A Comprehensive Look on the Key Takeaways with Rich Dad Poor Dad Summary
Do you ever think how come some individuals have the talent of making money? On the other hand, there are people who can barely suffice their needs? It is easy for people to struggle with the concept and management of money. This is because it forms part of everyday life. It is where this fantastic book called ‘rich dad, poor dad’ can be of assistance at. Author of the book is Robert T. Kiyosaki.
It provides differentiated look of two fathers personalities in the life of author that is Poor Dad who is the father of the author, Robert T. Kiyosaki and Rich Dad is the friend of his 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
You can learn two different ways of thinking about money in this book.
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.
This, according to him, was true because anyone who wanted to become rich had to own a business and invest in assets that generate income with little effort. The most significant and revolutionary concept was the definition of an asset and a liability given by Kiyosaki.
He defined that asset is that which makes you money and a liability is that which costs you money. There are people that think that houses or cars are investments but they are actually expenses. The real assets are those that you put your money into.
In summary, the Rich Dad, Poor Dad book is about accumulating financial knowledge in order to be financially free from the traps. It must help you attain the socially accepted goals of the financial security.
Most important lessons learnt from Rich Dad Poor Dad
So, here we go:
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 as a matter of fact the opposite.
When you first look at the title of the chapter, ‘The Rich Don’t Work.’ What Kiyosaki is really teaching you is ‘The Rich Don’t Work for Money.’ That alters the whole meaning of the entire sentence just by placing the word money at the end of the sentence.
In fact, the overwhelming majority of rich people do work. However, they do it differently than ordinary folks. They are trained on how to manage and make money.
As Rich Dad says, The middle-class and poor work for money. The rich people have money that work for them.
Kiyosaki also notes that having a job and becoming comfortable and content.
Importance of Teaching Financial Literacy
The purpose of the entire book is the recognition of the significance of financial literacy. It means understanding how money works is really important for doing well with money. The writer believes that schools are not effective in imparting this while they ought to be more effective in imparting stuff like personal finance, and making money grow.
I remember him saying that two dads, one who was very wealthy and the other extremely parsimonious, and how they viewed the aspect of saving. This exemplifies why one of the most valuable things anyone can do is 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 one hand, there was his other dad who although earned more and was less educated had a lot to explain about the management of money. He believed that it is wise to save and begin to invest to achieve financial freedom.
It is also clear that education is significant but the knowledge of money management is also equally important. It is a good idea to learn about money management, understanding risks, and other important things to handle your money smartly.
Focus Should be on Assets, Instead of Liabilities
The next chapter defines the difference between assets and liabilities. It asserts that the issue of income is not the amount of money that one makes but rather the amount that one is able to save.
They propose that assets are the objects that can be useful, profitable or valuable, and can be melted. They are relatively easy to buy and sell in a market. Assets can either be capable of generating revenues, increase in value or both.
On the other hand, liabilities are the costs that bring money out of your pocket. They incur costs and do not contribute to generating income or increasing in value.
The book was published in 1997. It defines a difference between assets and liabilities which was considered as controversial in the beginning.
A home isn’t an investment unless it appreciates enough to offset the cost of owning it. Rental property, on the other hand, is an asset since it can generate more revenue than the expenses to run and fund it.
Kiyosaki in Rich Dad Poor Dad explains it in this manner, “Want to get rich? You should then start buying assets that brings in cash once you undertake the basics of what an asset is. Keep your debts and expenses low. This will increase the things that make you money.”
Running Your Own Business
Another major takeaway from the book Rich Dad, Poor Dad is that getting a job or having a regular income alone cannot help one become financially secure. One needs to become an entrepreneur to become affluent.
Rich people make money work. The author argues that instead of working for money, rich people invest in assets and use money to earn money. They do not work for others. They work for themselves only.
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.
Rich People Invest Money
There are two types of investors defined in the 5th chapter:
Investment Package Investors: These are people who invest in an investment package offered by a developer or a fund manager. This is perhaps the most popular form of investing such as buying stocks in ETF or investing in a real estate crowdfunding project.
Professional Investors: These investors not only look after their own investment but also search for sensible business opportunities in the market. They then seek professional help for overseeing the projects on a day-to-day basis.
Professional investors have three things in common:
Identify opportunities that others could not
Work with people who are intelligent
Raise funds for investment
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.
Taxes History and Power of Corporations
It does not justify that all rich people are smart, but according to Kiyosaki, they know how to use the tax code to their favor.
You spend a great deal of money on taxes such as income tax, social security tax and Medicare tax whenever you receive your salary or take loans. If you own a corporation, you can minimize your taxes by decreasing business expenses.
They help you to pay fewer amounts of taxes. Furthermore, it is possible to use the profits obtained by the company for expansion and development of the business. You can also make the profits payable as dividends which is charged at a lower tax than the salaries.
You are able to retain more of the income earned and thus paying lesser taxes by running a business.
Final Thoughts
The key lesson readers can learn from the book “Rich Dad Poor Dad” is indeed regarding management of money and wealth. 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.
