger Ramit Sethi writes that the book doesn’t speak to the specifics of investments strategies and advocates for real estate investing, which Sethi thinks is “too complicated for beginning investors.”
I disagree with Sethi’s opinion, because the purpose of the book is to change how a person thinks about money.
Without a change in mindset (the “why to do something”) the “how to do something” will rarely matter. Change a person’s mindset and you change their life.
Furthermore, as a real estate investor myself, I disagree that real estate is complex.
It is no more complex than the math lessons we had learn to graduate from high school. When my wife and I bought our first investment property, we had little knowledge, but we had commitment and we had a great team (realtor, lender, home inspector, title company). That was all we needed to get started.
Today, we still own that early investment property and it returns a 35% cash-on-cash return (meaning, it’s lucrative). We also bought two more identical properties in the same neighborhood, which also produce strong returns.
When it comes to obtaining the right financial mindset, there is no better book than Rich Dad Poor Dad. PERIOD.
As proof, the book has been translated into 51 different languages and more than 40 million copies have been sold across 109 countries worldwide. It was first self-published in 1997 by the author, before it garnered larger attention from readers and publishers. In addition, it has consistently been a New York Times bestseller.
Rich Dad Poor Dad is a Parable
Interestingly, Robert Kiyosaki choose to write the book as a parable (story).
In it, he tells the story of how his “rich dad” shaped his mind about money and investing, replacing what he had previously had previously been taught by his “poor dad” (birth dad), who was an academic.
Robert uses this storytelling to dispel one of the most common myths about money, which is that you need to earn a high income in order to be rich. He replaces this myth with the statement that you need need to be financially intelligent to become rich.
More than anything else, this book serves as a reminder that directly or indirectly, we become what we study.
In other words, the more input we give our financial education, the more financially independent we become.
One of the topics discussed in the book is the fact that many people get wrapped up into believing that they need to go to school, find a reliable job with benefits and a promotional structure, save their money little by little, pay their bills, and slowly save for retirement. They repeat the cycle day by day, month by month, year by year, but end up living on a fixed budget in retirement.
Robert is of the opinion that your money should work for you.
He teaches that your number one goal should be to convert ordinary earned income (“active income”) into portfolio or investment money (“passive income”) as rapidly as possible.
Summary of Rich Dad Poor Dad
The eight big ideas that Robert Kiyosaki presents in Rich Dad Poor Dad are:
- The single most powerful asset we all have is our mind.
- The low-class and the middle-class work for money, but the reverse is the case for a rich people —money works for them.
- It’s not how much money we earn that matters. It’s how much we keep.
- Learn to sell. Outside of a job, you will only get paid when you transact with the marketplace (that is, exchange something of value for money).
- The low-class and the middle-class use money to buy themselves liabilities, while rich people buy themselves assets. Assets put money into your pocket. Liabilities take money out of your pocket.
- Financial literacy can (and should) be learned through experience.
- Fear and skepticism are barriers to success, because they prevent people from acquiring the necessary life experiences.
- Think abundantly. Robert’s rich dad would not allow him to say, “I can’t afford it.” Instead, he taught him to say, “How can I afford it?“
Top 10 Lessons from Rich Dad Poor Dad
In addition to these big ideas, the following are top 10 lessons I learned from the book.
Lesson 1: Rich People Acquire Assets (Real Assets)
An asset is anything of value or a resource of value that can be converted into cash. Put simply, an asset is anything that puts money into your pockets.
Robert Kiyosaki, “The rich people invest in real assets and not liabilities.”
Unfortunately, the poor and middle-class people tend to spend their money on cars and houses to live in, which are examples of liabilities. Cars and residences will cost you money, most notably depreciation for cars and maintenance fees and taxes for houses.
Lesson 2: The Lack of Money Come from a Lack of Knowledge
The book teaches that the lack of money comes from a lack of knowledge.
