Rich Dad Poor Dad Summary

Robert Kiyosaki's personal finance book "Rich Dad Poor Dad" underlines the value of financial literacy. The author discusses his experiences growing up with two fathers: his "poor dad," who suffered financially despite having a college degree, and his closest friend's "rich dad," who had an alternative perspective on money. Kiyosaki emphasizes the importance of developing financial literacy by teaching readers about assets and liabilities, the value of passive income, and the potential of accumulating wealth through investments and entrepreneurship. The book encourages its audience to change their perspective and take charge of their financial future. Let us see a summary of the book.

Summary

Rich Dad Poor Dad is a masterpiece written by a famous writer and American entrepreneur Robert Kiyosaki. We all are grown up under the care of a single dad, but the life of Robert Kiyosaki was quite different from ours. He was grown up in the company of two dads. He categorized them as rich dads and poor dads. The first is his real father, whom he called a poor dad, and the second is his friend Mike's father, with whom he spent significant time. He called a rich dad. Robert and Mike were friends and studied in the same school. Poor Dad was well-educated. He had completed his Ph.D. degree by a scholarship.

On the other hand, the rich dad was not so educated. He had yet to pass the 8th standard. Poor dad was constantly suffering from financial crises and died with lots of pending bills left for his family, but rich dad was one of the richest persons in the town; he died with millions of dollars left for his family. His poor dad always focused on syllabus knowledge and considered a 9-5 job safe for the future. His rich dad focuses on the knowledge that can help the author set up a big company providing jobs to the unemployed.

According to rich dad, our thinking affects our lives. We act the way we think. So, he always calls himself rich, regardless of his financial condition. A famous quote in a book named The Secret says, "If you are thinking it in your mind, then you are going to hold it in your hand very soon." Both dads support education but in a different ways. Poor Dad believes Robert should study hard to find an excellent job with good pay. Rich dad believes that Robert should study enough to start his own company and not for becoming a slave of the corporate sector. Poor dad often complains about the 'not able to afford' statement. Rich dad works on "How can I achieve this?"

He favors the fact that to become rich, one should be intelligent. Schools usually do not teach us how to become rich. School teaches us how to become doctors, engineers, collectors, and paid jobs. These institutions wanted to keep us bound and trapped in the matrix. Knowledge of the market and various other skills are required to be rich. Two opinions of everything made Robert feel confused. He could not decide what way he should go because, at that time, his rich dad was not rich; he only talked about big dreams and decisions. Poor-class people want their children to find a good jobs and settle soon. Experiments on careers are not allowed in lower-middle-class families. Rich-class people teach their children financial education. They inspire them to explore things and not to remain limited to a single goal only. The importance of finances is being taught both in a theoretical as well as practical manner. They believe that "Knowledge is more important than money." Knowing how to make money is more crucial than having money itself.

One day Robert asked his father, "Hey, Dad, why are you not rich?" poor dad answered that the reason behind his poor financial situation was being a teacher. Poor Dad asked Robert to meet Mike's father. He would provide him with an excellent way to become rich. At this, Mike said that his father was not wealthy. Replying to him, poor Dad said that he and Mike's father had the same banker. The banker says that Mike's father will be super rich someday, and this moment will arrive soon. Both Mike and Robert decide to meet Mike's father, and he will teach them the skills required to become rich. As has been described in the book, the rich dad was a busy person. He had several stores, warehouses, a construction company, and three restaurants.

Despite being busy, Rich's dad agreed to meet and talk to Robert. At Mike's house, Robert had to wait for some time. Then, finally, rich dad arrived and met him. Rich dad explained that he would not give them theory lectures as given in the schools; instead, he offered them to work at his store. He would only teach them how to earn money practically and accountable. Rich dad offered them 10 cents for an hour of work at his store. Both boys accepted his offer and joined the store. They worked every Saturday at the store. His work was related to cleaning services. After four weeks, Robert felt unhappy and unsatisfied with his work. Poor Dad also told Robert to quit his work. This was because he was not getting an appropriate salary, and his rich dad was not teaching him as promised. So, Robert decided to quit his work. He told Mike that he was not going to work for his father.

