RICH DAD POOR DAD is a all time number one personal finance book, more than 50 million copies have been sold. In this book, Robert Kiyosaki illustrates the mindsets and beliefs that make rich, rich and poor, poor by comparing the advice of his real dad with the father of the author's best friend.
Robert's biological father was very brilliant and highly educated. Finished his four year undergraduate degree in less that two years, then obtained Masters and PhD at two prestigious universities and reached number one position in the state of Hawaii's educational system. But at the end, he left debts to be paid upon his death, while Robert's mentor - who never ever finished eighth grade - become the richest man in state, leaving 10's of millions to his family and charity.
Robert's both father strongly believed in education but their mindsets are different. This book all about mindset. Poor dad was poor, and rich dad was rich, because of their thoughts about money and the actions to which those thoughts led.
Robert's compares both father's advice and finally accept his rich dad's advice and achieve financial freedom at the age of the 47.
Robert's rich dad teach him 7 key lessons -
RICH DON'T WORK FOR MONEY:
Robert illustrated core difference of mindset of poor and middle class - Study hard in the schools, get good grades, then get a safe job with excellent benefits at a big company. The course of study to be rich is very different, and most people never take the time to learn it.
The poor and the middle class work for money. The rich have money work for them.
The poor and the middle class work for money. The rich have money work for them.
Most people get stuck in endless cycle of fear and greed. The fear of being without money forces them to work for it, and when they get the paycheck, greed makes them spend what they work for. They work hard to get paid more, and spend on liabilities and increase debts. You will get much more security by investing your time to create assets that generates money rather than only getting paid for your hourly labor.
Author is very sympathetic to them who say "I'm not interested in money," or "money isn't everything.". If that's how you feel, then why are you working eight hours a day, five days a week for it?
WHY TEACH FINANCIAL LITERACY?:
Financial literacy is something that is not taught in the schools or colleges, not even financial classes. Actually financial literacy is very simple. There is only one rule - know the difference between an asset and a liability and buy assets.
It does not matter how much you earn, How much you save it is more important.
It does not matter how much you earn, How much you save it is more important.
The poor and middle class do not become rich because they buy liabilities that they think are assets. But difference between Assets and Liabilities are very simple -
ASSETS - Assets are something which puts money in your pocket. Like Business, real estate, paper asset (stock, bond etc ) etc.
LIABILITIES - Liabilities are something which takes money from your pocket. Like Car, bike, phone etc.
MIND YOUR OWN BUSINESS:
The poor and middle class spend most of their time and energy working for other people, their company as a paycheck, the government as a taxes, and the bank as their mortgage and other loans. According to the data, one tragic fact is that if you calculate the amount paid for all types of taxes, the average Americans work five or six months out of year just to pay the government.
The rich focus on their asset columns while everyone else focuses on their income statements.
The rich focus on their asset columns while everyone else focuses on their income statements.
This is most important to know the difference between your profession and business. At the school we learn how to work for somebody else for the rest of our lives.
Rich people focus on building their assets. Author Robert Kiyosaki recommends you to keep your job and build your assets, keep your expenses low, reduce liabilities and buy assets.
THE HISTORY OF TAXES AND THE POWER OF CORPORATION:
Individual earn money, pay taxes on that money, and live with what's left. The corporation, on the other hand, earn money, spends everything it can, and is taxed on anything that's left.
My rich dad just played the game smart, and he did it through corporations— the biggest secret of the rich.
My rich dad just played the game smart, and he did it through corporations— the biggest secret of the rich.
Individuals may not be aware of how much they are being manipulated; they work from January to mid May to enrich the government by paying taxes on their income. In the meantime, the rich are hardly taxed. Rich possess the knowledge and savoir fair to use the power of corporation to protect and enhance their assets. This is because lack of financial literacy.
THE RICH INVENT MONEY:
Three hundred years ago, land was wealth. With the Industrial Revolution, wealth was owned by industrialist. Today, wealth is information.
Often in the real world, it’s not the smart who get ahead, but the bold.
Often in the real world, it’s not the smart who get ahead, but the bold.
People complain that they don't have enough money to take advantage of the deals they see. Even more often, they have opportunities that they can't see. Most people know only one solution - work hard, save, and borrow. Rich know that their mind is their most valuable asset.
To do this, they develop different kind of skills like -
- How to find an opportunity that everyone else has missed.
- How to raise money.
- How to organize smart people. Etc.
You will have to take risks but if you are informed and understand an Investment, it’s not as risky as it could be to someone who is just rolling the dice and praying.
DON'T WORK FOR MONEY, MONEY WORK FOR YOU:
Poor and middle class work for money. So, they work for employer, government, bank, etc. whereas rich do not work for money. They own or build business and leverages employees that create money and wealth for them. Because poor and middle class people's main focus, to get safe and secure job but rich people's main focus to achieve financial freedom.
Job security meant everything to my educated dad. Learning meant everything to my rich dad.
Job security meant everything to my educated dad. Learning meant everything to my rich dad.
The author recommended us, aim to learn a little about lot instead of seeking specialization, because specialization for employment, not for being rich. You be sure to develop the skills of communication, sales, and marketing, as those skills combine well with other skills, and are often necessary to create wealth.
The author, Robert Kiyosaki, list down five reasons, why even financial literate people may not develop their Asset column -
- Fear - The biggest cause for man's failure to become rich is fear of losing money. Instead of fearing losing money, rich people learn how to limit their losses, and turn those losses into opportunity.
- Cynicism - Cynicism comes from unchecked doubt and fear, and it is expensive. It can come from within or for the outside. A cynic will always criticism instead of analyzing.
- Laziness - Usually, the laziest people are the one who are busy. People stay busy in order to avoid problems they don't to face, or to avoid the work necessary to develop their ability to become rich - Laziness by staying busy. Rich people have a desire that overcome their laziness.
- Bad Habits - Our lives are more a reflection of our habits than of our education. As an overriding rule, the author insists that you "Pay yourself first." Take care of yourself first - Physically, mentally, and financially - instead of first paying your boss, tax collector, or landlord.
- Arrogance - The author defines arrogance as ego + ignorance. The solution is quite simple: education, specifically financial education.
In short, rich invest their time and money to learn because learning will help them make more money. The rich work very hard but they work in a different way than the poor do. This is more important to develop financial IQ by gaining knowledge of accounting, investing, understanding the market and law.
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