Rich Dad Poor Dad Summary: A Comprehensive Look on the Key Takeaways.
Have you ever wondered why some people seem to have the talent for making money while others struggle to meet their needs? If so, you are not alone. Understanding money and how to make it work for you is a common challenge for many people. That is where you can get help from this amazing book called “rich dad poor dad”. The book is written by Robert T. Kiyosaki.
It offers a comparison between two father figures in the life of author, i.e., Poor Dad which is father of Robert T. Kiyosaki and Rich Dad who is his friend’s father. The book explores different money-making approaches and mindsets of both persons and its impact on their lives.
Here we will explore summary of rich dad poor dad book and learn about the key secrets to financial success with this.
Summary of Rich Dad Poor Dad
Rich Dad, Poor Dad by Robert T. Kiyosaki is a very important book about how to manage money. It talks about two different ways of thinking about money.
The author shares important ideas about managing money by showing how his two dads thought about money. One dad worked hard at a job and thought that getting a good education and job security were the most important things. The other dad was a business owner who didn't think formal education was as important as learning about money.
He believed that the best way to become rich was to own a business and invest in things that make money without needing a lot of work.
The most important and groundbreaking idea in the book was Kiyosaki's explanation of assets and liabilities. He said that assets make you money, while liabilities cost you money. Some people believe that houses or cars are assets, but they're actually liabilities. The real assets are properties that you invest in or rent out to make money.
In general, the Rich Dad, Poor Dad book is about learning how to manage your money wisely, making smart financial choices to build wealth, and breaking free from financial struggles.
Key Lessons from Rich Dad Poor Dad
Here are the key lessons learnt from Rich Dad Poor Dad you must know:
1. The Rich Dad Do Not Work to Make Money
Many people misunderstand this chapter from its title and think it means that rich people don't work. However, it is the opposite in fact.
When you read the chapter title as “The Rich Don’t Work for Money,” what Kiyosaki is really saying is that “The Rich Don’t Work for Money.” This changes the meaning of the entire sentence just by putting the word money at the end.
The truth is that most rich people work very hard, but they approach it differently than other people. Rich people, and those who want to become rich, work and learn every day. They learn how to make money work for them.
As Rich Dad says, The middle-class and poor work for money. The rich people have money that work for them.
Kiyosaki also points out that having a regular job is just a temporary solution to the long-term challenge of creating financial freedom and wealth.
2. Importance of Teaching Financial Literacy
The main idea of the book is to understand the importance of financial literacy. It means understanding how money works is really important for doing well with money. The writer thinks that schools don't do a good job teaching this and should do better at teaching things like how to manage money and make wealth grow.
He talks about his two dads, one rich and one poor, and how they had different ideas about money. This shows why it's so important to learn about money.
His dad who didn't have a lot of money was educated and thought it was important to work for a salary. On the other hand, his other dad who had more money but less education knew a lot about how to handle money and thought it was better to invest and start a business to become financially secure.
So, while being well-educated is important, knowing how to handle money is just as crucial. It's a good idea to learn about money management, understanding risks, and other important things to help you handle your money wisely.
3. Focus Should be on Assets, Instead of Liabilities
The next chapter discusses the difference between assets and liabilities. It emphasizes that the key to financial success is not just how much money you make, but how much money you are able to retain.
Assets are things that hold value, generate income, or increase in value over time. They can easily be bought and sold in the market. Assets can either produce income, appreciate in value, or do both.
Liabilities, on the other hand, are expenses that take money out of your pocket. They incur costs and do not contribute to generating income or increasing in value.
When the book was first published in 1997, this distinction between assets and liabilities created significant controversy.
Your home isn't considered an asset unless it increases in value enough to cover the costs of owning it. On the other hand, rental property is an asset because it can make more money than the costs of running and financing it.
In Rich Dad Poor Dad, Kiyosaki says, “Want to get rich? You should focus on buying things that make money – once you understand what an asset is. Keep your debts and expenses low. This will increase the things that make you money.”
4. Running Your Own Business
Another important lesson from the book Rich Dad, Poor Dad is that just having a job and earning a salary won't make you rich; you need to run a business to become wealthy.
Kiyosaki explains that rich people acquire assets and use their money to make more money. They don't work for other people, only for themselves.
Making money from assets without actively working is the way to grow your wealth over time instead of depending solely on a salary. Instead of working hard to earn money for someone else, let others work for you to make you wealthier.
5. Rich People Invest Money
Inventing money means discovering opportunities or deals that others don't have the skills, knowledge, resources, or contacts for.
In Chapter 5 of "Rich Dad Poor Dad," it explains that there are two types of investors:
Investment Package Investors: These are people who buy investment packages from a developer or fund manager. This is the most common way people invest, like buying shares of an ETF or putting money into a real estate crowdfunding venture.
Professional Investors: These investors take care of their own investments, research the market to find sensible deals, and then hire professionals to manage the daily oversight. Professional investors have three things in common:
Identify opportunities that others could not
Work with people who are intelligent
Raise funds for investment
6. Work to Learn, Not to Make Money
The main idea from Rich Dad, Poor Dad is that the rich focus on gaining skills, not just making money.
The book suggests that acquiring valuable skills. It is the way to break free from financial struggles and build real wealth instead of working just for a paycheck.
The book encourages people to think like entrepreneurs and prioritize developing marketable skills rather than aiming for high-paying jobs.
The book uses the example of McDonald's to illustrate the point that having a skill, like making a great hamburger, is common. However, turning this into a profitable business is what truly matters.
In short, the key message is to focus on acquiring skills that can lead to earning opportunities, rather than solely working for a paycheck.
7. Taxes History and Power of Corporations
Robert Kiyosaki says that rich people take advantage of the tax code to benefit themselves.
When you earn a salary or take loans, you end up paying high taxes such as income tax, social security tax, and Medicare tax. However, if you run a corporation, you can reduce your taxes by deducting business expenses.
This allows you to pay less in taxes. Additionally, you can reinvest the profits generated by the company for business expansion and growth. Furthermore, you can also pay the profits to the owners as dividends, which are taxed at a lower rate compared to salaries.
Overall, running a business allows you to keep more of your earnings and lower your tax bill.
Final Thoughts
"Rich Dad Poor Dad" offers valuable insights into the world of personal finance and investing. The book has presented straightforward and relatable facts to make understanding of its key lessons easier. You can set yourself on a path towards financial independence and security by understanding the key lessons of this book.