At this, Mike started laughing loudly. Robert got angry and asked Mike "why he was laughing at him." Mike answered that his father was a rich dad and had already told him that Robert would quit his job very soon, and when he quit his job, Mike had to take him to his rich dad. So, Mike took Robert to his house the following Saturday, where rich dad met him. Robert was feeling very confused and full of self-doubt. He could not understand what was happening and why he (rich dad) did that. He was in anger. He started complaining to his rich dad about missing baseball games and working hard at his store, and in return, he did not learn anything fruitful. He called him selfish.

After listening to Robert, Rich dad answered that he had been teaching them from the day first. At this, Robert denied him by saying that he did not teach them anything. Rich dad replied that teaching does not always means giving theory lectures; instead, he was giving them the experience of work that was very hard to find. Robert was still confused; he told rich dad that he would either increase his wages or leave this work. Rich Dad explained that most people think increased wages can solve most of their problems, but this is not true. There is a famous quote by Robert Kiyosaki that thoroughly explains his scenario.

"The poor and middle-class work for money.

The rich have money to work for them."

Poor people work hard their whole life to work for someone else for a monthly salary and retirement. This 9 - 5 work sucks their inner talent to explore things and binds them in a matrix that is very hard to escape. Most people fall into this trap; their income and expenses increase. This is termed asRat racein the book.

Rat Race

More salary will help you if you use it at the right place and in the right way. It is suggested that you do not increase your expenses with your income.In the book, the term "Rat race" refers to the endless cycle of working to pay bills and collect debt without achieving true financial freedom. Kiyosaki contrasts the rat race with financial independence and building wealth through passive income. Kiyosaki emphasizes the importance of financial education and changing one's mindset to escape the rat race. He promotes acquiring assets that generate passive income, such as real estate, stocks, or businesses. By building a portfolio of income-generating assets, individuals can create a steady cash flow that covers their expenses, allowing them to achieve financial independence.

The book encourages readers to focus on gaining financial literacy, knowing cash flow, and looking for chances to invest and generate multiple sources of income. By leaving the rat race mentality, people may take control of their finances and fulfill their passions and objectives without being entirely dependent on a single job.

How Did Robert Apply this Lesson in Real Life?

Mike and Robert observed that children were very interested in comic books then. Children often read them and throw them in the waste. So, they contacted the distributor of this comic book and requested to provide them with used books. The distributor agreed to this but with the condition that they could not resell these books. They started a library in the basement of Mike's house with these books. They charged 10 cents for two hours of reading. They hired a library head who managed records and paid one dollar weekly. Rich Dad says, "Don't work for money, do something where money works for you." Both the boys understood this concept. They still needed to work in the library, earning from there. From this concept, we should invest in the right place and let money earn for us.

In 1923 a meeting took place where most of the wealthy class and most influential people were present. Some are Leon Frazier (Bank President), Richard Whitney (New York Stock Exchange President), Ivar Kreuger, Arthur Cotton, Jesse Livermore, Albert Fall, and many more personalities. Many of these personalities faced a sudden downfall in their financial situation. For example, Albert Fall and Richard Whitney were in jail, and Jesse Livermore and Leon Frazier committed suicide. The question was, what had happened to them? Many people face such kinds of problems. The answer to this question is that most people focus on money rather than financial education.

Financial education is the leading factor in the process of becoming rich. One must know how to manage and grow his wealth. Money without knowledge is money soon gone. Financial education is not a subject that can be learned in one or two weeks. It requires a lifetime of learning that includes some life-altering experiences. This subject is not taught theoretically; it can be learned by reading books, attending seminars, and having productive conversations with successful people. One day Robert asked their rich dad, "Hey, Dad, what is the secret of becoming rich?" Rich Dad answered to be a successful and wealthy person, one must know the difference between assets and liabilities and invest in assets in the early stage of earning. It is the golden rule that every rich follows. Let us know what is assets and liabilities.

Asset:Anything that brings you money is called an asset. For example, we were buying a house and hiring it for rent. In this way, we can make money from money.
Liability: Anything that takes money from you. For example, buying a big house for personal living is categorized as a liability as it increases house rent, electricity bills, and other expenses.

