This is a summary of the best selling personal finance book of all time: Rich Dad Poor Dad.
Told as a true story from a first person narrative, Rich Dad Poor Dad was written by best-selling author, Robert Kiyosaki. The book is controversial, because it doesn’t advise you to follow the standard dogma of penny pinching and stashing money into your 401K to access it in your twilight years.
Instead, it’s a foolproof guide for how to create actual wealth – meaning, wealth you can enjoy in your 20s, 30s, 40s (or whenever you put your mind to it).
Rich Dad Poor Dad Summary
The ten big ideas that Robert Kiyosaki presents in Rich Dad Poor Dad are presented below.
Whether or not you read the full book, the book presented a practical system for breaking free from the rat-race and acquire a lifestyle filled with:
- Financial abundance – Have money in excess of your needs
- Geographic freedom – Live anywhere in the world that you want
- Time freedom – Spend your time how you want (and not how you’re told)
- Self Expression – Express yourself freely, authentically, and without concern for what other people think
Take this Rich Dad Poor Dad summary seriously, because this book was one of the main reasons that I “broke free” in my mid-20’s. Armed with these lessons, I abandoned the path of a stable job and 401K contributions to pursue worldwide travel, real estate investing, and entrepreneurship.
With this said, let’s dive in starting with lesson number 1.
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 Comes 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
According to Robert, you need to acquire skills – and get advisers – in four key areas to progress on your journey towards financial freedom.
- 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.
Lesson 7: Work To Learn, Don’t Work To Earn
As Robert explains, you should work to learn, not just work to earn. Unfortunately, all too many people are focused on what they want to be paid, when they should be focused on what they could learning – and how it could transform their life.
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 defined as 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 important for facilitating the wealth creation cycle.
Lesson 10: Dream Big
According to Robert, you should 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.
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.
Rich Dad Poor Dad Summary and Takeaways
Rich Dad Poor Dad is a controversial book, because it destroys conventional thinking and replaces it with real financial literacy.
Clearly, most folks need this, because 40% of Americans don’t have $400 in the bank for emergencies. There’s a reason it has sold 32 million copies in 40 languages since it was first published in 1997.
If you’re committed to financial expansion instead of comfort and security, then Rich Dad Poor Dad will dramatically change your life.
Have you read the book? If so, how would you summarize Rich Dad Poor Dad’s key takeaways? Share your thoughts below.
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