Rich Dad Poor Dad Book Summary
If you were looking for the Rich Dad Poor Dad book summary, then this article might be what you’re looking for.
Robert Kiyosaki’s 1997 bestseller, Rich Dad Poor Dad, is a book that teaches ways of gaining financial self-reliance.
The advice is presented in the form of conflicting ideas from the author’s two mentors:
- the “Poor Dad” that represents traditional ways of managing money and
- the “Rich Dad” that encourages using one’s brain to come up with creative ways to grow one’s wealth.
There are ideas that, at first glance, seem outrageous and fantastical.
Robert has also put forward some non-sequiturs and a few blanket statements. On deeper analysis however, an astute guide to financial independence emerges.
Rich Dad, Poor Dad: Book Summary in a Few Points
Rich Dad, Poor Dad is a 300-page book that uses made-up and real examples to make its points.
Here is a distillation of the book, a summary of the key takeaways one might consider in order to change one’s mindset about money.
Your Greatest Asset In Life Is Your Brain
Development of the brain allowed the physically weak Homo Sapiens to take over the entire world. Even now — especially now — it is the most powerful tool in our arsenal.
According to Robert, having a sharp mind is the only thing someone needs to become wealthy.
Robert believes that one has to work hard to get rich. He goes on to argue that those who don’t use their brains can never get rich. The poor tend to be lazy.
They don’t think. Given a situation, the poor are likely to think, “I can’t afford it”, and leave it at that.
Making this generic, defeatist statement absolves them of responsibility in the short term. It also means that they never progress.
Those who really want to put in work will instead think, “How can I afford it?”.
This, according to Robert, is what sets the rich apart from the poor.
The rich ask questions of themselves and spend effort deriving an answer. This is what allows them to be successful.
Money is a side effect of this mindset.
Make Your Money Work for You, Not the Other Way Around
The traditional thought-process of managing money is to work hard at a job, get some benefits and a few bonuses, then spend it all on a luxury.
With increased earnings, most people tend to increase their expenditure.
The dopamine rush that tends to follow this practice works in the short term.
It keeps the employee engaged and motivated enough to keep working at the current level of productivity.
What it doesn’t do is allow the employee to grow their wealth. The employee is working for money.
Things like this happen because people generally let two emotions drive their lives — fear and greed. In the fear of missing out on life, we tend to give in to our greed. We don’t think rationally.
This drains our money and nothing is left behind to invest in assets. As it turns out, classical education makes it possible (if not easy) to get rich.
But it doesn’t actually teach people to stay rich.
The rich do things differently. They make investments with their salary and bonus.
As their assets grow, they reward themselves from the profits. In this manner, it is the money works for them.
Invest in Financial Education
The classical school system has never focused on financial education.
In Rich Dad Poor Dad, Robert has explained this complex topic through simple diagrams.
His rule of thumb is to use his income from his job to build his asset column, and use the returns from said assets to boost his earnings.
Expenses should be kept low and liabilities at the bare minimum.
Without financial education, it is difficult to understand the difference between assets and liabilities. Simply put,
An asset is something that puts money in my pocket. A liability takes money out of my pocket.
A house is generally said to be one’s greatest asset.
However, the said house will come with hidden expenses like a mortgage and maintenance costs. Seen in this way, a house is actually a liability disguised as an asset.
Traditional education makes people work for others — first for their employer, then for the government (through taxes), and finally for the bank (through mortgages).
Mind Your Own Business
This brings us to the question: “How exactly does one acquire an income-generating asset?”
Robert’s answer was to build a business. He enjoyed the concept of real estate, and began acquiring properties.
He also enjoyed investing in small-cap companies. And thus, over many years, trading real estate and small-cap stocks, was an empire forged.
Robert encourages his readers to do the same — use their brains to come up with ways to turn their passion into a business.
A personal business wrapped around one’s assets allows the person to utilize the power of the corporation.
One can control vast resources though the corporation while actually owning nothing. This allows loopholes in tax laws to be exploited.
The corporation also protects the owner from lawsuits.
In his real-estate business, Robert would acquire a cheap property and keep trading up in value; he only had to pay taxes when he liquidated something. He recommends the book “Inc. and Grow Rich” to learn more about the power of corporations.
Work and Learn
It is of vital importance to never stop learning. This is the only way of staying on top of our ever-changing world.
Rich Dad advised Robert to learn a little about a lot of things. His diverse knowledge-base is what allowed Robert to work on so many projects and businesses.
The most powerful skill one can develop is the ability to sell. It’s applicable in all walks of life. For example, a good author with poor salesmanship will struggle to publish their books.
An average one with a good pitch, on the other hand, might find quick success. The key to being a good salesperson is communication skills.
The rich focus on diversification — be it in assets or in skills. They groom their children and apprentices to be able to handle all aspects of the particular business.
