Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not
Introduction
Have you ever wondered why some people are rich and others are poor? Have you ever asked yourself what you can do to improve your financial situation and achieve your dreams? Have you ever felt frustrated by the lack of financial education in school and society?
If you answered yes to any of these questions, then you might want to read Rich Dad Poor Dad, a best-selling book by Robert Kiyosaki that has changed the lives of millions of people around the world. In this book, Kiyosaki shares his personal story of growing up with two dads: his biological father, who was highly educated but financially struggling, and his best friend's father, who was a high school dropout but a successful entrepreneur. He calls them his "poor dad" and his "rich dad", respectively.
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Kiyosaki learned valuable lessons from both of his dads, but he realized that they had very different views and attitudes towards money, work, and life. He decided to follow the advice of his rich dad, who taught him how to become financially literate, how to build wealth, and how to achieve financial freedom. He also realized that most people are stuck in the "rat race" of working hard for money, instead of making money work for them.
In this article, we will summarize the main lessons from Rich Dad Poor Dad that can help you change your mindset, increase your financial intelligence, and create your own destiny. We will also provide some quotes from the book that will inspire you to take action and pursue your goals.
Main Lessons from Rich Dad Poor Dad
Lesson 1: The Rich Don't Work for Money
The first lesson that Kiyosaki learned from his rich dad was that the rich don't work for money. They make money work for them. This means that they understand how money works, how to use it as a tool, and how to create multiple streams of income that generate cash flow without their active involvement.
The difference between assets and liabilities
One of the key concepts that Kiyosaki explains in his book is the difference between assets and liabilities. He defines an asset as something that puts money in your pocket, and a liability as something that takes money out of your pocket. For example, a rental property that produces positive cash flow is an asset, while a mortgage that requires monthly payments is a liability. A car that you use for personal transportation is also a liability, unless you use it for business purposes or rent it out to others.
Most people think that their home is their biggest asset, but Kiyosaki argues that it is actually their biggest liability. This is because a home costs money to maintain, repair, insure, and pay taxes on. Unless your home appreciates in value faster than your expenses, it is not generating any income for you.
The rich, on the other hand, focus on acquiring assets that produce passive income, such as stocks, bonds, businesses, royalties, and intellectual property. They use their income to buy more assets, creating a cycle of wealth accumulation. They also use debt strategically, borrowing money to invest in assets that generate higher returns than the interest they pay.
The power of passive income
Passive income is income that you earn without having to work for it. It is the opposite of active income, which is income that you earn by trading your time and energy for money. Examples of active income are salaries, wages, commissions, and tips.
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Passive income is the key to financial freedom, because it allows you to have more time and money to do what you love. It also gives you more security and stability, because you don't have to worry about losing your job or getting sick. You can also leverage your passive income to create more passive income, by reinvesting your profits or diversifying your portfolio.
Kiyosaki says that the rich don't work for money; they work for assets that generate passive income. They use their money to buy or create systems that make money for them, such as businesses, franchises, licenses, patents, or websites. They also hire people who are smarter than them to run their systems, so they don't have to be involved in the day-to-day operations.
The mindset of abundance
Another important lesson that Kiyosaki learned from his rich dad was the mindset of abundance. He says that most people have a scarcity mentality, which means that they believe that there is not enough money, opportunities, or resources for everyone. They think that money is hard to come by, and that they have to compete with others for it. They also fear losing money or missing out on opportunities.
The rich have an abundance mentality, which means that they believe that there is more than enough money, opportunities, and resources for everyone. They think that money is easy to make, and that they can cooperate with others for mutual benefit. They also embrace risk and uncertainty as part of the game of wealth creation.
Kiyosaki says that the mindset of abundance is essential for becoming rich, because it allows you to see possibilities instead of limitations. It also motivates you to take action and pursue your goals with confidence and optimism. He says that you can develop an abundance mentality by changing your thoughts, words, and actions from negative to positive.
Lesson 2: Why Teach Financial Literacy?
The second lesson that Kiyosaki learned from his rich dad was why teach financial literacy. He says that financial literacy is the ability to understand how money works and how to make it work for you. It involves knowing how to read and interpret financial statements, how to manage your cash flow, how to plan your taxes and investments, and how to protect your assets.