Without the proper financial education, you will spend your whole life trading time for money, until your time (your life) runs out.
Lesson 3: Focus on Financial Education
The sad reality is that we learn nothing about money-making in school.
Instead, teachers advise us to get good grades, go to Ivy-league schools, get high-paying jobs, etc. They don’t teach us how to become a millionaire, nor do they teach us how to thrive outside the school walls.
“The bitter truth is —one cannot get rich by formal education,” says Robert.
Lesson 4: The Single Most Powerful Assets We Have is Our Mind
“If our minds are trained well, it can create enormous wealth,” says Robert Kiyosaki.
No wrestler, football player, or rugby player would go into an arena without proper practice. The same principle applies to money-making.
To get rich, you need to feed your mind with financial knowledge and experiences, and thereby, increase your financial IQ.
Lesson 5: Learn to Overcome Obstacles
A big lesson from Rich Dad Poor Dad is that we should learn to overcome obstacles.
“The primary difference between a rich person and a poor person is how they manage fear,” says Robert.
For most people, the reason they don’t win financially is that the fear of losing money is far greater than the joy of being rich.
Lesson 6: Four Skills That Financial Intelligence Demands
- The Law: The law is the awareness of state, federal, and corporate regulations.
- Investing: Investing is the allocation of money in the expectation of a future benefit.
- Understanding Markets: Understanding markets simply means understanding the science of supply and demand.
- Accounting: Accounting is the ability to read numbers. It is a very important skill to have if you want to build your business/investments.
You need acquire skills (and get advisers) in these four areas to start your journey towards financial freedom.
Lesson 7: Work To Learn, Don’t Work To Earn
Find a job where you can learn one or more of the four skills above. Alibaba’s Jack Ma also emphasizes this particular point. Your early jobs should help you build financial skill-sets.
Skill-stacking, which is the acquisition of different skill sets over time, is an essential component to wealth building.
Lesson 8: Learn from successful people around you
Simply put, you need to surround yourself with winners. Talk to people who have gone ahead of you. Learn from their past mistakes, decisions, and experience.
As Jim Rohn is famous for saying, “You are the average of the five people you spend the most time with.”
Additionally, you need a mentor. Approach someone you want to learn from and offer them something of value in exchange for their guidance, such as labor, a unique skill-set you possess, or other perk. Then, be teachable.
Lesson 9: The Concept of Cash Flow
Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business.
In finance, the term is used to describe the amount of cash (currency) that is generated or consumed in a given time period.
Excess cash flow generated by your assets should be invested again into other assets. This is very important!
Lesson 10: Dream Big
Dream big, have a clear game plan in your mind. Always seek answers to important questions such as why do you want to earn more passive income?
That will make you think more about where you are now and what you want to achieve. Also think abundantly.
As Robert Kiyosaki writes, “Money will be anything you want it to be.” By that he means, if you think money is hard to get, it will be. If you think money is abundantly available, it will be.
Conclusions about Rich Dad Poor Dad
Rich Dad Poor Dad is a controversial book, because it breaks with conventional thinking. In my opinion, this is because most Americans where taught how to think about financial goals during the agrarian age and not during the information age.
The ratio of business owners to employees has shifted over the past 100 years. This is significant, because the corporate income taxes were enacted in 1909 and federal income tax was enacted in 1913.
Today, we are living longer than ever and there are 7.7 billion people on earth.
Furthermore, 3.2 billion of those people are estimated to be connected with each other online. Within this global marketplace, the balance of supply (skills possessed) and demand (skills needed) is changing at a rapid pace.
Regardless of how the world has been impacted by the information age, we clearly need more financial literacy, because 40% of Americans don’t have $400 in the bank for emergencies.
If you’re committed to learning what works to create wealth, instead of what will make you comfortable and secure, then Rich Dad Poor Dad will dramatically change your life, just like it changed mine.
Have you read the book? If so, did you like it or dislike it? Please share your key lessons and takeaways below!
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