Rich Dad Poor Dad by Robert Kiyosaki

Rich Dad Poor Dad is a book by Robert Kiyosaki and Sharon Lechter which was originally published in 1997. It is a classic that everyone should read when they are starting their journey in personal finance.

In Rich Dad Poor Dad, Kiyosaki teaches people how to think differently about money and how to achieve financial freedom. He challenges the traditional belief that you need to have a high income to become rich. Instead, he teaches people how to make their money work for them and how to acquire assets that will generate income.

Two Dads, Two different mindset

The book revolves around Roberts's two dads:

His real father (poor dad) and his best friend's father (rich dad) and how they both men shaped his thoughts about money and investing.

Kiyosaki's poor dad was a highly educated man who worked hard and earned a good living. However, he was always struggling with money.

Kiyosaki's rich dad, on the other hand, was an eighth-grade dropout who became one of the richest men in Hawaii.

Kiyosaki realized early on that his two dads had very different mindsets about money. His poor dad believed that you should get a good education, get a good job, and work hard for your money.

His rich dad believed that you should make your money work for you and that you should focus on acquiring assets that generate income.

Kiyosaki also realized that the traditional school system does not teach people about money. This is why so many people struggle with their finances, even if they have a good education and a good job.

The book is divided into 9 chapters:

• Chapter 1: The Rich Don't Work for Money

• Chapter 2: Why Teach Financial Literacy?

• Chapter 3: Mind Your Own Business

• Chapter 4: The History of Taxes and the Power of Corporations

• Chapter 5: The Rich Invent Money

• Chapter 6: Work to Learn – Don't Work for Money

• Chapter 7: Overcoming Obstacles

• Chapter 8: Getting Started

Let’s look into each one of them

The Rich Don't Work for Money

Kiyosaki explains that his poor dad was a highly educated man who worked hard and earned a good living. However, he was always struggling with money. He was constantly working to pay the bills and he never had any money left over to invest.

Kiyosaki's rich dad, on the other hand, was an eighth-grade dropout who became one of the richest men in Hawaii. He didn't have a lot of formal education, but he was very financially intelligent. He knew how to make his money work for him and he was always looking for new ways to invest his money.

He realized early on that his two dads had very different mindsets about money.

• His poor dad believed that you should get a good education, get a good job, and work hard for your money.

• His rich dad believed that you should make your money work for you and that you should focus on acquiring assets that generate income.

Doctor and Businessman

The doctor works hard for his money. He sees patients all day long and he gets paid for his time. The businessman, on the other hand, has built a business that generates income for him, even when he is not working. He has made his money work for him.

Here doctor's income is related to the time he spends treating patients, whereas a businessman earns even when he is sleeping.

The traditional school system does not teach people about money. This is why so many people struggle with their finances, even if they have a good education and a good job.

Why Teach Financial Literacy?

Kiyosaki begins by telling the story of a young man who graduates from college with a degree in engineering. He gets a good job at a prestigious company and starts earning a high salary. However, he quickly realizes that he is living paycheck to paycheck. He is spending more money than he is earning and he is going into debt.

The young man's problem is that he is not financially literate. He doesn't know how to manage his money effectively. He doesn't know how to budget, invest, or avoid debt.

Financial education is just as important as math and science education. Everyone should learn about money so that they can make informed financial decisions.

Parents should start teaching their children about money at a young age and Schools should offer financial literacy courses.

Here are some of the key points:

• Financial literacy is essential for achieving financial freedom.

• The traditional school system does not teach people about money.

• Everyone should learn about money so that they can make informed financial decisions.

• Parents should start teaching their children about money at a young age.

• Schools should offer financial literacy courses.

Mind Your Own Business

Kiyosaki begins by telling the story of a man who works hard all his life to buy a house. He believes that the house is his asset, but he is wrong. The house is actually a liability because he has to pay a mortgage, property taxes, and insurance.

Assets VS Liabilities

Assets are things that put money in your pocket, while liabilities are things that take money out of your pocket.

The best way to achieve financial freedom is to focus on acquiring assets that generate income. This could include starting your own business, investing in real estate, or buying stocks.

Start small and focus on building one asset at a time. Also finding a mentor who can help you learn about business and investing, will ease the process.

Acquiring assets that generate income is one of the best ways to achieve financial freedom. However, it is important to note that building a business or investing in real estate is not easy. It takes time, effort, and money.

The History of Taxes and the Power of Corporations

Corporations are one of the best ways to protect your assets and reduce your taxes.

Taxes were originally created to pay for wars. However, taxes have become increasingly complex and burdensome over time.

Corporations

Corporations can be powerful tools for protecting your assets and reducing your taxes. They offer several advantages that make them attractive for individuals looking to achieve financial freedom.

Corporations can help you to:

• Protect your assets from lawsuits

  • By establishing a separate legal entity, your personal assets are shielded from potential lawsuits or liabilities incurred by the corporation.

