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Summary of Rich dad Poor Dad
If you were to stop working, imagine this to yourself. How long can you survive on your remaining savings? What I just asked you was a definition of wealth.
Here is a man named Robert Kiyosaki, an American investor, businessman, author, motivational speaker, and financial commentator, who became well-known in the recent years, who has an estimated net worth of 80 million dollars!
Want to know something interesting? “Oh?” He wasn’t raised in a wealthy background. In fact his family was like most people who work but didn’t have the best financial education and often times struggled with money.
So then how did Robert become rich today? Let’s take a look as he explains in one of his bestsellers called Rich Dad Poor Dad
Robert Kiyosaki was born in Hilo Hawaii in April 1947 .In 1957 at age nine years old, little Robert was attending the same public school where the rich people sent their children for his town had lots of doctors, business owners, and bankers
Robert saw that the rich kids would separate themselves from him for his family wasn’t able to afford the newest collections of toys and bikes like them.
So one day Robert asked his father who had a PhD and completed multiple universities with excellent degrees, “Dad, can you tell me how to get rich?” Unfortunately, his dad didn’t know the right answer because he was a rich himself, so he responded with, “Well, use your head, son.” “Stay in school, get good grades so you could find a safe and secured job. His real dad is what he’ll be referred as poor dad.
He wasn’t poor at this time, in fact, he was making lots of money, but in the end, this man’s financial life takes a turn for the worse.
Now little Robert has a friend named Mike and which Mike’s father would be referred as rich dad. Who started mentoring Robert and his son Mike about how to really become rich.
At this point in time, rich dad wasn’t really rich yet but soon became to be one of the wealthiest men in Hawaii. So then, what did rich dad teach Robert?
Rich dad poured a strong financial foundation into these kids minds of many important principles. To start off, the first lesson you need to know is you must know the difference between an asset and a liability and that you need to buy assets.
If you want to be rich this is all you really need to know and understand the most! You see, the rich acquire assets and the poor and middle class acquire liabilities but sometimes they think they are assets.
The primary cause of financial struggle is simply not knowing the difference between an asset and a liability.
An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.
For instance let’s try cash flow pattern of a normal individual.
Suppose person earns his income from a job and as expenses are things like food, clothes, entertainment, and transportation Unfortunately he doesn’t have assets but sure does have liabilities that constantly takes money out of his pocket because things like mortgages, taxes credit cards, loans and believe it or not the house.
Now let’s take a look how to cash flow pattern really works for the rich. Instead of looking to earn more money from their normal job as the only source of income, they buy and own assets that brings money into their pockets as a form of passive income.
Passive income is something that earns money that doesn’t require you to trade your time for it, so in other words you would be earning money even as you’re sleeping.
Examples of assets are businesses that doesn’t require your presence such as stocks bonds, mutual funds, income generating real estate, royalties, notes, and anything else that has value that produces income.
As mentioned before, poor dad was making quite a lot of money from his job but his expenses seemed to always keep up with his income, never allowing him to invest in assets.
As a result his liabilities such as his mortgages and credit card debts grew greater over time and this is the fault of having income equals expense and assets is less than liabilities and sadly this is what drove poor dad into debt even after he passed away.
On the other hand, rich dad’s personal financial statement reflects the result of a life dedicated to investing and minimizing liabilities so he has income that is greater than the expense because of assets is greater than liabilities.
This is practically why the rich are getting richer! Their assets generate more than enough income to cover expenses with the balance reinvested into the asset column.
The asset column continues to grow and therefore the income grows with it. You see, both dads worked hard, but they have opposing attitudes and thoughts.
One dad recommended study hard so you can find a good company to work for. The other recommended study hard so you can find a good company to buy.
One dad said the reason I’m not rich is because I have kids. The other said the reason I must be rich is because I have you kids.
One said when it comes to money play it safe and don’t take risk. The other said learn to manage your risk.
One said I can’t afford that. The other said how can I afford that?
Although both men had tremendous respect for education and learning they disagreed on what they thought was important to learn.
Robert learned from rich dad that the truth about the general population, their lives are run forever by two emotions, fear and greed, that keeps you stuck in a pattern of get up, go to work, pay bill. Get up, go to work, and pay bills.
Fear has them in this trap of working, earning money, working, earning money and hoping fear will go away of not having money.
Instead of confronting the fear they react emotionally instead of using their heads. The other emotion which is desire, some call it greed, is a second reason why people also work for money.
They desire money for the joy that they think it could buy. But the joy that the money brings is often short-lived and soon needs more money for more joy, more pleasure, more comfort, and more security.
You see that same fear and desire is what makes a lot of people be so fanatical about going to school for a better chance of a high paying job, but don’t be discouraged an education and a job are important, but it won’t exactly handle that fear.
To handle that fear, you need to learn the power of money, not be afraid of it. Unfortunately most schools don’t teach about this and if you don’t learn it, you’ll become a slave to money.
Ignorance of money can cause so much greed and so much fear that can lead you into life’s biggest trap of constantly working.
Rich Dad said learn to use your emotions to think not think with your emotions. Examples of emotional thinking are like I need to get another job! I deserve a raise! I want this job because it is secured!
Instead of clearly thinking like is there something I’m missing here? This is our reality for most people your profession is your income. The rich, your assets is your income.
Apply these lessons to your life for if I were to ask you about the definition of your wealth if you would stop working today, how long can you survive? You might laugh at me and say I no longer work for money, money works for me.
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