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Rich Dad Poor Dad

Updated: Feb 28, 2022

This was an influential finance book as it shifted my mindset in terms of working for money, instead of having money work for you which sparked my entrepreneurial spirit.

 

About the Author

Robert Kiyosaki graduated from college in New York and started his career as an employee for Standard Oil's tanker. He left after 6 months and went on to serve in the Marine Corps as a helicopter gunship pilot during the Vietnam Warm in 1972. In 1974, Robert left the Marine Corps and started working as a salesman in Xerox Corporation. He went on to become an entrepreneur, investor, motivational speaker and author of what many consider to be the #1 personal finance book of all time.



The Premise of the Book

How to use money as a tool for wealth development.


The Book in a Nutshell

  • The book is about Robert's upbringing by two dads - his biological father (poor dad) and his best friend's dad (rich dad). He observed the contrast between the ways in which each dad shaped his ideas about money and finance.

  • To be rich you don't need a high income.

  • Poor People work for money vs Rich People make money work for them.


Key Ideas

  1. Escaping the "Rat Race"

If we want financial independence, we can't subscribe to the model which says go to school, get good grades to get a decent job. Schools teach people to work for money and not how to make money work for them. Students leave school without a financial education which makes managing money difficult. This results in getting trapped on the hamster wheel and spending your life chasing paychecks that barely cover our expenses.


2. Fortunate Favours the Brave

The fear of being different or shunned by society inhibits the financial decision-making process. Fear is what keeps most people tied to a job, but to acquire financial independence and break away from the pact we need to be willing to take chances and be different.


3. The Rich don't Work for Money

The emphasis here is on money. It doesn't mean the rich don't work for money. It means the rich learn how to put money to work for them.


4. Mind Our Own Business

Don't confuse our business with your profession. Often a profession will earn us money while we manage or work for other people's businesses. For most people, their profession is their income. For rich people, their assets are their income. We mind our own business by focusing on our asset column.


5. Becoming Financially Independent

The only way to become financially independent is to accumulate income-generating assets which can pay for our expenses.


6. Work to Acquire Skills (Learn) Not for Money (Paycheck)

Poor dad was very educated but worked for money because job security was everything to him. Rich dad worked to learn which was the foundation of his wealth.


My Favourite Quotes

“The poor and the middle-class work for money. The rich have money work for them”
“You must know the difference between an asset and a liability, and buy assets - An asset puts money in your pocket. A liability takes money out of your pocket”
“The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant”
“There is a difference between being poor and being broke. Broke is temporary. Poor is eternal”
“In school we learn that mistakes are bad, and we are punished for making them. Yet, if you look at the way humans are designed to learn, we learn by making mistakes. We learn to walk by falling down. If we never fell down, we would never walk”
“The primary reason the majority of the poor and middle class are fiscally conservative is that they have no financial foundation. They have to cling to their jobs and play it safe. They can’t afford to take risks”
“Seek work for what they will learn, more than what they will earn. Look down the road at what skills they want to acquire before choosing a specific profession and before getting trapped in the Rat Race”

Actionable Takeaways

  1. Have Clarity Over Why We Want To Be Financially Independent

This will serve as a great source of motivation during difficult times.


2. Buy Luxuries Last, Not First

Before buying what we want, generate enough cash flow from our assets to cover these expenses.


3. Order Our Finances

Keep our expenses low and reduce your liabilities.


4. Create a Corporation to Protect Assets and Reduce Expenses

An employee earns, gets taxed and then spends what is left vs A corporation earns, spends everything it can and then gets taxed on what is left.


5. Invest

Spend time learning about how to invest.


6. Reinvest

Reinvest excess cash flow generated by assets into other assets.


7. Build a Financial Toolkit

We become what we learn so be selective when choosing materials and teachers.


8. Welcome Mistakes

Failures inspire winners and defeat losers.


9. Control Our Emotions

Don't let the general public or fear dictate our actions. A financial crash is both a crisis and an opportunity depending on how you look at it.


10. Don't Be the Smartest Person in the Room

Surround yourself with smarter people and learn from them.


11. We have 2 Ears and 1 Mouth

Listen more than we speak so we can absorb information and new ideas.


Impact Statement

“Workers work hard enough to not be fired, and owners pay just enough so that workers won't quit”


 

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