Rich Dad Poor Dad

Rich Dad Poor Dad – Book Summary

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Rich Dad Poor Dad is the story of 2 friends, Robert (author) and Mike (his friend), whose fathers have different views about money. Author mentioned his father as ‘Poor Dad’ & Mike’s father as ‘Rich Dad’. One (Poor Dad) had high degree, Ph.D, diplomas and other (Rich Dad) is a school drop-out. The overqualified father is a government employee while other is one of the richest man in his country. First father always says, ‘I can’t afford it’, while other always think ‘How can I afford it?’ Mike’s father died living millions of dollars to his family and charity. The other left bill to be paid when died.
In this book the rich father teaches 2 small boys some invaluable lessons about money through his experience. He teaches how to use your mind and time to create your own wealth through investment and business.

Rich Dad & Poor Dad’s view for Money:

Poor DadRich Dad
The Love of money is a root of evil.The lack of Money is a root of evil.
I can’t afford it.How can I afford it?
Study hard so you can find a good jobStudy hard so you can find a good business
I am not rich because I have you kids.I must be rich is because I have you kids.
Don’t take risks.Learn to manage risks.
My home is largest investment & asset.My home is a liability.
Money doesn’t matter.Money is power.

Following are the lessons from the book:

The Rich Don’t Work for Money

Robert and his friend Mike asked Mike’s father (Rich Dad) to help them how to make money at the age of 9. He gave them opportunity work at his office. After working of 3 weeks on less salary, Robert begins to think about quitting job. On that moment, Rich Dad gave him 1st lesson about money: Some people leave their job for not being paid enough. Others see it as opportunity to learn something new.
Rich dad wanted to force them to find the way to create their own source of income. Inspiration came to them when they collect comics from shop which left lying. They opened a library for their classmates. Fixed an entrance fee of 10 cents for 2 hours of reading. They paid $2 to Mike’s sisters for managing the business. Soon they were making $9.50 per week.

Why Teach Financial Literacy

Many people know how to make money, but don’t know how to manage it. A person can be very intelligent and still be illiterate when it comes to finance. They learn how to work hard in job for money but didn’t know how to make their money work for them. What is missing for them is a financial education. That’s why they are successful at their profession but still struggling with their money.
Roberts says, you must know the difference between an asset and a liability. You should only buy assets. Assets puts money in your pocket while liability takes money out of your pocket. Many people think that their home is an asset. But according to Robert, home is a liability because it takes money out of your pocket. The middle class gets stuck in the Rat Race because they treat their home as an asset. Also, their salary is the primary source of income and thus when their salary increases so their taxes and expenses.
How to grow rich? Buy income producing assets. Keep liabilities and expenses low.

Mind Your Own Business

In 1974, Ray Kroc, the founder of McDonald’s, speak to the MBA class. After talking, the students ask Ray if he could join them to have a beer. He accepted. He asked students what business he is doing? At first, they laughed and answered he is in the business of selling hamburger. Ray told them that he is not in the hamburger business, but in the real estate business. He knew that land and location of each franchisee is the most important factor in success. Today McDonalds is the largest single owner of real estate in world around the globe.
So many people work for someone else; their employer, the government etc. Ray Kroc and Rich Dad knew the secret of the rich. Mind your business. Don’t spend your whole life working for someone else. So many people spend their lives minding someone’s else business results in making them rich. Majority of poor and middle class have no financial foundation. They have to stick to their jobs. They can’t afford to take risk. So Robert tells people to keep your day time job but start buying real assets not liabilities.
Real assets falls into following categories:
Real Estate
Acquire assets that you love. If you love stocks, invest in it. If you don’t like real estate, don’t invest in it.

The History of Taxes and The Power of Corporation

Many people think that the rich should pay more in taxes and help to the poor. In reality, it is the middle class who taxed heavily, especially the educated upper-income middle class. If government spends more and more money, it results into more taxes on poor and middle class. An corporation/company has offered a lower income tax rate than individual have, and some expenses can be paid before paying taxes.
The problem is, the harder you work in the job, the more you pay to the government. Rich finds ways to minimize their tax burden. Tax consultants, accountants and attorneys are worth their cost, at it is cheaper than paying to the government.
Business owner with Corporation
1) Earn. 2) Spend. 3) Taxes.
Employee who work for Corporation
1) Earn. 2) Pay Taxes. 3) Spend
If you work for money, you give the power to your employer. If money works for you, you keep the power and control it.

The Rich Invent Money

Author says, you should develop your Financial IQ to allow you to see the future of change. About 300 years ago, land was wealth. Later wealth was in factories and production. Today wealth is in data and information. Some people stick to old ideas and when they struggle, they blame technology or the economy. The idea that may have an asset yesterday, isn’t today.
Robert had invented a board game CASHFLOW. It teaches people how money works and relationship between income statement with balance sheet. People having creative financial minds escape the Rat Race fastest. Train your mind well and millions can be made from ideas and agreement.
If you want to be professional investor, you must work on 3 main skills:
1) Find the opportunities that everyone else missed
2) Raise money
3) Hire and organize people with more intelligence than you.

Work to Learn – Don’t Work for Money

According to Robert, most people only know to work hard when it comes to money. If we would master just one more skill, our income will jump exponentially. Robert has learned many skills by changing different companies.
He works in Standard Oil for 6 months. Then he moved to Marine Corps and learn how to fly and lead the troops for leadership skills. After some years Robert took a job at Xerox in sales to overcome his fear of selling. After years, he launched his first company of wallet manufacturing.
Most people focus on secure job for salary and benefits in short term. Robert explains his students that McDonalds is making millions not because of hamburger but because of business systems. Rich Dad encourage Mike and Robert to upgrade themselves and learn about lot of different areas of business. Our life become easy, if we are better at communication, negotiation, and handling fear of rejection.

Overcoming Obstacles

5 reasons that stop you from getting Financial Freedom
1) Fear: Every person has the fear of losing money. The difference between rich and poor is how they manage fear. Only way to overcome fear is to start investing early and let the power of compounding work.
2) Cynicism: Most people are poor due to doubts & cynicism. Rich keeps their eyes open and grab the opportunities everyone else missed. They know that the worst of times is actually the best time to make money.
3) Laziness: Many people can’t escape the Rat race due to laziness. What’s the solution? A little greed. Without little greed, our life can’t have something better.
4) Bad Habits: To be successful, a person must change his bad habits. You must pay yourself first and then pay to everyone. It means you should do investment first and then use the remaining funds in other expenses.
5) Arrogance: Many people think that they know everything about money. They lost money because of arrogance. So, you should always learn from others as well.

There are many other things & real-life examples which we haven’t included in our blog. If you want to read full book you can buy it from this link.

About the author

Shankar Awale

Hey! I am Shankar Awale an aspiring blogger with an obsession for all things of Finance. This blog is dedicated to help people to learn about Financial Knowledge in easy language.

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