Rich dad always believed in simplicity. He converts complex problems and situations into simpler ones. Now you will think that rich people own many expensive things, all of which come under liabilities. The author says that one must buy luxuries when assets generate extra income and reinvest the savings into assets. You can buy any asset that gets you income without working. Job is not an asset. The asset should be an income source where you get money without working.

In 1974, while having dinner with some university students, the owner of McDonald's asked the students about his business. Everyone replied that his business relates to the sale of burgers. At this, he said my business is not about selling burgers; instead, I do real estate business. The McDonald's franchise's location played a significant role in its success. McDonald's owns a large proportion of real estate in the world. The author also suggests minding our own business and buying assets regularly.

Many people need to learn the actual difference between profession and business. The profession includes teaching, doctor, plumbing, engineering, etc. One must be the owner or have a partnership in the asset to call it a business. In his modern world, everyone must have multiple sources of income to live a better life.

The Concept of Taxes

In this chapter, the author takes the example of Robin Hood. Before 1913 there was no such permanent concept of taxes in the United States of America. After 1913 America implemented permanent taxes inspired by the robin hood theory.It has been noted that rich-class people legally pay fewer taxes than poor-class ones. Billionaire and well-known personality Warren Buffet pay less tax than his secretary. Rich people take advantage of laws to pay less taxes. Corporations have significantly less income tax rates. Many think a company means a massive building with many workers and businesses. But it is not more than a legal document. Even most businesses are not known as companies because they need legal documents. Some people use the power of corporations and pay lower taxes. It will take a considerable amount of time to discuss the topic of corporations and taxes.

The author did not explain the taxes in this book; Rather, he suggested taking advantage of corporate laws and becoming financially literate to pay fewer taxes and increase savings. Rich hired many high-paying lawyers who helped him by giving advice and consultancy related to corporate laws so that minimum taxes would be paid to the government. The author suggested a book to explore this topic more and become financially literate. The name is "Incorporate and grow rich." This book teaches us how to cut 70 % of the taxes and protects your assets forever. Financial literacy is a must to be fulfilled the criteria for becoming a wealthy and successful person. The money saved in less tax payments can be invested in good fields like buying assets.

In this chapter, the author discusses two stories. The first is Alexander Graham Bell, who invented the telephone. When he invented the telephone, there was a massive demand for it that he could not handle. So, he decided to sell his idea to the western union. He demanded one hundred thousand dollars for his pretend. Western Union denied his demand. He did not give up and worked hard to set up AT&T, a billion-dollar company today.

In the second story, a company fired many regular working employees. In this extensive list, one is the manager who returned to the company with his wife and children so the owner could hire him again. This scenario highlights the fear of people in investing. This happens to many people. They think their job is everything and only their job can keep them alive. Their fear of loss stops them from investing. Most people have sufficient investment knowledge; they know what to do but fear losing. The author says that if you want to be rich, you must face many losses, ups, and downs in the journey to become rich. No one is perfect is a perfect mindset. Even Robert Kiyosaki had been passed through many loss cases. He learned from his mistakes and failures and did not repeat them further. Failures are necessary to gain good experience in life. And experience is the best qualification. It takes enough courage and financial education to become rich. You all know the founder of Facebook, Mark Zuckerberg; he says that the most significant risk is not taking risks. In today's modern and fast-moving world, only depending on your job and having only one source of income is the most significant risk. The author also says that poor and middle-class people often blame others for not being rich. For example, they blame the government for costliness, their boss for not increasing their salary, etc. You cannot change others, so there is no profit in blaming others. You can only change yourself, and only you can change it. No one else can.

Robert Kiyosaki attended an event. After the event, a female reporter contacted him and said she wanted to become a best-selling author. After looking into her writing works, Kiyosaki advised her to join a sale training course. The biggest mistake most people often make is not learning the necessary skills. A good product is not enough. You should know how to do business. The author quit one of the best jobs in which he had to work only for seven months, and the rest was off because there was nothing left to learn. The author says that to become financially wealthy, you must have four mandatory skills: