Robert kiyosaki’s Rich Dad Poor Dad book review and summery

Is it worthwhile to read Rich Dad Poor Dad?

The purpose of Rich Dad Poor Dad is to inspire you to chart your own path to financial independence.

While the book does not give one-size-fits-all answers, it does provide a good foundation for developing your own goals for building wealth through real estate investing.

Strengths

• Provides an alternative viewpoint to the “common knowledge” given in most personal finance courses.
• focuses on converting profits into assets that generate even more income
• Controlling expenditures and expenses is encouraged.
• Explains why investors should prioritise real estate above other asset classes.
• It emphasises the power of mind and the need of lifelong learning.
• Discusses taking action rather than merely thinking about it

Weaknesses

• The book’s success examples are distinctive to Kiyosaki’s position and may be difficult to reproduce.
• Some sections of the book are also lacking in depth, which may make applying the principles covered more challenging.
• People who prefer to follow the crowd rather than think for themselves are frequently disparaged.
• Rich Dad Poor Dad is a motivational book, not a financial expert’s book.

Book Summery 

Rich Dad Poor Dad, by Robert Kiyosaki, was initially published in 1997 and immediately became a must-read for anybody interested in investment, money, or the global economy. The book has been translated into dozens of languages and sold all over the world, becoming the best-selling personal finance book of all time.

Rich Dad Poor Dad’s overriding subject is how to use money as a tool for wealth growth.

It debunks the idea that the wealthy are born wealthy, explains why your own house may not be an asset, defines the distinction between an asset and a liability, and much more.

Important Takeaways/Lessons Learned

• Six lessons about money that Robert Kiyosaki learnt from his Rich Father and the blunders that his Poor Father made
• Five difficulties to overcome before becoming wealthy
• Ten steps to developing your financial brilliance
• Actionable next actions that you can put into action right immediately

Summary of Chapters/Sections

Rich Dad Poor Dad has eleven chapters including an introduction, however the most of the book is devoted to the first six segments or lessons.

Robert Kiyosaki, author of Rich Dad Poor Dad, grew up with two very important dads (Intellectually)  .

Poor Dad was Kiyosaki’s biological father, a guy of great intelligence and education. Poor Dad felt that hard work and excellent grades would lead to a decent job. Despite these apparently favourable characteristics, Poor Dad did not fare well financially.

Kiyosaki’s best friend’s father was Rich Dad. He possessed a work ethic comparable to Kiyosaki’s real father, but with a twist. Rich Dad believed in financial education, knowing how money works, and making money work for you. Rich Dad, despite being an eighth-grade dropout, finally became a millionaire by harnessing the power of money.

The book is told from Kiyosaki’s point of view on how Rich Dad got money and the mistakes that Poor Dad made. The first six chapters of Rich Dad Poor Dad account for roughly two-thirds of the book and cover the six lessons Kiyosaki acquired from his Rich Father.

We will summarize some chapters here,  

The Rich Do Not Work for Money, Chapter 1

People frequently misinterpret the title of this chapter, believing it to suggest that the wealthy do not labour. In reality, the inverse is true.

Rather from viewing the chapter title as “The Rich Don’t Work for Money,” Kiyosaki meant “The Rich Don’t Work for Money.” This part takes on a whole new meaning when the focus is placed on the word “money.”

The majority of wealthy individuals work very hard, but they do so in a different way than other people. Affluent individuals – and those who aspire to be rich – labour and study every day how to make money work for them. “The poor and middle class labour for money,” Rich Dad argues. The wealthy have money working for them.”

Kiyosaki further points out that doing a normal job is only a temporary answer to the long-term problem (or challenge) of earning wealth and financial freedom:

“It’s fear that keeps most people working at a job: the fear of not paying their bills, the fear of being fired, the fear of not having enough money, and the fear of starting over. That’s the price of studying to learn a profession or trade, and then working for money. Most people become a slave to money – and then get angry at their boss.”

Why Teach Financial Literacy, Chapter 2?

The second chapter of Rich Dad Poor Dad defines the terms asset and liability. Chapter 2 emphasises the importance of how much money you maintain rather than how much money you produce.

An asset is something that has worth, generates income or increases in value, and has a market where it can be readily purchased and sold:

• Assets produce income
• Assets appreciate
• Assets do both

Liabilities, on the other hand, drain money out of your pocket due to the expenditures involved with them. Kiyosaki’s assertion in Rich Dad Poor Dad was controversial when it was initially released in 1997.

That’s because a residential dwelling isn’t considered an asset until it appreciates sufficiently to cover the costs of ownership. Rental property, on the other hand, is an asset since it may create enough passive income to cover the costs of managing and financing the property.

“Want to get rich?” says Kiyosaki in Chapter 2 of Rich Dad Poor Dad. When you properly grasp what an asset is, focus your efforts on purchasing income-producing assets. Keep obligations and costs to a minimum. You’ll increase the size of your asset column.”

Take Care of Your Own Business, Chapter 3

This chapter has two major messages.

Pay off your obligations first, and then begin investing in income-producing assets as quickly as feasible.

Next, maintain your financial health by investing as much of your money as possible in assets and spending your time (rather than your wage).

In Chapter 3 of Rich Dad Poor Dad, Kiyosaki observes that most individuals mix their occupation with their business. In other words, they spend their whole lives making other people rich by working in someone else’s business.

“The primary reason the majority of the poor and middle class are fiscally conservative is that they have no financial foundation. They have to cling to their jobs and play it safe. They can’t afford to take risks.”

 The History of Taxation and Corporate Power, Chapter 4

It’s crucial to remember that Kiyosaki authored Rich Dad Poor Dad as a motivating book, not to give professional financial or tax advice.

For example, Kiyosaki writes about buying a Porsche and deducting the cost as a business expense with pre-tax cash. Purchasing a high-end luxury automobile when a much less expensive brand and model will do might lead to an IRS examination.

Leaving aside the Porsche, the suggestions given in this chapter explore how to play the investing game wisely. The wealthy understand the power of corporate structures and the tax system, and they employ all legal tool at their disposal to reduce their tax burden.

Contrast how most people pay taxes with how company owners and investors with companies such as C Corps, S Corps, or LLCs pay taxes:

Business owners with a corporate structure:

1. Earn
2. Spend
3. Pay taxes

Employees who work for corporations:

1. Earn
2. Pay taxes
3. Spend

Employees spend their money after paying taxes, whereas business owners earn and spend before paying taxes.

Accounting, Investment Strategy, Market Law, and Law are the four main components of what Kiyosaki refers to as “Financial IQ” in Chapter 4 of the book.

As Rich Dad Poor Dad points out, recognising the legal and tax benefits can help you develop long-term wealth:

“For instance, a corporation can pay expenses before paying taxes, whereas an employee gets taxed first and must try to pay expenses on what is left. . . Corporations also offer legal protection from lawsuits. When someone sues a wealthy individual, they are often met with layers of legal protection and often find that the wealthy person actually owns nothing [in their own name]. They control everything, but [personally] own nothing.”

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