Rich Dad Poor Dad by Robert Kiyosaki Book Summary
Rich Dad Poor Dad is the bestseller book by writer Robert Kiyosaki. Written in 1997, it is a must read for everyone who wants to know how the money and wealth game works. This book shows us a path of making money and wealth building based on the principles explained by author. These principles are quite different than the traditional beliefs.
“Rich Dad Poor Dad” this book is the narrative of Robert Kiyosaki's life, here and there.
In this book the author Robert T Kiyosaki discusses about the success and behavior pattern of two different persons who had their influence over his life and personality.
Here author talks about his real natural dad. He was exceptionally educated clever man with PhD and was in well-paying employment but he was struggling throughout his life to manage his money and financial issues. He is referred here as ‘Poor Dad’.
There is another man to whom author refers as his ‘Rich Dad’. This person was actually father of author’s close friend. He was not so educated and was just eighth grade pass but still he was ‘The Most Rich and Successful Man in Hawaii’.
Based on both of their personalities, teachings and life and success mantras, the author derived different principles of managing money, accumulating wealth and becoming successful in life and they are discussed as follows.
Ignorant People Often Make Irrational Decisions Due To Greed And Fear.
In case of money Greed and Fear are two basic emotions which are common among rich and poor people. Most of the rich people tend to focus on spending money on new and interesting things they find. It is greed of spending money. Whereas most of poor people spend lot of time worrying about the fact that they do not have enough money. It is fear of not having enough money.
Both these emotions of Greed and Fear have negative effect on our financial situations. These emotions prevent ignorant people from taking rational decisions about money and prevent them from achieving long term wealth.
Financial Intelligence Is Very Much Important In Our Life But We Never Get Its Formal Training.
Author says our education system trains us in different subjects. Some of them are more important for us than others. But the education system never teaches us Financial Intelligence.
As children, in our schools we are never taught how to deal with money related issues. We are not taught how money works and how to do financial planning and wealth building.
The result is that when these children grow up they become financially clueless adults who do not know how to manage their finances and money and create wealth for them.
Majority of people think that their talent and capability can make them wealthy but the reality is that this world is full of talented and capable people who never become rich due to lack of Financial Intelligence.
You Have To Be Realistic And Focus On Financial Self-Education To Become Wealthy.
You can start your journey for financial freedom and wealth building at any point of time in your life. It is advisable to start it as soon as possible. You are much more likely to achieve your wealth building goals if you start it at younger age.
You have to be realistic when you are planning your financial journey. You have to be realistic about your average expected earnings, your savings and your cost of livings and so on. It will help you in planning your financial goals properly.
You have to keep learning for becoming more financial independent. Investing in oneself in acquiring new skills and financial education helps a lot in long run to earn more money and manage wealth. You have to keep learning.
If You Want To Become Wealthy Then You Have To Learn To Take Risks.
If you trying to save money in traditional ways then you will never become wealthy. If you want to change your financial status then you have to do things in different manner.
Majority of wealthy people have taken many risks to rich that level. They have learned the way to manage risks instead of fearing the risks.
If you put your money in savings account or checking accounts then in that case you are not taking any risk and you will not get good returns. Instead you have to take little risk and invest your money in bonds and stocks to earn more return and generate wealth. Safe options will give very limited returns.
Achieving Wealth Is Long Process So You Need To Keep Yourself Motivated.
The way to achieve desired wealth is never easy and often it is very long and tiring process. Sometimes you may even have to witness that the prices of stocks you invested in suddenly falls down or business you doing makes losses. But it is all part of the wealth journey. It happens with almost all wealthy people.
In such cases you need to keep yourself motivated all those times. If you lose your motivation then chances are you will leave the wealth journey in middle.
You may take help of external things like reading success stories of wealthy people like Warren Buffet and others. You can see motivational shows, videos, movies which inspire you.
Arrogance And Laziness Can Make Poor Even The Most Financially Intelligent People.
Some drawbacks in behavior can make even the most financially intelligent people poor. Arrogance and Laziness are the traits in personality which can destroy your dream of becoming wealthy.
Laziness doesn’t just mean inactivity. It comes in many forms. Sometimes it means avoiding some beneficial difficult situations like investing in some big company stocks which is financially sound but has some minor issues and trading at much discounted rates or leaving good business opportunity thinking it is bit risky and difficult.
Arrogance works exactly in opposite way. But here someone who knows that you are arrogant takes your advantage to convince you to do things which are beneficial to him but not you by satisfying your ego.
In both the situations even if you are very much financially intelligent then also you will not able to judge the situation logically because of your Laziness and Arrogance.
Avoid Liabilities and Focus On Assets.
One must understand the difference between Assets and Liabilities. Assets help you to earn more and more money while Liabilities cost you money. To achieve your desired wealth you need to invest money into Assets and avoid Liabilities.
Assets include business, stocks, bonds, real estate and anything which helps you to generate more and more money. Assets earn money for you.
Liabilities are those expenses which create debt burden on you. It is not producing any return or adding to your wealth. For instance, house is generally seen as asset but if taken entirely on mortgage with long term then it is huge liability on borrower.
Business Can Make You Wealthy Not Profession.
Professionals are those who provide services to their clients and earn money in return. Professional services are personal services and are based on individual skills of the Professional. For Instance, Painter is Professional and he gives personal services to client based on his skills.
Business on the other hand is separate individual identity. Business is organization and not solely dependent on just one person’s personal skills. It can run by management and management can change too. For Instance, Apple, Google company runs business.
Profession stops when you stop working whereas Business once established keeps continuing even after you stop and management takes over.
You earn money by working when you are in Profession whereas Business works for you to earn money. Therefore Business can make you wealthy but Profession cannot because it does not generate money on its own.
Knowing Tax Laws Very Well Can Help You In Reducing Your Tax Liabilities.
Everyone knows that majority of earnings are paid in Taxes. But if you know your Tax Laws very well then you can reduce your Tax Liabilities in legal ways.
One of the best ways to reduce Tax Liabilities is by way of creation of corporation for business. If you invest your money through your corporation then you will pay less tax than what you pay if you invest in your own name.
Corporations in United States have many types of benefits. For instance, debts and liabilities are not placed in the owner’s name, but in the name of the corporation. This helps one to have limited losses if things go bad.
There are many ways to minimize your Tax Liabilities but first you need to educate yourself and learn about the loopholes and benefits of the current Tax System.
The key message given in this book:
In this book Rich Dad Poor Dad writer Robert Kiyosaki put forward that, as most of us are not taught anything about money and financial intelligence in school we have to learn it on our own. We need to first get the education of finance and how to create wealth opportunities and manage them. Then we have to take limited risk to earn more return when we invest. We have to be patient for long term and we should have adequate knowledge of Tax Laws to minimize Tax Liability and maximize our wealth.
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