The difference between income statement and balance sheet
One of the basic concepts of financial literacy is the difference between income statement and balance sheet. An income statement shows how much money you earn (income) and how much money you spend (expenses) over a period of time. A balance sheet shows how much money you own (assets) and how much money you owe (liabilities) at a point in time.
Kiyosaki says that most people only focus on their income statement, and try to increase their income by working harder or getting a raise. However, this does not necessarily make them richer, because they also increase their expenses by buying more things or paying more taxes. He says that the rich focus on their balance sheet, and try to increase their assets by investing in income-generating assets. They also reduce their liabilities by paying off their debts or using them wisely. He says that the rich measure their wealth by their net worth, which is the difference between their assets and liabilities, not by their income.
The importance of cash flow
Another concept of financial literacy is the importance of cash flow. Cash flow is the amount of money that flows in and out of your pocket. It is different from income, which is the amount of money that you earn, and profit, which is the amount of money that you keep after paying your expenses.
Kiyosaki says that cash flow is the most important factor in determining your financial health, because it shows how well you manage your money and how much money you have available to invest or spend. He says that there are two types of cash flow: positive and negative. Positive cash flow means that you have more money coming in than going out, and negative cash flow means that you have more money going out than coming in.
Kiyosaki says that most people have negative cash flow, because they spend more than they earn, or they have high expenses that eat up their income. He says that the rich have positive cash flow, because they earn more than they spend, or they have low expenses that allow them to keep more of their income. He also says that the rich use their positive cash flow to buy more assets that generate more cash flow, creating a virtuous cycle of wealth creation.
The impact of taxes and inflation
A third concept of financial literacy is the impact of taxes and inflation. Taxes are the amount of money that you pay to the government from your income or profits. Inflation is the increase in the prices of goods and services over time, which reduces the purchasing power of your money.
Kiyosaki says that taxes and inflation are the two biggest enemies of the poor and middle class, because they erode their income and savings. He says that most people pay taxes on their income before they spend it, which means that they pay taxes on every dollar they earn. He also says that most people save money in low-interest accounts or bonds, which means that they lose money to inflation every year.
Kiyosaki says that the rich use taxes and inflation to their advantage, because they know how to minimize their tax liability and maximize their return on investment. He says that the rich pay taxes on their income after they spend it, which means that they pay taxes on only a fraction of what they earn. He also says that the rich invest money in high-return assets or businesses, which means that they make money faster than inflation.
Lesson 3: Mind Your Own Business
The third lesson that Kiyosaki learned from his rich dad was to mind his own business. He says that this means to focus on building your own assets and creating your own sources of income, rather than working for someone else's business or relying on someone else's income.
The difference between profession and business
One of the distinctions that Kiyosaki makes in his book is the difference between profession and business. He defines a profession as a specialized skill or knowledge that you use to provide a service or product to others. He defines a business as a system or organization that you own or control, that provides a service or product to others.
Kiyosaki says that most people are trained to become professionals, such as doctors, lawyers, engineers, teachers, or accountants. They spend years studying and working hard to acquire a degree or certification, hoping to get a good job with a high salary and benefits. However, he says that this does not guarantee financial success or security, because professionals are still employees who depend on their employers for their income and security.
Kiyosaki says that the rich are entrepreneurs who create businesses, such as restaurants, hotels, factories, stores, or franchises. They spend years learning and working hard to develop a system or brand, hoping to create a loyal customer base and a competitive edge. He says that this leads to financial success and security, because entrepreneurs are owners who control their own income and security. The benefits of entrepreneurship
Some of the benefits of entrepreneurship that Kiyosaki highlights in his book are: - You have more freedom and flexibility to choose your own hours, location, and projects. - You have more creativity and innovation to solve problems, create value, and make a difference. - You have more potential and opportunity to grow your income, wealth, and impact. - You have more satisfaction and fulfillment from pursuing your passion, vision, and purpose. Of course, entrepreneurship also comes with challenges and risks, such as: - You have more responsibility and accountability for your own decisions, actions, and results. - You have more uncertainty and volatility in your income, expenses, and cash flow. - You have more competition and pressure from the market, customers, and regulations. - You have more stress and frustration from dealing with problems, failures, and setbacks.
