Rich Dad Poor Dad Summary: We studied Rich Dad Poor Dad and here's what we learnt.

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Zahra Khaliq
Zahra Khaliq
August 31, 2021
· 5 min read
Rich Dad Poor Dad Summary

Rich Dad Poor Dad tells the story of a man named Robert Kiyosaki. 

Kiyosaki grows up with the benefit of two contrasting influences - his best friend’s father, known as ‘Rich Dad’ and his own father, who he refers to as ‘Poor Dad’. While his Poor Dad encourages him to take the ordinary route in life - school, college and a job at a reputable company, his Rich Dad pushes him beyond this comfort zone. Kiyosaki is given a number of lessons on how to create wealth and financial freedom, without becoming a ‘slave to money’. 

We thought we’d pass on those lessons to you.

Lesson 1: The Rich Don’t Work for Money

On initial reading of this title, you might assume that the rich do not work at all - but this isn’t the case. Kiyosaki is trying to say that the rich don’t work for money; they instead have money work for them

  • This lesson places emphasis on the fact that the rich often veer from the ordinary route that most of us take in life: school, university and a good paying job at a reputable company. Kiyosaki notes that a regular job is just a short-term solution to the long-term challenge of creating wealth and financial freedom.

  • The consequences of taking this ordinary route is that most people become a slave to money. The fear of not having enough money to pay their bills is what keeps them in their jobs, and therefore trapped in a cycle of working more in order to earn enough and stay afloat.

“When it comes to money, most people want to play it safe and feel secure. So passion does not direct them. Fear does.”

  • The difference between the rich and poor is that the rich take an entirely different approach. Instead of working to earn money, they make an effort to understand how money works. They look for opportunities where money can work for them.

  • For example, as the chapter closes, Kiyosaki discovers a stream of passive income by collecting unsold comic books that would’ve otherwise been thrown out of convenience stores. He then creates a comic book library where kids can pay an admission fee to access the comics. He’s not only passionate about comics, but is able to make a profit, even when he’s not there. In this case, he isn’t working for money, money is working for him.

Lesson 2: Why Teach Financial Literacy

Kiyosaki believes that even those with millions in the bank cannot sustain their wealth unless they are financially literate. There’s just one thing you need to know: the difference between an asset and a liability.

  • The all-important lesson of financial literacy is not about how much money you make, but how much money you keep. Kiyosaki opens the chapter by telling us about lottery winners and professional athletes who take millions home just to end up ‘broke’ shortly after their wins.

“Money without financial intelligence is money soon gone.”

  • Most people struggle to keep their money because they can’t differentiate between an asset and a liability. An asset adds to your income and puts money in your pocket, whilst a liability takes money out of your pocket.

  • Kiyosaki tells us not to look up the terms ‘asset’ or ‘liability’ as they are defined by numbers, not words. Examples of assets are Real Estate, Stocks, Bonds and Intellectual Property. In contrast, examples of liabilities are Mortgages, Consumer Loans and Credit Cards.

  • According to Kiyosaki, rich people accumulate assets that feed their income, whilst the poor accumulate assets that feed their expenses. For example, someone may treat their home as an asset, but it could take more money out of their pocket than in. What prevents these people from becoming rich is less about their salary and more about how they choose to spend their salary - on liabilities rather than assets.

  • The key to growing rich is to invest in income-producing assets such as investment real estate, collectables like books or art, a business, or the dividends from stock and bond investments.

Lesson 3: Mind Your Own Business

This chapter teaches us why we should differentiate between our profession and our business. We should, in essence, ‘mind our own business’ - or in other words, should not spend our whole lives working for someone else.

“The rich focus on their asset column, whilst everyone else focuses on their income statements.” 

  • For some people, ‘Minding Your Own Business’ might mean starting your own company, but it also means focusing on your asset column (not your income column). ‘Real assets’ that the rich typically focus on are:

    • Businesses that don’t require your presence but still make you profit. You own them, but they’re managed or run by other people.
    • Stocks, shares and bonds.
    • Income-generating real estate.
    • Royalties from intellectual property such as patents, scripts and music.
    • Anything else that has value, produces income or appreciates.

  • The key to sustainable wealth is building a base of solid assets whilst keeping your expenses low. Keep your day job, but start investing in real assets, not liabilities or personal effects that have no real value.

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

This lesson opens with a brief history of taxes. Taxes initially came about to fund past wars in order for empires to fight for expansion, but in today’s world, they remain a regular part of society. Kiyosaki tells us that what sets the rich apart, is that they know how to manage their taxes. Here’s how:

  • Because the rich don’t play by the rules, they see an opportunity to use corporations as a way around taxes. Understanding the legal corporate structure gives them a steep advantage to outsmart the intellectuals.

“A person who understands the tax advantages and protections provided by a corporation can get rich so much faster than someone who is an employee or a small business sole proprietor. It’s like the difference between someone walking and flying”

  • Corporation tax is lower than income tax, so you can save tax through corporations. In corporations, some costs can be deducted pre-tax, so as you begin to grow your assets, you might want to think about incorporating in order to reduce your taxes.

Lesson 5: The Rich Invent Money

Rich people are more likely to take risks in order to make a gain. 

  • Kiyosaki opens this lesson by telling us to take risks and be bold. Although we all have self-doubt, we should also recognise that we have great potential, and the courage to explore this potential through risk can make all the difference in leading a successful life.

  • Money isn’t our greatest asset; our mind is. As we develop our financial IQ and begin to put it into practice through investing, we should welcome failures as well as successes. After all, failure is part of the process of success.

“Often in the real world, it’s not the smart that get ahead, but the bold.”

  • Setting money aside each month is a sound idea, but it can hinder your growth because it places your focus on saving rather than the several opportunities the world has on offer to increase your wealth. Financial intelligence is what allows us to take on these opportunities.

  • Kiyosaki shows us how a small amount of money can quickly grow into a large amount through financial intelligence. He buys a house in a depressed market in Oregon for just $45,000, renting it out for barely any profit. When the market picks back up, he manages to sell the house for $95,000, then reinvests in more real estate, which increases his wealth even more.

Lesson 6: Work to Learn, Don’t Work for Money

People spend years in school, achieve amazing grades and become really talented in a particular field. Yet, they still tend to struggle in life because, along the way, they have learned nothing about money. 

  • Schools encourage us to specialise in a single skill. But we should focus on building more than one skill in order to help us seize opportunities. For example, a writer can produce a great novel, but a writer who can also sell and market themselves is already one step ahead of the game.

“The world is filled with talented poor people. All too often, they’re poor or struggle financially or earn less than they’re capable of, not because of what they know, but because of what they don’t know.”

  • Instead of working for money and security, we should take on second jobs or external opportunities to learn a second skill. Although most people will resist this because they detest change, the process is much like going to the gym. You might be reluctant to start working out, but once the workout is over, you’ll be so glad that you did it. Hard work pays off!

Koody Approved?

Whilst Kiyosaki can be repetitive at times, continuously telling his readers to veer from the ordinary, take risks and have money work for them, Rich Dad Poor Dad provides beginners in personal finance with six solid and thought-provoking lessons to kickstart their journeys towards sustainable wealth and financial freedom. The book is not only easy to read but is packed with anecdotes to bring Kiyosaki’s lessons to life, helping us understand and challenge the way we think about money. 

Koody Approved ✅

Click here to buy Rich Dad Poor Dad on Amazon.

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Zahra Khaliq

Zahra Khaliq

Hi, my name is Zahra, and I'm responsible for Content and SEO at Koody. Here to simplify and provide tips on personal finance so that you can kickstart your journey towards financial independence.
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