Rich Dad, Poor Dad by Robert Kiyosaki | Book Summary and PDF

In the Rich Dad Poor Dad PDF summary you will learn:

• The key differences between Rich Dad and Poor Dad
• A quick review of financial statements (assets and liabilities)
• What kind of education to get
• What kind of work to do
• How to invest/spend money

SUMMARY

Rich Dad vs. Poor Dad

This book is the story of Robert Kiyosaki’s life in some ways as he talks about the 2 most influential figures in his life.

Financial Statements

Most people understand the difference between income and expenses, but they do not understand the difference between assets and liabilities.

Asset

• Works for you
• Generates income for you even when you’re not working
• Examples:
  • A cashflow-positive real estate investment that produces a thousand dollars’ income a month
  • A business that produces income

Liability

• Always takes money out of your pocket even when you’re not using it
• Loses value every day
• Examples:
  • A large house bought for personal use for which you are paying a lot of mortgage. This does not really put any money in your pocket.
  • A big luxury car for personal use

Lesson 1: What Kind of Education to Get

This lesson is what we teach most kids when we start off.

Poor Dad’s advice: Go ahead and get the best possible education in order to get a great job.

Poor Dad believed in conventional education. He was a teacher himself but he never really learned about money. He was an educated, intelligent man, had a PhD, but he was ignorant when it came to finances.

Rich Dad’s advice: Go and get the best possible education so that you can start your own business and give other people jobs.

Unlike the educated Poor Dad, Rich Dad only had an 8th grade education. He believed in the kind of education where he was constantly feeding his mind about business and finances.

4 key areas of financial education that Rich Dad always emphasized on:

• Accounting
• Investing
• The market
• The laws surrounding financing and money

Your greatest asset: Your mind

Kiyosaki emphasizes that financial literacy is the only way to get rich, not some quick scheme or formula. He encourages people that while the major areas of financial education, particularly accounting and the laws, can be complex, they are fundamental for making money for the long term.

Parents should start their kids early on accounting basics in the simplest and clearest ways possible so that it would be easier for them to have a grasp of this knowledge as they grow.

The lesson: This lesson shows a huge difference in mindset. Instead of focusing on conventional education, we need to think about educating ourselves financially and in everything else that goes around building a financial portfolio or business.

Lesson 2: What Kind of Work to Do

This is one of the most important lessons from the book.

Let’s say you’ve gone to college and you graduate, what do you do next? What kind of work should you do?

Here’s the key:

• The poor and middle class get a degree and get a job. They work for money and for others for the rest of their lives.
  • The first person to work for is their employer.
  • Then they work for the government because the government takes taxes as soon as they receive an income.
  • Then they work for the bank because they buy a big house and a big car. They’re paying mortgage and interest to the bank.
  • Only after they have have worked for the employer and the government and the bank do they really start to work for themselves…and then they wonder why they’re not rich.
  • Fear and greed run their lives. They have this fear of not having enough money so they keep on working hard on their job and keep on trying to make more and more money. They’re fearful of starting their own business or venture.
  • They’re stuck in a rat race.

• The rich don’t work for money, rather it’s money that works for them.
  • Rich Dad’s mantra was to work to improve upon assets, which in turn produce income.
  • Rich Dad was always acquiring and growing his assets like businesses and cashflow-positive real estate, stock, and other investments, and that’s what rich people do.
  • Rich people own their businesses and then they leverage corporate structures and taxation to their advantage.

Lesson 3: How to Invest/Spend Money

Let’s say you have your education and you have a job or a business. How do you invest or spend your money?

The key: Pay yourself first.

You probably know a lot of people who are making lot of money but are still broke; they have almost no real tangible assets. Meanwhile, some people are not even making as much money as them but are rich.

It’s all about when they pay themselves.

The poor:

• They never get around to paying themselves at all.
• As soon as they get their income, it goes out into expenses.
• They never put it into an asset.
• They’re ignorant about how money works.

The middle class:

• They pay themselves last.
• They start with a certain amount of income then spend it up on liabilities. These liabilities are big on expenses and so the money goes out of their expense column.
• They have very limited assets. They probably have retirement savings, bank savings or some sort of housing, but that’s a barrier.
• They might have higher income, but then they also have higher liabilities, which in the end keep taking money out of their pockets.
• They acquire limited assets and they get almost no income from these because they are limited.

The rich:

• They pay themselves first.
• As soon as any income comes in, they invest a portion of it into their assets. Their money is employed right away.
• The remainder of their income is then used for expenses and liabilities.
• They ensure that their expenses are much lower than their income, and their liabilities are much lower than their assets.

Limit Your Risks, Increase Your Sales

Avoid being taxed

Since the rich have the financial knowledge on the workings of the business structures, they are able to avoid the rules surrounding taxes. Meanwhile, the middle class, due to their lack of this kind of education, end up being punished by the taxes.

The rich avoid paying more taxes by doing their research and pushing back whenever there are new initiatives meant to tax them.

Incorporate

Kiyosaki calls it a basic fact of life that the rich somewhat control the financial system to their benefit. His advice is to incorporate in order to limit risks.

A typical corporation protects the rich, and you should let it protect you as well. Corporations in the United States, for instance, enjoy various advantages in the areas of finance.

Help others sell

Kiyosaki also encourages people to practice the “principle of reciprocity” by helping someone else sell something. If you want sales, this can have huge impact on your business. The idea is that you get back whatever you give out.

Be Bold

The road to richness may be a long one but it’s worth the taking. Besides, we are all after freedom and abundance in life. But why are many of us still stuck or struggling financially?

Major roadblocks getting in our way:

• Fear

Many of us fear failing along the way, or fear losing all our hard-earned money. We also fear how the society would see us. But Kiyosaki says that failure is actually a part of financial education.

If we fear failure, we would not take risks or create ventures for ourselves. Being too concerned with it hinders us from learning and growth and from the richness we are actually capable of attaining.

What to develop in ourselves to defeat fear:

– Patience
– Courage
– Bold thinking toward failure

• Laziness

Laziness will also not get us anywhere. To defeat laziness, Kiyosaki suggests applying a certain amount of greed. Greed spurs motivation and desire to do something great.

• Arrogance / lack of financial IQ

This is the ultimate roadblock in this journey. Ego and ignorance of finances means lost money and opportunities. Worse, the arrogant person is not aware of it.

Again, Kiyosaki says that self education is the key to step up one’s finances. Be willing to honestly assess what aspects of financial education you need to know more of, and be open to learning.

If we clear these blocks away from our path, the journey to richness would generally be a smoother one. Start now.

Related Readings:

1. How to Get Rich by Felix Dennis
2. Profit First by Mike Michalowicz
3. The Millionaire Fastlane by MJ Demarco
4. Think and Grow Rich by Napoleon Hill