Kiyosaki says that the key to overcoming these challenges and risks is to develop your financial intelligence, which is the combination of financial knowledge, skills, experience, and attitude. He says that financial intelligence will help you to: - Make better financial decisions based on facts, logic, and analysis. - Manage your finances effectively based on planning, budgeting, and monitoring. - Leverage your resources efficiently based on borrowing, investing, and partnering. - Protect your assets wisely based on insurance, legal, and tax strategies.
The skills of financial intelligence
Some of the skills of financial intelligence that Kiyosaki recommends to learn are: - Accounting: the ability to read and understand financial statements, such as income statement, balance sheet, and cash flow statement. - Investing: the ability to allocate your money into different types of assets, such as stocks, bonds, real estate, commodities, or businesses. - Marketing: the ability to communicate the value of your product or service to your target market, such as customers, investors, or partners. - Law: the ability to understand the rules and regulations that affect your business or industry, such as contracts, licenses, or taxes.
Kiyosaki says that these skills are not taught in school or college, but they are essential for becoming rich. He says that you can learn these skills by reading books, taking courses, attending seminars, or finding mentors. He also says that you can practice these skills by starting your own business or investing in other businesses.
Lesson 4: The History of Taxes and the Power of Corporations
The fourth lesson that Kiyosaki learned from his rich dad was the history of taxes and the power of corporations. He says that this lesson explains how the rich use the system to their advantage, while the poor and middle class are exploited by the system.
The origin of taxes and how they affect the poor and middle class
Kiyosaki says that taxes were originally created to fund wars and public services. They were only imposed on the rich landowners who had the most to gain from the protection of the government. However, and how they use corporations to reduce their tax burden and protect their assets. The advantages of corporations and how they protect the rich
A corporation is a legal entity that is separate from its owners, shareholders, and managers. It has its own rights and obligations, such as the ability to enter into contracts, own property, sue and be sued, and pay taxes. A corporation can also issue shares of stock, which represent ownership interests in the company.
Kiyosaki says that corporations are the most powerful tools that the rich use to create wealth and avoid taxes. He says that corporations provide several advantages, such as: - Limited liability: The owners of a corporation are not personally liable for the debts or obligations of the company, unless they commit fraud or negligence. This means that they can protect their personal assets from creditors or lawsuits. - Tax benefits: The owners of a corporation can deduct many expenses from their taxable income, such as salaries, travel, entertainment, education, and health care. They can also defer or avoid taxes by reinvesting their profits in the company or distributing them as dividends to shareholders. - Asset protection: The owners of a corporation can use various strategies to shield their assets from taxes, creditors, or lawsuits, such as creating trusts, foundations, or offshore entities. They can also use different types of corporations for different purposes, such as C corporations, S corporations, LLCs, or LLPs.
Kiyosaki says that the rich use corporations as vehicles to accumulate and transfer wealth, while the poor and middle class pay taxes on their income and savings. He says that the rich understand the rules of the game and play by them, while the poor and middle class are ignorant of the game and are played by it.
The loopholes and strategies of tax planning
Kiyosaki says that tax planning is one of the most important skills of financial intelligence. He says that tax planning is the art of arranging your financial affairs in such a way that you minimize your tax liability legally and ethically. He says that tax planning is not tax evasion, which is the illegal and unethical avoidance of paying taxes.
Kiyosaki says that there are many loopholes and strategies that the rich use to reduce their taxes, such as: - Depreciation: The deduction of the cost of an asset over its useful life, such as a building, a car, or a machine. This reduces the taxable income of the owner of the asset. - Capital gains: The profit from selling an asset for more than its purchase price, such as a stock, a bond, or a property. This is taxed at a lower rate than ordinary income in most countries. - Tax credits: The reduction of the amount of tax owed by a certain amount, such as for investing in renewable energy, hiring employees, or donating to charity. This reduces the tax liability of the taxpayer. - Tax deferral: The postponement of paying taxes until a later date, such as by using retirement accounts, annuities, or life insurance. This allows the taxpayer to compound their money without paying taxes until they withdraw it.
Kiyosaki says that these loopholes and strategies are available to anyone who is willing to learn and apply them. He says that the rich hire professionals such as accountants, lawyers, and financial advisors to help them with their tax planning. He also says that the rich lobby the government to create more loopholes and benefits for themselves.
