Robert Kiyosaki grew up with two dads: his biological father, a financially illiterate PhD who valued job stability, and his best friend’s father, a high school dropout who built a business empire worth millions. Kiyosaki calls them Poor Dad and Rich Dad, respectively.
Poor Dad believed in the traditional view of work and money, which is to get a good education, a secure job, and buy a house without a clear long-term plan. In contrast, Rich Dad had a contrarian view of finances and life, focusing on achieving financial independence, having money generate more money, and taking calculated risks.
Kiyosaki argues that most people adopt the Poor Dad view and let money control their lives, leading them to get stuck in jobs they dislike for the sake of money, trapped in a cycle of working to make ends meet.
Lesson 1: The Rich Don’t Work For Money – Money Works for Them
To become wealthy, it’s not enough to just earn a high salary – owning income-generating assets is crucial. The rich buy assets that generate income and limit spending on expenses and liabilities. Those who are not wealthy either spend all of their money on spending or acquire non-income producing obligations. The objective is to amass enough assets that produce income so that you may stop working.
Lesson 2: Buy Assets, Not Liabilities
To build wealth, focus on buying income-generating assets, not liabilities that drain your money. Assets create more money for you, while expenses reduce it. However, beware of deceptive investments that look like assets but are liabilities in disguise, such as overpriced houses.
Real assets include businesses, stocks, bonds, income-generating real estate, and intellectual property. Treat each dollar as an employee working for you 24/7 to create more wealth. Remember, every dollar you spend today is a missed opportunity to generate future income.
Lesson 3: Reduce Taxes through Corporations
Kiyosaki suggests setting up corporations to deduct business expenses pre-tax instead of paying with post-tax dollars.
Lesson 4: Overcome Your Mental Obstacles
To achieve your Rich Dad goals, you need to overcome common mental obstacles:
- Self-doubt: Success requires more than intelligence and grades. Guts, chutzpah, balls, and tenacity play a big role.
- Fear: Courage is needed to pursue great opportunities, and failure is an opportunity to learn and grow. Don’t let fear of failure or others’ opinions hold you back.
- Laziness: Busy people can be the laziest, using busyness as an excuse to avoid investing in their future.
- Guilt for feeling greedy: Embrace your desire for wealth and the power it brings.
- Arrogance: Be open to new ideas and don’t dismiss anything as beneath you. Even sales techniques can be valuable.
Lesson 5: Build Your Economic Intelligence. Continue To Learn
Understanding accounting, investment, markets, and legislation is a prerequisite for having financial intelligence, which entails applying that knowledge to problem-solve ingeniously. Incremental improvements in knowledge can have a significant impact over time, and the faster you can learn and apply your knowledge, the greater the rewards.