Rich Dad Poor Dad by Robert Kiyosaki

Last book I read was Rich Dad Poor Dad by Robert Kiyosaki. It tells the story of Kiyosaki’s two dads: his biological father, the “poor dad”, and the father of his best friend, the “rich dad”. The book contrasts their financial philosophies and approaches to money, and lays out the lessons Kiyosaki learned from both. The “poor dad” emphasizes traditional education and job security while the “rich dad’s” teachings focus on financial education, investing, and entrepreneurship.

Reading this book made me recognize my own “poor dad” mindset education and how it shaped my financial decisions in my early years of adulthood. My own family taught me to work hard, save money, and avoid risks. These are valuable lessons, but as the book stated they don’t necessarily lead to financial independence or wealth building. About 5 years ago, I started to get more interested in financial education and investing. Reading books like this one was part of that journey. Here are some of the insights I found most valuable.

#Lesson 1: The Rich Don’t Work for Money

The first lesson from the book is that the rich don’t work for money. Instead of solely relying on a paycheck, they focus on building assets that generate income. Kiyosaki’s point is that financial education, understanding how money works, lets you make it work for you rather than working for it.

#Lesson 2: The Importance of Financial Education

Traditional education does not teach people how to manage money, invest, or create wealth. It’s not how much money you make. It’s how much money you keep. Understanding the difference between assets and liabilities matters, and the goal is to acquire assets that generate income.

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

Typically rich people acquire assets and the poor and middle class acquire liabilities that they think are assets. The rich buy assets that put money in their pockets, like stocks, bonds, rental properties, and businesses.

A positive cash flow matters: your assets (plus income) need to generate more money than your liabilities (plus expenses) cost you. Acquire assets that generate passive income.

Whether a house is an asset or a liability is debatable. Basically a house is an asset if it generates income or saves you money, and a liability if it costs you money without providing any financial benefit.

#Lesson 3: Mind Your Own Business

The rich focus on their assets while everyone else focuses on their income statements. Financial struggle is often the result of people working all their lives for someone else, without paying attention to their own business and financial growth.

The book encourages readers to invest in their own businesses and assets, rather than solely relying on employment income. If you are not tailored to be an entrepreneur and have a business, you can still focus on building your own assets and investments, such as stocks, real estate, or other income-generating ventures.

#Lesson 4: The History of Taxes and the Power of Corporations

The rich use corporations to protect and grow their wealth. Corporations offer tax advantages and legal protections that individuals do not have. You can use anonymous societies and corporations to minimize tax liabilities and protect personal assets from lawsuits or creditors. By declaring expenses as business expenses, the rich can reduce their taxable income and increase their cash flow.

If you work for money, you give the power to your employer. If money works for you, you keep the power and control it. That gives you some peace of mind and freedom to make your own decisions and take calculated risks.

Financial knowledge, also known as financial IQ, plays a big part in building wealth and achieving financial independence. Several components contribute to financial IQ.

• Accounting, the logical side, means being able to read financial statements, track income and expenses, and manage cash flow.
• Investing, the creative side, means knowing how to put money into stocks, bonds, real estate, or businesses, and analyzing opportunities before taking calculated risks.

This financial knowledge sometimes makes the cash flow of the rich more efficient.

• Rich: Earn -> Spend -> Pay Taxes
• Middle class and poor: Earn -> Pay Taxes -> Spend

#Lesson 5: The Rich Invent Money

The rich are not afraid to take calculated risks and think outside the box. They look for opportunities to create value and generate income, rather than waiting for opportunities to come to them. They are willing to invest in themselves and their ideas, and they understand that failure is a part of the learning process.

Sometimes people are afraid to take risks or invest in themselves because they fear failure or lack the necessary financial knowledge. They think of it like gambling, where the outcome is uncertain and the risk of loss is high. However, with financial education and careful planning, investing and taking calculated risks can be much more predictable and manageable.

Great opportunities are not seen with your eyes. They are seen with your mind. Opportunities are everywhere, but you need the right mindset and knowledge to recognize and seize them. Try to see opportunities where others see obstacles.

#Lesson 6: Work to Learn, Don’t Work for Money

The idea is to acquire diverse skills and knowledge by working in different roles and industries, which makes you more adaptable and resourceful, and better at spotting opportunities in different contexts. Focus on personal growth and skill development rather than solely pursuing monetary rewards of your job.

#Overcoming Obstacles

Fear, cynicism, laziness, bad habits, and arrogance are common obstacles that can prevent achieving financial independence.

• Fear: Recognize it, understand it, and take action despite it. A failure is a learning opportunity.
• Cynicism: Stay open-minded and seek opportunities even when others doubt and see problems.
• Laziness: Cultivate discipline and a strong work ethic. “I can’t afford it” shuts down your brain. “How can I afford it?” opens up possibilities and dreams.
• Bad habits: Identify and replace them with productive behaviors. When you have 1€ it’s you who decides how to use it.
• Arrogance: Stay humble and continuously seek knowledge and improvement. Start educating yourself by finding an expert in the field or a book on the subject.

#Getting Started

There is gold everywhere. Most people are not trained to see it. Here are some steps to get started.

1. Find a reason. A financial goal, a personal ambition, or a desire to create value.
2. The power of choice. You can make decisions that shape your financial future.
3. Choose friends wisely. Surround yourself with people who inspire, challenge, and support you.
4. Learn quickly. Keep acquiring skills so you can adapt and seize opportunities as they arise.
5. Pay yourself first. Save and invest a portion of your income before spending on anything else.
6. Pay your brokers well. Compensate those who give you good financial advice.
7. Give for nothing. Contribute your time, knowledge, or resources without expecting returns. It builds goodwill and relationships.
8. Use assets to buy luxuries. Fund your luxuries with income-generating assets, not your cash flow.
9. Choose heroes wisely. Look up to people whose values and achievements you admire, and learn from them.
10. Teach others. Sharing what you know helps others grow and reinforces your own understanding.

#Here are some To Dos

Some actionable steps to implement the lessons from the book include.

• Stop doing what you’re doing. Evaluate your actions and habits against your financial and personal goals.
• Look for new ideas. Read and explore new resources to find better approaches to financial success.
• Find someone who has done what you want to do. Learn from their experience and seek mentorship.
• Take classes, read, and attend seminars. Keep learning to grow your knowledge and skills.
• Make lots of offers. Persistence and volume increase your chances of success.
• Shop for bargains in all markets. Look for ways to save money and maximize value.
• Look in the right places. Focus your efforts where the potential for growth is greatest.
• Look for people who want to buy first. Understand the needs of your customers before building products or services.
• Think big. Team up with others to leverage collective resources and increase your odds of success.
• Learn from history. Study past successes and failures, and apply those lessons to your own decisions.
• Action always beats inaction. Take initiative and make progress rather than waiting for perfect conditions.

#Conclusion

The book tends to devalue traditional education and employment, but I think they can be valuable tools if used wisely. What best suits for me now is to balance traditional education and employment with financial education and asset-building strategies. It’s a less risky approach than solely relying on entrepreneurship and investing. But perhaps in the future, I will take more risks.

I found the book is a bit repetitive at times. Nevertheless, the lessons are valuable and can be life-changing if applied consistently. It’s an ok read, but I was expecting more deep and disruptive insights.