Lesson 5: The Rich Invent Money
The fifth lesson that Kiyosaki learned from his rich dad was that the rich invent money. He says that this means that the rich create money out of thin air by using their imagination, creativity, and knowledge to create value and opportunities that others don't see or don't act on. He says that this is the essence of being an entrepreneur and an investor.
The difference between being creative and being competitive
One of the distinctions that Kiyosaki makes in his book is the difference between being creative and being competitive. He says that most people are trained to be competitive, which means that they try to win by being better, faster, or cheaper than others. They follow the rules of the game and try to beat their opponents. However, he says that this leads to a zero-sum game, where one person's gain is another person's loss.
Kiyosaki says that the rich are creative, which means that they try to win by creating new value, new solutions, or new markets. They change the rules of the game or create their own game. He says that this leads to a positive-sum game, where everyone can benefit from the innovation and growth.
Kiyosaki says that being creative is more important than being competitive, because it allows you to invent money and create wealth. He says that you can develop your creativity by expanding your mind, learning new things, seeking new experiences, and challenging yourself.
The opportunities and risks of investing
Another aspect of inventing money is investing. Investing is the process of putting your money into something that you expect to generate a return in the future, such as a business, a property, or a financial instrument. Investing is one of the main ways that the rich create passive income and grow their wealth.
Kiyosaki says that investing involves both opportunities and risks. Opportunities are the potential rewards or benefits that you can gain from investing, such as income, appreciation, or tax advantages. Risks are the potential losses or drawbacks that you can face from investing, such as volatility, depreciation, or liability.
Kiyosaki says that the rich are not afraid of risks, but they know how to manage them. He says that the rich use four strategies to reduce their risks and increase their opportunities: - Education: The rich learn as much as they can about the investment before they invest. They study the market, the industry, the company, and the deal. They also keep themselves updated on the trends, changes, and news that affect their investment. - Analysis: The rich analyze the numbers and facts of the investment before they invest. They calculate the return on investment (ROI), the cash flow, the break-even point, and the exit strategy. They also compare different options and scenarios to find the best one. - Due diligence: The rich verify the information and assumptions of the investment before they invest. They check the background, reputation, and track record of the people involved in the deal. They also inspect the property, documents, and contracts to make sure they are accurate and legal. - Risk control: The rich control their risk exposure and limit their downside before they invest. They use various tools and techniques to protect their investment, such as diversification, hedging, insurance, or legal entities.
The types and levels of investors
Kiyosaki says that there are different types and levels of investors, depending on their knowledge, experience, and goals. He uses a quadrant model to illustrate this: - The E quadrant: These are employees who work for someone else's business or organization. They invest in safe and secure assets such as savings accounts, certificates of deposit, or bonds. They have low risk tolerance and low return expectations. They rely on their salary or pension for their income. - The S quadrant: These are self-employed professionals who work for their own business or practice. They invest in their own skills, knowledge, or reputation. They have moderate risk tolerance and moderate return expectations. They rely on their fees or commissions for their income. - The B quadrant: These are business owners who own or control a system or organization that works for them. They invest in other people's skills, knowledge, or reputation. They have high risk tolerance and high return expectations. They rely on their profits or dividends for their income. - The I quadrant: These are investors who own or control assets that generate passive income for them. They invest in businesses, properties, or financial instruments that they don't have to work for. They have very high risk tolerance and very high return expectations. They rely on their cash flow or capital gains for their income.
Kiyosaki says that the rich are mostly in the B and I quadrants, while the poor and middle class are mostly in the E and S quadrants. He says that the goal is to move from the left side of the quadrant to the right side, where you have more freedom, wealth, and power.
Lesson 6: Work to Learn, Don't Work for Money
The sixth and final lesson that Kiyosaki learned from his rich dad was to work to learn, not to work for money. He says that this means to use your work as a platform to acquire new skills, knowledge, and experience that will help you become richer and more successful.
The difference between job security and financial freedom
One of the contrasts that Kiyosaki makes in his book is the difference between job security and financial freedom. He says that most people seek job security, which means that they want to have a stable and predictable income from a reliable employer. They want to have benefits such as health insurance, retirement plan, and paid vacation. They want to have a career path that leads to promotions and raises.
Kiyosaki says that job security is an illusion, because it depends on factors that are beyond your control, such as the economy, the market, the industry, or the company. He says that job security can also limit your potential, because it makes you complacent, dependent, and fearful of change.
