Rich Dad, Poor Dad Summary and Review

Robert Kiyosaki’s Rich Dad, Poor Dad, is one of the most famous and best-selling personal finance books of all time. And for good reason.

This book is entertaining to read and will challenge the way you think about money and becoming rich.

The titular “rich dad” and “poor dad” were two powerful male role models from Robert’s childhood. The “rich dad” was actually his friend Mike’s dad, the “poor dad” was his own father. His father was well-educated and made good money and Robert learned a lot from him. But he didn’t have the right strategies for acquiring wealth.

Kiyosaki says he benefited from always getting another perspective. His rich dad was not well educated (he never finished middle school), but he became successful in business.

The idea is a powerful one. You can be smart and educated, but still not really “get” how the money game is played. If you want to build wealth, you need to think in ways that are most conducive to building wealth. You need a mentor like Robert Kiyosaki’s rich dad.

Ideas I Loved From the Book

Identity Determines Actions

Kiyosaki says that while he was growing up, he couldn’t yet tell that his rich dad was rich. It was only later that the financial differences between his rich dad and poor dad became clear. But there were always differences in attitude that he could pick up on. One was the simple fact that his rich dad thought of himself as being rich:

My rich dad, on the other hand, always referred to himself as rich. He would say things like, “I’m a rich man, and rich people don’t do this.” Even when he was flat broke after a major financial setback, he continued to refer to himself as a rich man. He would cover himself by saying, “There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”

I find that phrasing to be very interesting: “I’m a rich man, and rich people don’t do this.” The identity comes first, and then the identity drives action. This is a psychologically powerful concept. If you want to see yourself in a certain light, you’ll subconsciously make decisions that validate your beliefs.

Don’t Let Yourself Off the Hook

For example, one dad had a habit of saying, “I can’t afford it.” The other dad forbade those words to be used. He insisted I ask, “How can I afford it?” One is a statement, and the other is a question. One lets you off the hook, and the other forces you to think.

I love the notion of thinking creatively to get what you want. It could be figuring out how to earn more money. Maybe there are things you want you can borrow, or leverage credit card miles for. Don’t let yourself off the hook by assuming something is out of reach.

School is Designed to Create Employees, Not Employers

This is something his rich dad told him that he would remember whenever his teacher told him he had to get good grades to do well in the real world.

Unfortunately, success in school revolves around executing clearly defined tasks. This suits you fro employment, but it doesn’t prepare you for creating value in the marketplace through entrepreneurship. It’s the people with the courage to try something, not the ones that keep their head down and play it safe, that create jobs.

Don’t Let Fear Lead to Regret

To me, this might be the most haunting quote in the whole book:

Deep down you were terrified of taking risks. You really wanted to win, but the fear of losing was greater than the excitement of winning. Deep inside, you and only you will know you didn’t go for it. You chose to play it safe.

Actions Speak Louder Than Words

So many people say, “Oh, I’m not interested in money.” Yet they’ll work at a job for eight hours a day.

Money isn’t everything, but when you look at how willing people are to trade their most valuable resource (time) for it, it might as well be.

Acquire Assets, Not Liabilities

Kiyosaki doesn’t use the standard definitions of assets and liabilities. Usually we think of assets as “what you own” and liabilities as “what you owe.”

According to Kiyosaki:

An asset puts money in my pocket. A liability takes money out of my pocket.

He goes on to say:

Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.

In other words, a house and a car are two examples of things that would traditionally be classified as assets. The loans that pay for them are liabilities, but the items themselves are assets. However, Kiyosaki would regard even fully paid cars and houses to be liabilities because they take money out of your pocket.

These are the liabilities that the poor and middle class buy thinking they are assets. Kiyosaki says you must know the difference between assets and liabilities, and buy the former, not the latter.

How Do You Define Wealth?

Many people have an arbitrary definition of wealth such as becoming a millionaire. Kiyosaki has a mich better way of thinking about it:

Wealth is a person’s ability to survive so many number of days forward— or, if I stopped working today, how long could I survive?

The ultimate level of wealth then, would be if you could go indefinitely without needing to work to earn more income. This is thinking behind the post I did on the 4% rule. The rule itself is an inexact rule of thumb, but the notion of figuring out how much it would take to never have to work again is profound

Luxuries Come Last

Personal finance is all about slashing your costs, living a spartan minimalist life, and never having any fun, right? No, but you have to be careful that you don’t end up as broke as everyone else whose trying to act rich.

As your cash flow grows, you can indulge in some luxuries. An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first.

Losing = Learning (If You’re Smart)

Kiyosaki says that you can win or you can learn. Really either outcome is a win for those bold enough to try something.

The important thing to remember is that trying and failing is way better than failing to try.

Winners are not afraid of losing. But losers are.

Work to Learn, Not Earn

Kiyosaki fervently believes that your most powerful asset is your mind. He says that physical exercise is how you improve your health, and mental exercise is how you improve your wealth.

For this reason, he gives the advice to join an MLM (multilevel marketing) company. I have plenty of general objections to MLM’s, but Kiyosaki points out that many of them have training programs to help you overcome your fear of failure and to teach you how to sell.

In other words, if you recognize that representing an MLM won’t make you rich, but that it can give you an education, you can increase the value of your most important asset: Your mind.

Take the Hard Path to the Easy Road

Too often today, we focus on borrowing money to get the things we want instead of focusing on creating money. One is easier in the short term, but harder in the long term. It’s a bad habit that we as individuals, and as a nation, have gotten into. Remember, the easy road often becomes hard, and the hard road often becomes easy.

I love the insight that people get into debt because it’s easier than making money. Almost all self-help boils down to getting you to make the tough choices to do the hard work now to make things easier later.

Give In Order to Get

If I could leave one single idea with you, it is that idea. Whenever you feel short or in need of something, give what you want first and it will come back in buckets. That is true for money, a smile, love, or friendship. I know it is often the last thing a person may want to do, but it has always worked for me. I trust that the principle of reciprocity is true, and I give what I want. I want money, so I give money, and it comes back in multiples. I want sales, so I help someone else sell something, and sales come to me. I want contacts, and I help someone else get contacts. Like magic, contacts come to me. I heard a saying years ago that went: “God does not need to receive, but humans need to give.”

My Favorite Story From the Book

This story actually appears in the appendix. It’s so concise that I can quote the whole thing here, but there are multiple lessons to be gleaned from it:

A neighbor bought a condominium for $100,000. I bought the identical condo next door for $50,000. He told me he’s waiting for the price to go up. I told him that profit is made when you buy, not when you sell. He shopped with a real estate broker who owns no property of her own. I shopped at the foreclosure auction. I paid $500 for a class on how to do this. My neighbor thought that the $500 for a real estate investment class was too expensive. He said he could not afford the money, or the time. So he waits for the price to go up.

Here are a few of the lessons:

  • Money in real estate is made when you buy, not when you sell
  • Take the time to look: deals are out there
  • Invest in yourself to get better at making money

Final Thoughts

Rich Dad, Poor Dad really does deserve to be a classic. You might not agree with anything that Robert Kiyosaki says, but the majority of ideas in this book are too good to ignore.

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