Rich dad did the same with Robert. It is important to learn how to manage three things — cashflow, personnel and business processes. Again, a good manager is the one with good communication skills, the one that can delegate properly.
Robert Kiyosaki’s Ten-Step Formula to Getting Rich
Our Rich Dad Poor Dad Book Summary couldn’t be complete without Robert Kiyosaki’s simple ten-step approach to build wealth. In short, here’s his 10-step formula.
1. Find a good reason for you personally
Starting business, stock trading etc. are all risky endeavors.
You are pretty much guaranteed to lose money at some point. It is of vital importance to have a strong personal belief system that will provide you with internal motivation to weather though times.
It’s not nearly enough to just say “I want to be rich”.
You need a because to go with that. “I want to be rich so I can buy a ticket to Mars someday” or “I want to be rich so I can give my child the lifestyle I could only dream of earlier” or “I want to be rich so I can watch the sun rise over the Pyramids” are all worthy goals.
2. Choose to work towards that reason
It is easier to spend money on short term comforts than to set it aside for investing. You have to consciously make efforts to towards achieving your goals.
“I am going to start stock trading and get rich” is a wish. “I have started taking a course on stock trading and set aside a starter amount” is a step towards making your wish come true.
3. Make good friends, learn from them
Humans are social creatures. Having strong interpersonal connections generally makes for a more fulfilling life.
A secondary benefit is that you can learn from each person you have associated yourself with. E.g.: you can learn the art of creating content and growing a community from your influencer friend. It’s also important not copy bad habits from your friend. This is the power of association.
4. Master one formula, then learn another
There are many uncertainties in life and in the market. It’s important to diversify one’s skills if one is to survive and prosper.
You can start with trading stocks of small-cap companies. Once you have mastered this and are making steady monthly income, you can look at real estate.
Then, you might want to go for cryptocurrencies.
5. Pay yourself first, then bills and taxes
This is a direct lesson from Rich Dad. His idea is that people must focus on themselves first. He would always buy whatever he needed from his monthly salary.
Only then would he worry about his bills and taxes.
This meant that he had to find creative ways of expanding his resources each month to clear his dues. It helped him develop the self-discipline required to grow his wealth.
6. Find a good financial advisor, pay them well
It never hurts to take professional advice. Good advice may be costly, but it’s always worth it.
7. Always get the return on your investment
Once your reliable broker recommends a stock, buy into it. When the value starts rising, recover your initial investment. Then you can invest it somewhere else.
That way, your money will be able to work on another asset and you don’t have to worry about market fluctuations. Of course, only play with the money you can afford to lose.
8. Use your assets to pay for your luxuries, not your income
This seems counterintuitive, so let’s go back to our stock trading example.
Suppose you job awards you a bonus for good performance. That is an income, money you made by actively working. If you want to buy a new phone, the quickest way to do that would be to spend your bonus.
The smarter way would be to make and investment — say crypto (because it’s fast growing). Once you money starts growing, recover only the amount needed for the phone.
This way, you have made your money work for you.
9. Look up to your heroes
It’s important to have an idol, someone you want to be like. Kids admire Superman. And responsible adults can choose to admire successful investors and entrepreneurs.
Myths and legends have the power to inspire people. Wanting to emulate someone means you will be willing to pick up their good habits. This will provide you with some intrinsic moral support on your quest to generate wealth.
10. Give, and you shall receive
This is what Robert did in his life. He gave seminars, wrote books and invented games — all to teach financial literacy. All this has made him millions in turn.
Rich Dad, Poor Dad Summary – Conclusion
With this ten-step plan, our Rich Dad Poor Dad book summary comes to its conclusion.
I found it to be an okay reading experience. The writing is easy to understand. The book manages to maintain its focus throughout, despite some repetition of thought.
It has a lot of rousing rhetoric and cheesy one-liners, but most of the ideas it presents are intriguing.
For me, the best advice was the very first one — to develop my brain and come up with ways to manoeuvre situations to my advantage.
“Minding your own business” is another awesome piece of advice. It’s something that access to cheap, high-speed internet has made possible for many people now.
The rise of the influencers and the content creators in the late 2010s is a testament to the fact — these are all people that have successfully turned their passions into income-generating assets.
Of course, ideas by themselves can’t do much by way of making money.
One has to be able to sell one’s ideas.
Good salesmanship combined with management skills are essential to build and maintain an empire.
This, I believe, is the ultimate tool the rich has at their disposal.
At the end of the day, financial education is something my school did not teach me.
And reading RDPD has left me with a lot of ideas to improve my life.
I’m sure it’ll be helpful for you too. Cheers to being wiser!
If you would like to download the Rich Dad Poor Dad summary pdf, you can find it here.
Photo by Kelly Sikkema on Unsplash