Kiyosaki says that the rich seek financial freedom, which means that they want to have enough passive income from their assets to cover their expenses and lifestyle. They want to have options such as choosing when, where, and how to work. They want to have a purpose that drives them to create value and make a difference.
Kiyosaki says that financial freedom is a reality, because it depends on factors that are within your control, such as your mindset, your actions, your results, or your network. He says that financial freedom can also expand your potential, because it makes you curious, independent, and adaptable to change. The value of lifelong learning and self-education
Another point that Kiyosaki emphasizes in his book is the value of lifelong learning and self-education. He says that most people stop learning after they finish school or college, thinking that they have enough knowledge and skills to succeed in life. They rely on their diplomas, certificates, or degrees to get them a job or a promotion. They also rely on their employers, teachers, or experts to tell them what to learn and how to learn.
Kiyosaki says that the rich never stop learning, because they know that the world is constantly changing and evolving. They take responsibility for their own education and development, seeking new information, ideas, and perspectives. They also choose their own mentors, coaches, or role models to guide them and inspire them.
Kiyosaki says that lifelong learning and self-education are essential for becoming rich, because they help you to: - Stay relevant and competitive in the market, by updating your knowledge and skills according to the trends, demands, and opportunities. - Discover and develop your talents and passions, by exploring your interests, strengths, and values. - Create and leverage your network, by connecting with like-minded people who can support you, challenge you, and collaborate with you.
The skills and knowledge that make you rich
Some of the skills and knowledge that Kiyosaki suggests to learn are: - Communication: The ability to express yourself clearly and persuasively, both verbally and in writing. This includes listening, speaking, reading, writing, presenting, negotiating, and influencing skills. - Sales: The ability to convince others to buy your product or service, or to join your cause or vision. This includes marketing, branding, advertising, prospecting, closing, and servicing skills. - Leadership: The ability to inspire and motivate others to follow your direction and achieve your goals. This includes visioning, planning, organizing, delegating, coaching, and empowering skills. - Personal development: The ability to improve yourself continuously in all aspects of your life. This includes goal setting, time management, stress management, problem solving, decision making, and emotional intelligence skills. Kiyosaki says that these skills and knowledge are not taught in school or college, but they are crucial for becoming rich. He says that you can learn these skills and knowledge by reading books, taking courses, attending seminars, or finding mentors. He also says that you can practice these skills and knowledge by working in different fields, industries, or roles.
Conclusion
In conclusion, Rich Dad Poor Dad is a book that teaches you how to become rich by changing your mindset, increasing your financial intelligence, and creating your own destiny. It is based on the personal story and lessons of Robert Kiyosaki, who learned from his two dads: his poor dad, who was a highly educated but financially struggling employee, and his rich dad, who was a high school dropout but a successful entrepreneur.
The main lessons from the book are: - The rich don't work for money; they make money work for them. - Why teach financial literacy? - Mind your own business. - The history of taxes and the power of corporations. - The rich invent money. - Work to learn, don't work for money.
By applying these lessons to your life, you can achieve financial freedom and live your dreams. You can also help others to do the same, by sharing your knowledge and experience with them. You can also contribute to the society and the world, by creating value and making a difference.
FAQs
What is the main message of Rich Dad Poor Dad?
The main message of Rich Dad Poor Dad is that you can become rich by changing your mindset, increasing your financial intelligence, and creating your own destiny.
Who is the author of Rich Dad Poor Dad?
The author of Rich Dad Poor Dad is Robert Kiyosaki, a best-selling author, entrepreneur, investor, and educator.
When was Rich Dad Poor Dad published?
Rich Dad Poor Dad was first published in 1997. It has since sold over 32 million copies worldwide and has been translated into 51 languages.
Is Rich Dad Poor Dad based on a true story?
Rich Dad Poor Dad is based on the personal story and lessons of Robert Kiyosaki, who learned from his two dads: his poor dad, who was his biological father and a highly educated but financially struggling employee, and his rich dad, who was his best friend's father and a high school dropout but a successful entrepreneur.
How can I learn more from Robert Kiyosaki?
You can learn more from Robert Kiyosaki by visiting his website ( where you can find his books, courses, podcasts, blogs, events, and other resources. You can also follow him on social media platforms such as Facebook ( Twitter ( Instagram ( YouTube ( or LinkedIn ( 44f88ac181