  • This separation offers a level of security, ensuring that your personal wealth remains safeguarded.

• Reduce your taxes

  • They have the ability to deduct business expenses before determining taxable income, which can significantly reduce the tax burden.

  • Additionally, corporations may have access to different tax rates or exemptions that can further optimize tax planning strategies.

  • By leveraging these benefits, individuals can legally minimize their tax obligations and retain more of their income.

• Raise capital

  • By issuing stocks or seeking investors, corporations can secure funds to expand operations, invest in new ventures, or acquire assets.

  • This ability to attract external capital can fuel business growth and increase profitability, ultimately contributing to long-term financial success.

Kiyosaki's advice in Chapter 4 is worth considering. Corporations can be a powerful tool for protecting your assets and reducing your taxes. However, it is important to note that corporations are complex legal entities. It is important to consult with a qualified attorney before setting up a corporation.

The Rich Invent Money

The rich don't simply earn money, they create it. They do this by finding opportunities to make money that other people don't see.

Real estate developers who buy a piece of land and build a new shopping center. The developer is able to make money because he has created something new. He has created a shopping center that people would want to visit.

A stock investor who buys shares of a company that is about to release a new product. The investor is able to make money because he has identified a company that is about to grow in value.

You should start thinking about how they can invent money. Look out for opportunities to create something new or to identify something that is about to grow in value.

Think creatively and to look for opportunities to make money. However, it is important to note that inventing money is not easy. It takes time, effort, and risk.

Work to Learn – Don't Work for Money

The best way to achieve financial freedom is to develop valuable skills and knowledge that you can use to start your own business or invest your money wisely.

Kiyosaki begins by telling the story of a young man who graduates from college with a degree in accounting. He gets a job at a large accounting firm and starts earning a good salary. However, he quickly realizes that he is not happy in his job. He doesn't enjoy the work and he feels like he is just a cog in a machine.

Kiyosaki then goes on to explain the difference between working for money and working for knowledge. When you work for money, you are trading your time and labor for a paycheck. When you work for knowledge, you are investing in yourself and developing valuable skills that you can use to make money in the future.

Focus on working for knowledge, even if it means taking a lower-paying job or working for free. The investment in knowledge will pay off in the long run.

Investing in yourself and developing valuable skills is one of the best ways to achieve financial freedom. However, it is important to note that working to learn is not easy. It takes time, effort, and sacrifice.

Overcoming Obstacles

The five main obstacles to financial freedom:

• Fear: Fear of losing money, fear of failure, and fear of change.

• Cynicism: Believing that it is impossible to achieve financial freedom or that the rich are dishonest.

• Laziness: Not being willing to put in the work required to achieve financial freedom.

• Bad habits: Habits such as overspending and procrastination. Checkout Atomic Habits summary

• Arrogance: Believing that you are too smart or too good to fail.

How to overcome these obstacles:

• Face your fears head-on. Educate yourself about money and investing.

• Be optimistic. Believe that it is possible to achieve financial freedom and that you are capable of achieving your goals.

• Be willing to work hard. There is no get-rich-quick scheme. Financial freedom takes time and effort.

• Develop good habits. Budget your money wisely and invest regularly.

• Be humble. There is always more to learn.

Never give up on their dreams of financial freedom. Anyone can achieve financial freedom if they are willing to work hard and overcome the obstacles in their path.

Getting Started

Here is a summary of the 10 steps:

1. Choose to be rich.

   • The first step is to decide that you want to be rich.

   • Make it a priority in your life.

2. Financial education.

   • Learn about money and investing.

   • The more you know, the better equipped you will be to make sound financial decisions.

3. Start small.

   • Don't wait until you have a lot of money to start investing.

   • Even a small investment can grow over time.

4. Pay yourself first.

   • When you get paid, take a portion of your paycheck and put it into your investments.

   • This is the most important step in building wealth.

5. Invest in assets.

   • Assets are things that put money in your pocket, such as real estate, stocks, and businesses.

   • Liabilities are things that take money out of your pocket, such as debt. Focus on acquiring assets and reducing your liabilities.

6. Work to learn, don't work for money.

   • Choose a job that will teach you valuable skills and knowledge that you can use to start your own business or invest your money wisely.

7. Overcome your obstacles.

   • Everyone faces obstacles on the road to financial freedom.

   • Identify your obstacles and develop a plan to overcome them.

8. Get professional help.

   • If you need help managing your finances or investing your money, consult with a qualified financial advisor.

9. Persevere.

   • Achieving financial freedom takes time and effort.

   • Don't give up on your dreams.

10. Give back.

    • Once you have achieved financial freedom, give back to others by helping them to achieve their own financial goals.

Kiyosaki's 10-step plan is a good starting point for anyone who is interested in achieving financial freedom.

It is important to note that there is no one-size-fits-all approach to financial planning. The best approach for you will depend on your individual circumstances and goals.

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